Q2 2024 Research Solutions Inc Earnings Call

Operator: Good day, and welcome to the Research Solutions, Inc. Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode.

Good day and welcome to the Research Solutions, Inc. Second quarter 'twenty 'twenty four earnings conference call.

All participants will be in a listen only mode.

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I would now like to turn the conference over to John Beisner Investor Relations. Please go ahead.

John Bifler: Thank you, Betsy, and good afternoon, everyone. Thank you for joining us today for the Research Solutions second quarter fiscal 2024 earnings call. On the call today are Roy W. Olivier, President and Chief Executive Officer, and Bill Northern, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the second quarter of fiscal 2024. This release is available on the company's website, researchsolutions.com. Before Roy and Bill begin their prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors.

Thank you Betsy and good afternoon, everyone.

Thank you for joining us today for the research solutions second quarter fiscal 2024 earnings call.

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

After the market closed this afternoon the company issued a press release announcing its results for the second quarter of fiscal 2024.

This release is available on the company's website research solutions Dot com.

Before Roy and Bill begin their prepared remarks, I would like to remind you that some of the statements made today will be forward looking and are made under the private Securities Litigation Reform Act of 1995 actually.

Results may differ materially from those expressed or implied due to a variety of factors. We refer you to research solutions recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition.

John Bifler: We refer you to Research Solutions' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial conditions. Also, on today's call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of those measures to gap measures is included in the earnings release issued earlier this afternoon. Finally, I would like to remind everyone that this call is recorded and made available for replay via a link on the company's website. I would now like to turn the call over to Roy W. Olivier. Roy

Also on today's call management will reference certain non-GAAP financial measures, which we believe provide useful information for investors.

A reconciliation of those measures to GAAP measures is included in the earnings release issued earlier this afternoon.

Finally, I would like to remind everyone. This call is recorded and made available for repay replay via a link on the company's website.

I would now let's turn the call over to Roy W. Olivier right.

Roy W. Olivier: Thank you, John, and thanks to everyone joining us for our second quarter fiscal 2024 results. While there are a lot of moving pieces in this quarter's results, which Bill will help walk you through, I do want to take a minute to report a few milestones for the business. First, our core platform revenue from Oracle Galaxy and References is above $10 million in ARR for the first time. Second, our total ARR is now over $15 million.

Thank you John and thanks to everyone joining us for our second quarter fiscal 2024 results.

While there are a lot of moving pieces in this quarter's results, which bill will help walk you through I do want to take a minute to report a few milestones for the business.

First our core platform revenue from article Galaxy and references is above 10 million in <unk> for the first time.

Our total IRR is now over $15 million for the first time.

Roy W. Olivier: Third, the addition of SITE and Resolute positions the company well for the future. The new products from these acquisitions and the products we can build using the combined technology of the three companies position the company to provide competitive and unique functionality across the research workflow and into other departments in most research intensive organizations. I'll speak more of that, speak more about that in detail after Bill walks you through our fiscal second quarter 2024 results. Bill. Thank you, Roy, and good afternoon, everyone.

Third. The addition of sites and resolute are positioning the company well for the future.

The new products from these acquisitions and the products, we can build using the combined technology of the three companies positions the company to provide competitive and unique functionality across the research workflow and into other departments and most research intensive organizations.

I'll speak more of that speak more about that in detail. After bill walks you through our fiscal second quarter 2024 results Bill.

Thank you Roy and good afternoon, everyone.

Bill Northern: Before I begin, I'd like to remind everyone that our second quarter results include a full quarter's contribution from the acquisition of Resolute AI on July 28, and approximately one month of contribution from the site acquisition, which closed on December 1. For fiscal year-to-date numbers, there are approximately five months of Resolute AI and one month of site factored into the numbers. Another item I would like to discuss before going deeper into the numbers is that the site acquisition brings with it a material amount of what we classify as B to C recurring subscription revenue. This is revenue from individual subscribers, who are typically students or research professionals, that subscribe to the services through SITE's website and make automatic payment on either a monthly or annual subscription basis. I wanted to help everyone understand how we are accounting for those subscriptions from both an annual recurring revenue, or ARR, perspective and from a revenue recognition perspective. For the purposes of calculating ARR, in our financial and operational summary tables, we have separated out what we call B2B ARR and B2C ARR.

Before I begin I'd like to remind everyone that our second quarter results include a full quarter's contribution from the acquisition of Resolute AI on July 28, and approximately one month of contribution from the site acquisition, which closed on December 1st.

For fiscal year to date numbers, there are approximately five months of resolute AI and one month of site factored into the numbers.

Another item I would like to discuss before going deeper into the numbers is that the <unk> acquisition brings with it a material amount of what we classify as b to C recurring subscription revenue.

This is revenue from individual subscribers, who are typically students or research professionals.

Subscribe to the services three sites website and make automatic payment on either a monthly or annual subscription basis.

I wanted to help everyone understand how we're accounting for those subscriptions from both an annual recurring revenue or a or our perspective.

