Q1 2025 Research Solutions Inc Earnings Call
Also today's call's being recorded and if you should need any operator assistance during the call today. Please press star Zero now at this time I'll turn things over to Mr. Steven Hooser Investor Relations. Please go ahead Sir.
Yeah.
Steven Hooser: Thank you Bo and good afternoon, everyone. Thank you for joining us today for research solutions first quarter fiscal year 2025 earnings call.
Steven Hooser: On the call with me today are Roy W. Olivier President and Chief Executive Officer, and Bill near then Chief Financial Officer.
Steven Hooser: After the market closed this afternoon the company issued a press release announcing its results for the first quarter of fiscal of 2025 releases available on the company's website at research solutions Dotcom.
Speaker Change: Before Bill Roy and Bill begin their prepared remarks, I would like to remind you that some of the statements made today are forward looking and are made under the private Securities Litigation Reform Act of 1995.
Speaker Change: Actual 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 and uncertainties that could impact the company's future operating results and financial condition.
Speaker Change: 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 located in today's earnings press release as well.
Speaker Change: Finally, I would like to again remind everyone that this call will be recorded and made available for replay via a link on the company's website.
Speaker Change: I'd now like to turn the call over to President and CEO Roy Olivier right.
Roy Olivier: Thank you Steven our first quarter results reflect the financial scalability of our model is our net income and adjusted EBITDA growth outpaced our top line on a year over year basis, even when factoring in some one time expenses from a prior year deploying.
Deployments in the quarter were below our historical range, but we are seeing growth rebound in the second quarter.
Roy Olivier: Im, particularly pleased to report a 20% increase in total revenues and a 67% increase in platform revenue for the quarter.
A 60% increase in ear are with me to be contributing $12 2 million and BDC contributing $5 4 million.
Roy Olivier: An outstanding improvement in adjusted EBITDA and cash flows generated from operations of $1 3 million in EBITDA and 800000 in cash flow, resulting in almost $4 million and adjusted EBITDA on a TTM basis, and $5 1 million in cash flow in the same period.
Our first quarter deployments and incremental air or were lower than average due to several factors, including lower b to see subscription revenue growth during the summer months when universities, our out of season and the impact of the traditional European vacation period.
As we enter the fall our BDC subscriptions have materially picked up in our BDC subscription IRR is currently approaching 6 million.
Roy Olivier: Net platform deployments continued to be affected by a longer sales cycle, where customers are increasing their due diligence periods and extending budgetary reviews.
Roy Olivier: Under the surface the new logo team hit their quarterly targets, but that was offset by higher than normal churn and lower productivity from the upsell team.
We saw higher than expected non controllable churn driven primarily by acquisitions of our customers.
Roy Olivier: And customers closing their business that was over half of our churn.
Roy Olivier: On a positive note, we lost fewer customers to competitors in Q1.
Roy Olivier: My hope is that at the conclusion of this election provide some clarity for the near term and will allow for companies to make decisions as we approach the window for 2025 budgets to be finalized.
I'll review some of the steps, we're taking to improve our sales performance, but first I'd like to pass it over to bill to walk through our fiscal first quarter financial results in detail and then I'll wrap it up with some comments and outlook for fiscal 2025.
Roy Olivier: Bill.
Bill: Thank you Roy and good afternoon, everyone.
Bill: Before I start I would like to make a couple of reminders regarding year over year comparisons.
Bill: First for our prior fiscal year 'twenty 'twenty four we had approximately two months of activity from Resolute AI, which closed on July 28 2023.
Bill: In that same quarter.
Bill: No impact from site is that transaction closed on December one 2023.
Bill: Total revenue for the first quarter of fiscal 2025 was 12 million% to 20% increase from the first quarter of fiscal 2024.
Bill: Our platform subscription revenue increased 67% $4 3 million.
Bill: The growth the growth was primarily driven by the acquisition of site and a net increase of platform deployments and up sells from last year.
Bill: If you look at that growth from a pro forma perspective, assuming we had resolute in sight for the full quarter last year.
Bill: The growth rate was roughly 27%.
Platform revenue accounted for about 36% of our total revenue for the quarter compared to approximately 26% in the prior year quarter.
Bill: We ended the quarter was $17 6 million of annual recurring revenue or a R. R.
Bill: Up 60% year over year.
Bill: Which is comprised of roughly $12 2 million in beta B a R R and.