And from a revenue recognition perspective.

For the purposes of calculating a or are in our financial and operational summary tables, we had separated out what we call b to B a R. R and D to C. A R R.

Bill Northern: B2B ARR consists of annual subscription agreements with corporations, academic institutions, and government entities. We have contracts with those entities across the Research Solutions, Resolute AI, and Site Product Platforms, and everything is aggregated across those product lines for the purposes of calculating B2B ARR. B2C-AR consists of individual subscriptions, some of which are annual, but most of which are month-to-month. For the purposes of calculating B

So it would be a R. R consists of annual subscription agreements with corporations academic institutions and government entities.

We have contracts with those entities across the research solutions Resolute AI and site product platforms and everything is aggregated across those product lines for the purposes of calculating b to B a R. R.

B to C. A R consists of individual subscriptions some of which are annual but most of which are month to month.

The purposes of calculating b to C. A R.

Bill Northern: We aggregate the monthly subscriptions by taking their monthly subscription amount and multiplying it by 12. Please see today's press release for further information regarding how we define and use annual recurring revenue and other non-GAAP terms. Lastly, for the purposes of revenue recognition, all revenue resulting from our portfolio of B2B and B2C software products is flowing through the Platforms line in our profit and loss state. With that, I'll start going through some of the numbers.

We aggregate the monthly subscriptions by taking their monthly subscription about and multiplying it by 12.

Please see today's press release for further information regarding how we define and use annual recurring revenue and other non-GAAP terms.

Lastly for the purposes of revenue recognition all revenue, resulting from our portfolio of B to B and B to C software products.

Flowing through the platforms line.

Our profit and loss statements.

With that I'll start going through some of the numbers.

Bill Northern: Total revenue for the second quarter of fiscal 2024 was $10.3 million, an 18% increase from the second quarter of fiscal 2023. Our platform subscription revenue increased 48% to $3.1 million. The year-over-year growth was primarily driven by the acquisitions of Resolute, AI, and Sight, as well as organic growth in our core Article Galaxy platform. We ended the quarter with $15.6 million in annual recurring revenue, up 77% year-over-year

Total revenue for the second quarter of fiscal 2024 was $10 3 million.

18% increase from the second quarter of fiscal 2023.

Our platform subscription revenue increased 48% to $3 1 million.

The year over year growth was primarily driven by the acquisitions of resolute AI insights.

Well as organic growth in our core article Galaxy platform.

We ended the quarter with $15 6 million in annual recurring revenue up 77% year over year.

Bill Northern: SITE contributed almost $4.4 million of the ARR, which was a good outcome when you consider that at the time of acquisition, we announced that their ARR as of the end of October was roughly $3.6 million. Article Galaxy also had a strong quarter with net incremental ARR for the quarter being the best result in the last four quarters. On a standalone basis, Article Galaxy's ARR is now over $10 million.

Site contributed almost $4 4 million of V. A R. R, which was a good outcome. When you consider at the time of the acquisition, we announced that they're a R. R. As of the end of October was roughly $3 6 million.

Article Galaxy also had a strong quarter with net incremental or are for the quarter being the best result in the last four quarters.

On a standalone basis article Galaxy a R. R is now over $10 million.

Bill Northern: The growth in site and Article Galaxy was offset by some churn in Resolute AI; do expect some continued churn in that product over the next six months before it stabilizes. However, we still feel there is tremendous value in the technology that was acquired as part of that transaction. Our transaction revenue increased almost 9% from the second quarter of fiscal 2023 to $7.2 million, and our total active customer count for the quarter was $1,398, a net increase of $175 from the same period a year ago.

The growth in site and article Galaxy was offset by some churn and resolute AI.

Do you expect some continued churn in that product over the next six months before it stabilizes. However, we still feel there's tremendous value in the technology that was acquired as part of that transaction.

Our transaction revenue increased almost 9% from the second quarter of fiscal 2023 to $7 2 million and our total active customer count for the quarter was 1398, a net increase of 175 from the same period a year ago.

Bill Northern: The increases are primarily due to organic growth, notably in the academic segment of the business, which was enhanced by higher transaction volumes and contracts transferred related to the FIS calls through acquisition effective January 1, 2023. I will note that we are now at the point where the FIS transaction will anniversary itself starting in our Q3. This will slow the growth rate we have seen over the past four quarters in transactions.

The increases are primarily due to organic growth.

Notably in the academic academic segment of the business, which was enhanced by higher transaction volumes and contracts transferred related to the fish Karlsruhe acquisition effective January one 2023.

I will note that we are now at the point, where the fuse transaction will anniversary itself starting in our Q3.

This will slow the growth rate, we have seen over the past four quarters and transactions.

Bill Northern: However, we still do expect organic growth on this line for the foreseeable future. Gross margin for the second quarter was 43.5 percent, a 450 basis point improvement over the second quarter of 2023. The increase is due to the ongoing revenue mix shift towards our higher-margin platform businesses as well as some modest increases in transaction margins. The platform business recorded a gross margin of 84.4%, a decrease compared to 88% in the prior year quarter.

However, we still do expect organic growth on this line for the foreseeable future.

Gross margin for the second quarter was 43, 5%, a 450 basis point improvement over the second quarter of 2023.

The increase is due to the ongoing revenue mix shift towards our higher margin platforms businesses as well as some modest increases in transaction margins.

The platform business recorded a gross margin of 84, 4% a decrease compared to 88% in the prior year quarter.

Bill Northern: The decrease is related to the inclusion of resloot platform revenues, which generate a lower margin. Gross margin on ArticleGalaxy remained consistent with recent history, and the gross margin of CITES products is similar to that of ArticleGalaxy. Gross margin in our transaction business increased 230 basis points to 25.7%. The increase was primarily due to increased copyright margins, aided by better fixed cost coverage due to higher order volume. We did lower some copyright reserves in the quarter, which also contributed to the increase. So I would expect this number to fall back to somewhere between 24% and 25% on a more normalized basis going forward. Total operating expenses in the quarter were $4.9 million, compared to $3.7 million in the prior year quarter.

The decrease is related to the inclusion of resolute platform revenues, which generate a lower margin.

Gross margin on article Galaxy remained consistent with recent history.

And the gross margins of sites products are similar to that of article Galaxy.

Gross margin in our transaction business increased 230 basis points to 25, 7%.

The increase was primarily due to increased copyright margins Adrian.

Aided by better fixed cost coverage due to the higher order volume.

We did lower some copyright reserves in the quarter, which also contributed to the increase so I would expect this number to fall back to somewhere between 24% and 25%.

On a more normalized basis going forward.

Total operating expenses in the quarter were $4 9 million compared to $3 7 million in the prior year quarter.

Bill Northern: A little over $700,000 of the year-over-year variance comes from the addition of the cost bases of resolute and site. In addition, this quarter's results included roughly $300,000 in costs associated with the acquisition of site as well as other M&A activities in the quarter. The net loss for the quarter was $54,000, or roughly break even on a per-share basis compared to a net loss of $256,000 or one cent per share in the prior year quarter.

Well, a little over $700000 of a year over year variance comes from the addition of the cost bases of resolute in sight.

In addition, this quarter's results included roughly $300000 in costs associated with the acquisition of site as well as other M&A M&A activities in the quarter.

Net loss for the quarter was 54000 or roughly breakeven on a per share basis compared to a net loss of 256000 or one cent per share in the prior year quarter.

Bill Northern: Given some of the churn and resolute, we did reduce a portion of their contingent earn-out liability, which generated some below-the-line income in the other income category of our operations statement. Adjusted EBITDA for the quarter was $318,000 compared to $201,000 in the year-ago quarter. It is important to note that the adjusted EBITDA result includes the aforementioned $300,000 of acquisition-related expenses in the quarter and, as a result, would have been $625,000 on a more normalized basis. Turning to our balance sheet, cash equivalents as of December 31, 2023 were $2.7 million versus $13.5 million on June 30, 2023. The decrease was primarily attributable to the cash used for the Resolute and Sight acquisitions, which were approximately $10 million.

Given some of the charity Resolute, we did reduce a portion of their contingent earn out liability, which generated some below the line income in the other income category of our operations statement.

Adjusted EBITDA for the quarter was 318000 compared to 201000 in the year ago quarter.

It is important to note that the adjusted EBITDA result includes the aforementioned $300000 of acquisition related expenses in the quarter and as a result would have been $625000 on a more normalized basis.

Turning to our balance sheet.

Cash and cash equivalents as of December 31, 2023 was $2 7 million versus $13 5 million on June 32023.

The decrease was primarily attributable to the cash used for the resolute and site acquisitions, which was approximately $10 million.

Bill Northern: We also had heavy outlays in Q1 related to the proxy issues, which have since been resolved, as well as costs related to our M&A activities. However, despite continuing to incur expenses related to our M&A activities in Q2, we were able to generate $300,000 in cash flow from operations in the quarter. We expect our cash flow to improve as we move on from a number of these one-time expenditures and more fully integrate the acquisitions into our business. Additionally, we have experienced some good growth in cash in the early part of Q3. As we look ahead, 3 and Q4 will be much cleaner from an expense perspective, which will give us an opportunity to demonstrate the profitability of the business. We will have some M&A-related costs in the first month of Q3, but we should not incur much after that.

We also had heavy outlays in Q1 related to the proxy issues, which have since been resolved as well as costs related to our M&A activities.

Despite continuing to incur expenses related to the M&A activities in Q2, we were able to generate $300000 in cash flow from operations in the quarter.

We expect our cash flow to improve as we move on from a number of these one time expenditures and more fully integrate the acquisitions into our visits.

Actually we have experienced some good growth in cash in the early part of Q3.

As we look ahead.

Three in Q4 will be much cleaner from an expense perspective, which will give us an opportunity to demonstrate the profitability of the business.

We will have some M&A related costs in the first month of Q3, but it should not incur much after that.

Bill Northern: From a year-to-date perspective, recall that in Q1, we had roughly $700,000 in costs related to the proxy matter and an additional $300,000 in M&A-related expenses. In Q2, most of the proxy costs were behind us, but we still had $300,000 in M&A-related expenses. Those expenses collectively total about $1.3 million year to date and are included in the year-to-date adjusted EBIT loss of $100,000.

From year to date perspective recall that.

One we had roughly $700000 in costs related to the proxy matter and an additional $300000 in M&A related expenses.

Q2, most of the proxy costs were behind us, but we still have $300000 in M&A related expenses.

Those expenses collectively total about $1.3 million year to date and are included in the year to date adjusted EBIT loss of $100000.

Bill Northern: In Q3 and Q4, we are aiming to produce a more normalized adjusted EBER result and see that result improve over time as we further integrate the acquisition. From a cash perspective, we are targeting to improve cash flow as well, however, it should be noted that cash flow will likely lag behind adjusted EBITDA for the next six months. This is related to working off some deferred revenue associated with the acquisitions, paying off some of the one-time items that were previously discussed, and paying down some severances that were previously expensed.

In Q3, and Q4, we were aiming to produce some more normalized adjusted EBITDA results.

See that result improve over time as we further integrate the acquisitions.

From a cash perspective, we are targeting to improve cash flow as well. However, it should be noted that cash flow will likely lag behind adjusted EBITDA for the next six months.

This is related to working off some deferred revenue associated with the acquisitions.

Off some of the one type one time type items that were previously discussed and paying down some severance is that were previously expensed.

All this said I think Roy and I feel very good about where the business stands today.

Bill Northern: All this said, Roy and I feel very good about where the business stands today. Despite some of the proxy matters in Q1 which affected our profitability and cash position, we were able to execute on our acquisition strategy and now feel like we have the pieces in place to grow the business and realize the profit potential that will come from our ongoing mixed shift to higher-margin platform revenue. I'll now turn the call back to Roy. Okay?

Some of the proxy matters in Q1, which affected our profitability and cash position, we were able to execute on our acquisition strategy and now feel like we have the pieces in place to grow the business and realize the profit potential that will come from our ongoing mix shift to higher margin platform revenues.

I will now turn the call back to Roy.

Right.

Roy W. Olivier: Thanks, Phil. I'm going to address several issues on today's call, but I'd like to start with what we plan on doing with acquisitions and acquired products going forward. As a reminder, CITE is an advanced discovery tool or search tool focused on scientific, technical, and medical content. It has a full text search capability for most published articles and has a great user interface. It also includes a citation badge that helps the researcher understand how often the article they are looking at has been cited by other papers. In addition to showing how many times the article has been cited, it shows the number of supporting, mentioning, and contrasting statements in that article based on the site's unique learning model. Think of this as a FICO score or a Rotten Tomatoes score for the article the user is looking at.

Thanks Bill.

I'm going to address several issues on today's call, but I'd like to start with what we plan on doing with acquisitions and the acquired products going forward.

As a reminder, site isn't advanced discovery tool or search tool focused on scientific technical medical content.

It has a full text search capability for most published articles and has a great user interface.

It also includes a citation bad because it helps the researcher understand how off on the article they are looking at has been cited by other papers.

In addition to showing how many times. The article has been decided that shows the number of supporting mentioning and contrasting statements in that article.

Just on sites unique learning model.

Think of this as a FICO score or Rotten Tomatoes score for the article users looking at.

Roy W. Olivier: It has been successful in academic and corporate segments worldwide. The B2B corporate and academic ARR is about 400,000, and the ARR associated with the B2C version used by academic and corporate researchers is about 4 million as of the end of the quarter. Site's products have been successful largely based on their full-text search capabilities, the AI assistant, and their unique citation badge. Resolute has a similar advanced discovery tool, but with some very specific differences.

It has been successful in academic and corporate segments worldwide.

The b to B corporate and academic air or is about 400000, and the error associated with a b to C version used by academic and corporate researchers it was about $4 million as of the end of the quarter.

This product had been successful largely based on their full text search capabilities, the AI assistant and their unique citation badge.

Resolute has a similar advanced discovery tool, but with some very specific differences.

Roy W. Olivier: In addition to searching available scientific, technical, and medical content, Resolute products also have over 10 external databases connected, so search results show the scientific, technical, and medical content, plus whatever the external database is, return if they are turned on. Some of those databases include clinical trial information, patent data, FDA databases, financial information, and more. Think of this capacity as providing a 360-degree view of the search, not just STM or scientific, technical, and medical articles. The advanced version of Resolute's platform also provides enterprise search capability. Think of this as searching the customer's internal database. Some examples include scientific notebooks, videos, and other data.

Additionally, the searching available scientific technical medical content research products, all research that I'm, sorry, Resolute products also have over 10 external databases connected so search results show the scientific technical medical content.

Plus whatever the external databases.

Return if they are turned on.

Some of those databases include clinical trial information.

Patent data F D a databases financial information and more.

Of this capacity is providing a 360 degree view of the search not just S T M or scientific technical and medical articles.

The advanced version of Resolute platform provides for enterprise search capability.

Think of this the searching the customers' internal databases. Some examples include scientific notebooks videos and other data Reza.

Roy W. Olivier: Resolute built a very flexible and capable product, but it did not build specific workflows to solve specific problems for the customer. In my opinion, the Resolute technology was a black box with very advanced capabilities that had to be programmed to do specific tasks like identifying key opinion leaders, post-market surveillance, and other solutions. As such, the user interface and the workflow were built largely on a case-by-case basis.

Resolute built a very flexible and capable product, but does not build specific workflows to solve specific problems for the customer.

In my opinion, the Resolute technology was a black box with very advanced capabilities that had to be programmed to do specific tasks like identifying key opinion leaders post market surveillance and other solutions.

As such the user interface and the workflow was built largely on a case by case basis.

Roy W. Olivier: Moving forward, we are executing what we call a one search strategy where we will bring these tools together and then build solutions for our customers that will address specific problems that they are working on. Site will be our front end and user interface layer, with Resolute adding the external and enterprise search capability. Site will be our STM, or Scientific, Technical, and Medical Search Tool.

Moving forward, we are executing on what we call a one search strategy, where we will bring these tools together and then build solutions for our customers that were a little address specific problems that they are working on.

<unk> will be our front end and user interface layer.

With resolute, adding the external and enterprise search capability.

[noise] site will be our S T M or scientific technical and medical search tool site pro will be sized plus resolute external databases and site enterprise will be sized plus resolute enterprise search and external databases.

Roy W. Olivier: Site Pro will be Site plus Resolutes External Databases, and Site Enterprise will be Site plus Resolutes Enterprise Search and External Databases. We will then use these tools to build new solutions that service the needs of other departments in research-intensive organizations. The initial solutions we will build are the technology landscape. Solutions, Clinical Trial Solutions, Key Opinion Leader, Identification, Competitive Intelligence Modules, Patent Data, and more. We will also be releasing an enhanced postmarket surveillance and patent module. These modules are key to our long-term growth objectives. The first release will be the Tech Landscape module, which will launch this quarter, with clinical trials coming in our Q4 fiscal 2024. The remaining modules will launch late this fiscal year or in the first half of fiscal 2025. So, what does this do to our total addressable market and serviceable addressable market? The answer is quite simple.

We will then use these tools to build new solutions that service the needs of other departments in research intensive organizations.

The initial solutions were built our technology landscape.

Solutions clinical trial solutions key opinion leader identification competitive intelligence modules patent data and more.

We will also be releasing an enhanced post market surveillance and the patent module. These modules are key to our long term growth objectives. The first release will be the tech landscape module, which will launch this quarter with clinical trials coming in our Q4 fiscal 2024.

The remaining modules will launch late this fiscal year or in the first half of fiscal 2025.

So what does this do to our total addressable market and serviceable addressable market. The answer is simple it expands exponentially.

Roy W. Olivier: It expands it exponentially. The current IR deck shows that a couple of years ago, we offered solutions that served one part of the life sciences innovation value chain. Previous to these acquisitions, we organically built additional capacity that addressed four areas of the value chain. Not only does Resolute and SITE add to the four areas we already serve, but it also allows us to service a total of 13 areas of the value chain going forward. For the first time, we can also provide solutions to areas outside of scientific, technical, and medical content and life sciences. In October of 2024, I will have been this formal CEO for three years.

Our current IR deck shows that a couple of years ago, We offered solutions that serviced one part of the life Sciences innovation value chain.

Previous of news acquisitions, we organically built additional capacity that address four areas of the value chain.

Not only does resolute and site add to the for US we already serve it also allows us to service a total of 13 areas of the value chain going forward.

For the first time, we can also provide solutions to areas outside of scientific technical and medical content and life Sciences.

Two plus years ago, I set a b had b H a G of 20 million and are are in three years.

In October of 'twenty, 'twenty, four or will have been this formal CEO for three years, we were at $615 6 million an IRR as of 12 31, So I'm confident that we'll be close to 20 million by October, but likely a bit short.

Roy W. Olivier: We're at $15.6 million in ARR as of 12-31, so I'm confident that we'll be close to $20 million by October, but likely a bit short. I'm happy that we did not aggressively acquire someone when valuations were still at or near the top of the market. That said, our BHAG has been adjusted up to $30 million in ARR by the end of fiscal 2026, almost double where we are now. We believe this number can be hit through all organic growth with the product portfolio we have today and no further acquisitions. In addition, margins should expand as we approach this goal, and we would expect the overall EBITDA margin at that point to be in the double digits. I want to reiterate, this is not guidance; this is our BHAG.

I'm happy that we did not aggressively acquire someone one valuations were still at or near top of the market.

That said our behalf, it's been adjusted up to $30 million and air or by the end of fiscal 'twenty 'twenty six almost double where we are now.

We believe this number can be hit through all organic growth with the product portfolio, we have today and no further acquisitions.

In addition margins should expand as we approach this goal and we would expect the overall EBITDA margin at that point to be in the double digits I want to revert reiterate this is not guidance. This is <unk>.

Roy W. Olivier: Now, this is not to say that we will not continue to evaluate and acquire companies that align with our shareholder return objectives in addition to our business and product strategy. We expect to continue to focus on providing solutions throughout the research workflow and the innovation value chain. Regarding what I've recently referred to as acquisition number four, we have decided not to pursue that opportunity further.

Now this is not to say that we will not continue to evaluate and acquire companies that align with our shareholder return objectives. In addition to our business and product strategy.

We expect to continue to focus on providing solutions throughout the research workflow and the innovation value chain.

Regarding what I recently referred to as acquisition number four we have decided not to pursue that opportunity further.

Roy W. Olivier: While we were excited about the technology, some items in the diligence did not meet our threshold. We will continue to be disciplined about acquisitions moving forward. We do have other opportunities that we will continue to investigate; however, we will be more selective over the next two or three quarters to allow us to focus on getting our new strategy and the integration of the various products underway. Early returns on Resolute have not been in line with our financial expectations as we have experienced customer churn, some of which was expected when we signed the deal. We have developed a strong pipeline for new prospects. However, it should be noted that these products have the longest sales cycle of any products we offer.

While we're excited about the technology some items in the diligence did not meet our threshold.

We will continue to be disciplined about acquisitions moving forward.

We do have other opportunities that we will continue to investigate however, we will be more selective over the next two or three quarters to allow us to focus on getting our new strategy and the integration of the various products underway.

Early returns on resolute have not been in line with our financial expectations as we have experienced customer churn some of which was expected when we signed the deal.

We have developed a strong pipeline for new prospects. However, it should be noted that these products have the longest sales cycle of any products we offer.

Roy W. Olivier: On the other hand, we have been encouraged to find that the core technology is as strong as we believed it was, and we remain confident that we can utilize that technology in the new solutions described earlier and that those solutions will be more relevant to our customers. We have added two senior sales executives selling that product and expect to see some results in the form of new sales in the second half of the fiscal year. Conversely, in the early days of CITE, it overperformed to our expectations on B2C and B2B. Our belief was that we could cross sell the site into our academic and corporate customer base through our existing sales team. Those teams are trained and are doing demos now.

On the other hand, we have been encouraged to find that the core technology is as strong as we believed it was and we remain confident that we can utilize that technology in the new solutions described earlier.

And that those solutions will be more relevant to our customers.

We've added two senior sales executive selling that product and expect to see some results in the form of new sales in the second half of the fiscal year.

Conversely, the early days of a site has shown has over performed to our expectations on b to C and b to B.

Our belief was that we could cross sell site into our academic and corporate customer base through our existing sales teams.

Those teams are trained and doing demos now.

Roy W. Olivier: In just the past few weeks, we've closed $50,000 in new ARR on what was a $400,000 B2B business, and we have a very robust pipeline going forward. We're excited about our prospects as we integrate SiteSight's best-in-class capability with Resolute's extensive external and enterprise data capabilities and tie that integration with our industry-leading document delivery platform. In closing, I'll say that the entire management team believes that we now have the building blocks in place that will allow us to transform Research Solutions from a document delivery company to a software solutions provider that can compete with anyone in the space. We're very excited about our future, and we'll continue to report our progress on future calls. With that, I'd now like to turn it back over to the operator for Q&A. Operator, we will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.

Just the past few weeks, we've closed 50000, our new air or on what was a 400000 or b to B business and we have a very robust pipeline going forward.

Cited about our prospects as we integrate sites best in class capability with resolute extensive external and enterprise data capabilities and tie that integration with our industry, leading document delivery platform.

In closing I'll tell you that the entire management team believes that we now have the building blocks in place that will allow us to transform research solutions from a document delivery company to a software solutions provider that can compete with anyone in our space.

We're very excited about our future and we'll continue to report our progress and our future calls.

With that I'd now like to turn it back over to the operator for Q&A.

Operator.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Klee with Maxim Group. Please go ahead.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question today comes from Allen Klee with Maxim Group. Please go ahead.

Alan Klee: Yes, hi. Congratulations on the quarters. Could you talk about why you think Guide has been performing so well? And then you also said that Article Galaxy was your best quarter. What do you think turned that around? Thank you.

Yes, hi, congrats on the quarter you talk could you talk about why you think.

It has been performing so well and then you also said that article Galaxy was your best quarter.

What's the what do you think turned that around thank you.

Oh, yeah, thanks, Alan in terms of our site.

I would say a couple of things one is I think a site being part of a larger public organization.

Roy W. Olivier: One is I think CITE being part of a larger public organization has really helped its B2B prospect feel more comfortable with acquiring that platform. So I think that's helped accelerate some sales or even close some sales that maybe would not have closed because Site was a small independent company with a few employees. You know, we now offer 24-7 Technical Support.

<unk> has really helped it's b to b prospects feel more comfortable with acquiring that platform. So I think that has helped accelerate some sales or even a close themselves that maybe would not have closed because it was a small independent.

A company with a few employees, we now offer 24 seven.

Roy W. Olivier: We have a whole onboarding team to help onboard customers. We have larger sales and support organizations. So I think that's really helped increase the velocity of some of the B2B business. The B2C business actually has a very predictable investment return conversion rate. In other words, if we invest in digital marketing, it typically results in a certain amount of trials, and those trials convert at a very predictable rate.

Technical support are we have a whole onboarding team to help onboard customers, we have larger sales and support organization. So I think that's really helped increase the velocity of some of the b to B business.

The B to C business has actually a very predictable investment return.

Conversion rate in other words, if we invest in digital marketing it typically results in a certain amount of trials and those trials convert it very predictable right. So we have been we have been ratcheting up digital marketing spend on the on the BDC side and we see those results are literally in days or weeks, whereas as you know we have at least a two.

Roy W. Olivier: So we have been ratcheting up digital marketing spend on the B2C side, and we see those results literally in days or weeks, whereas, as you know, we have at least a 20-week, or typically about an average 20-22-week sales cycle for Article Galaxy and a longer sales cycle for Resolute. So we're able to basically move that needle very quickly by investing more in marketing. Bill, anything you want to add to the site comments? No, I think that's good, Roy.

The week are typically about an average 2022 week sales cycle for article Galaxy and a longer sales cycle for resolute. So we're able to basically move that needle.

He quickly by investing more in marketing.

Bill anything you want to add to the site comments.

No I think that's good right.

Roy W. Olivier: Yeah, on the AG comments, I think that we're seeing the new new sales teams pick up the pace. They're doing a nice job. We've closed a number of large deals. We actually closed the largest deal that we've closed in since I've been with the company during the quarter. And we're seeing pretty good success with larger deals, which is encouraging to me because there was a period there where we were closing a lot of new logos, but they weren't the average revenue per customer was not as high as we'd like it to be. So I think new news is starting to perform well. Part of that is marketing is driving, I think, a nice amount of leads into that new, new team. You know, I think our challenge going forward is taking what's working on the ArticleGalaxy, ArticleGalaxy references new, new team and applying it to upsells and site, and resolve products. Bill, anything you want to add to that? Yeah, I think I would say it was our best quarter in the last four quarters.

Yeah on the AG comment so I think that we're seeing the new new sales teams pick up the pace Theyre doing a nice job. We've closed a number of large deals we actually closed the largest deal that we've closed and since I've been with the company during the quarter and we're seeing pretty good success with larger deals, which is encouraging to me because there was a.

Period, there, where we were closing a lot of new logos, but they werent. The average revenue per customer was not as high as we'd like it to be.

I think new news starting to.

Perform well part of that is marketing is driving I think a nice amount of leads into that new new team. You know I think our challenge going forward is taking what's working on the article Galaxy article Galaxy references new new team and applying it to Upsells and site and resolute products.

Bill anything you want to add to that.

Yeah, I think I would say it was our best quarter in the last four quarters, but just recall in the last four quarters have been kind of coming down steadily. So this was a this was a nice rebound for us. This this quarter.

Roy W. Olivier: But just recall, the last four quarters have been kind of coming down steadily. So this was a nice rebound for us this quarter. And we saw a nice bounce back. Not it bounced up kind of to, you know, a rate that is acceptable to us, but not quite the rates we've seen. You know, before we started talking about some of the issues with the economy hitting the sales process there. To Roy's point, new new has been performing very well.

And we even saw a nice bounce back.

It was slipped taught ought to you know a rate that is acceptable to us, but not quite sorted the rates we've seen.

Before we started talking to you about some of the issues with the economy hitting.

Yeah, the sales process there to voice point, we knew.

<unk> has been performing very well so new sales are coming through strong I think where we're still struggling a bit at least for this year is on the expansion upsell side of things last year, we launched references which was a big catalyst for up sells you know we don't have as much catalyst going into the fiscal year, so running a little bit behind there, but it was.

Bill Northern: So new sales are coming through strong. I think where we're still struggling a bit, at least for this year, is on the expansion upsell side of things. Last year, we launched references, which was a big catalyst for upsells. You know, we don't have as much catalyst going into the fiscal year. So running a little bit behind there, but it was nice to see the platform sales turn around in Q2. And we're hoping that's a trend that will, you know, continue for the rest of the fiscal year. Oh, thank you.

Nice to see the platform sales turnaround in Q2, and we're hoping that's going to that's a trend that will continue on for the rest of the fiscal year.

Oh. Thank you, but then I'm also on site you mentioned that most of the IRR is with the.

Bill Northern: Then, also on site, you mentioned that most of the ARR is with the B2C business and that while you have some annual customers, it's mostly under a monthly subscription. So, do you have enough data to have a sense of the churn for that? How confident can we say those monthly customers will be annual customers? Do you have a sense of that? Would you like to take that, Bill?

C business in a while you have some annual customers.

It's mostly under monthly subscription so do you have enough data to have a sense of.

The churn of that how confident can we say those months of customers will be annual customers.

Do you have a sense of that.

You don't take that bill.

Yeah, I would say, we don't have enough data yet and that's part of the reason you know we definitely wanted to separate this out on a separate line to really isolate it and give our investors a view of sort of the changes in that over time.

Bill Northern: Yeah, I would say we don't have enough data yet, and that's part of the reason, you know, we definitely wanted to separate this out on a separate line to really isolate it and give investors a view of sort of the changes in that over time. We are going to kind of look at it and continue to monitor it. I also will say that we do recognize that B2C tends to obviously have higher churn rates. We did see higher churn rates from that business during the diligence. However, what I would say is we're already, you know, hard at work on things to do to basically make that product more sticky and reduce the churn rates in that segment. So there's some software we're using to help reduce churn, but there are also things that we can do from a pricing and packaging perspective to reduce churn in that segment.

We are we are going to kind of look at it and continue to monitor. It I also will say that we do recognize that b to C tends to obviously have higher churn rates.

Didn't see higher churn rates from that business in the diligence.

However, what I would say is we're already hard at work on things too.

Due to basically make that product more sticky and reduce.

The churn rates in that segment. So theres. Some some software we're using to help reduce churn, but there's also things that we can do from a pricing and packaging perspective, we think to reduce churn.

Bill Northern: And so I think, you know, as we learn more over the next few quarters, we'll be able to discuss that in a little more detail with investors. Yeah, and I would just remind everybody that, you know, the net churn rate in site B to C is higher than we want it to be. That said, its net ARR growth for the short time that we owned it went from 3.6 to 4 million.

In that segment and so I think you know as we learn more over the next few quarters, we'll be able to discuss that a little more detail with investors.

Yeah, and I would just remind everybody that you know net turn rate insight b to C is higher than we want it to be that said it's met they are our growth for the short time that we owned it went from three $6 million to $4 million. So it continues to show a really strong growth profile in spite of this churn.

Roy W. Olivier: So it continues to show a really strong growth profile in spite of its churn. We are all on the same page in terms of if we can cut that churn down, it's just going to accelerate the growth even more. Thank you. My last question is on incremental ARR.

We all I think are on the same page in terms of where we can cut that turned down its just going to.

Accelerating the growth even more.

Thank you Mike My last question is on incremental.

Or are is there.

Roy W. Olivier: You have more moving pieces now, so I was curious, do you have an internal target for what you shoot for each quarter? Well, Research Solutions definitely has very detailed budgets of what we expect in all of the various sales categories. SITE did not, but we have applied our planning to SITE, so we now do have specific targets for B2B. We really don't have specific targets for B2C other than continue to grow at the rate you're growing because that is a new kind of animal to us. We've been a strong B2B player for years. B2C is relatively new for us. That said, SITE has some very experienced B2C people that are doing a great job. And then I think on Resolute. We did put a plan together, and I think on the surface, Resolute's not where we wanted them to be. On the EBITDA line, they are. Cite's overperforming on both lines.

You have more moving pieces now so I was curious do you have an internal target for what you shoot for each quarter.

Well research solutions definitely had very detailed.

Budgets of what we expected and all of the various sales categories site did not but we have applied you now are kind of planning to site. So we now do have specific targets for me to be we really don't have specific targets would be to see other than continued to grow at the rate you're growing.

That is a new kind of animal to us we've been a strong b to b player for years, because she is relatively new for US that said site has some very experienced would be to see are people that are doing a great job.

And then I think on on Resolute, we did put a plan together and I think on the topline resolute not where we want them to be on the EBITDA line. They are sites over performing on both lines and research solutions is doing a nice job on new new but we continue to see a little bit of softness.

Roy W. Olivier: And Research Solutions is doing a nice job on NuNu, but we continue to see a little bit of softness on upsells and more churn than we would like to see. Okay, thank you so much. Thank you. As a reminder, if you would like to ask a question, please press star then 1 to be joined into the question queue. That's stars and one to be joined into the question queue.

On up sells and more term and we would like to see.

Okay. Thank you so much.

Thank you.

As a reminder, if you would like to ask a question. Please press Star then one they joined into the question queue.

That's star then one to be joined into the question queue.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Roy Olivier for any closing remarks. Yeah, thanks everyone for joining us on our call today. We will be participating in the Roth Conference in Dana Point, California, on March 18th and 19th. Qualified investors that would like to attend or schedule a meeting should contact their Roth sales representative.

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

Yeah, Thanks, everyone for joining us on our call today, we will be participating in the Roth Conference in Dana point, California on March 18th and 19th.

Qualified investors that would like to attend or schedule, a meeting should contact their raw sales representative.

Roy Olivier: We look forward to speaking with you in May to discuss our third quarter results, and have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. The Ultimate Parody Site-Limited The Ultimate Parody Site-Limited, www. Solutions-TV.com

Look forward to speaking with you in May to discuss our third quarter results and have a great day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Thank you.

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