Bill: And approximately five five.
Bill: $5 4 million in a R. R associated with site B to C platform subscribers.
Bill: On a pro forma basis.
Bill: The year over year, our growth was roughly 22%.
Bill: Sequentially our growth in the quarter was modest with B to B, a R growing about $128000 and B to C. A R R growing roughly $68000.
We mentioned on our prior call that we expected lower growth to occur this quarter.
Bill: And then some of this was related to seasonality primarily in our <unk> business.
Speaker Change: As Roy mentioned I am happy to report that for the D to C perspective, we have seen that seasonality reverse as we entered the fall academic semester.
Speaker Change: And we are off to a strong start in b to C. A R growth for Q2.
Speaker Change: Please see today's press release for how we define and use annual recurring revenue and other non-GAAP items.
Speaker Change: Transaction revenue for the first quarter was $7 7 million.
Speaker Change: Three 4% increase from the prior year quarter.
Speaker Change: Our total active customer count for the quarter was 1390 compared to 1395 in the same period a year ago.
Speaker Change: Okay.
Speaker Change: Gross margin for the third quarter was 47, 9%.
Speaker Change: 780 basis point improvement over the first quarter of 2024.
And once again, a new company record for blended gross margin.
Speaker Change: The increase was due to the ongoing revenue mix shift towards higher margin platforms business and.
Speaker Change: In Q1, the platforms business contributed almost two thirds of the gross profits.
Speaker Change: As this mix shift continues we are starting to see the reality of being able to push our blended gross margin above 50%.
Speaker Change: Which we expect to happen in the next 12 to 15 months if not sooner.
Speaker Change: Platform business recorded gross margin of 87, 4%, a 210 basis point increase compared to the prior year quarter.
Speaker Change: The increase is primarily related to lower personnel costs and some steps we have taken to reduce our hosting costs.
Speaker Change: I will say this is a high result, and we may see this fall back slightly in future quarters.
Speaker Change: All things considered however, we expect it will remain above 85%.
Gross margin in our transaction business increased 140 basis points to 25, 7%.
Speaker Change: The increase was primarily attributable to increased copyright revenues and pricing initiatives.
Speaker Change: Similar to platforms. This result was very strong for the quarter.
Speaker Change: And we May experience slightly result, slightly lower results in future quarters.
Speaker Change: It's still expect results above 24, 5% in the near term.
Speaker Change: Total operating expenses in the quarter were $5 1 million.
Relatively flat to the prior year quarter.
Speaker Change: Last year's first quarter included approximately $1 2 million in acquisition and proxy related expenses.
Speaker Change: But also do not have any impact from site and only two months of activity from resolute.
Speaker Change: When you offset these two things if basically translated it translates into some very modest year over year growth in the SG&A expense base.
Speaker Change: Our revenue mix shifts continues to move in favor of the platforms business at our blended gross margin continues to improve.
Speaker Change: And we are seeing a fall to the bottom line and generate cash flows for the business.
Speaker Change: Net income for the quarter was 669000 or two cents per diluted share.
Speaker Change: Compared to a net loss of 988000 or negative <unk> <unk> per share in the prior year quarter.
Speaker Change: Adjusted EBITDA for the quarter was $1 3 million, a 10, 6% margin.
Compared to negative 441000 in the year ago quarter.
Speaker Change: It is important to note that with respect to adjusted EBITDA on a trailing 12 month basis. We have now generated just under $4 million of adjusted EBITDA and.
Speaker Change: At eight 5% margin and we expect that result to improve as we complete our second quarter.
Speaker Change: Turning to our balance sheet cash and cash equivalents as of September 30th 2024 was $6 9 million.
Speaker Change: <unk> was $6 1 million on June 32024.
Speaker Change: We generated 840, 843000 and positive cash flow from operations compared to a cash burn of 756000 in the prior year quarter.
Speaker Change: Also important to note is that over the last 12 months, we've now generated over $5 1 million in cash flow from operations.
Speaker Change: On a trailing 12 months basis, our cash flow is outpacing our adjusted EBITDA by a factor of approximately one three times.
Speaker Change: Which we believe is a good indicator of the strong quality of our earnings.
Speaker Change: As of quarter end, there were no outstanding borrowings under our revolving line of credit and we have no long term debt or liabilities.
As we look ahead.
Speaker Change: I think Q2 will be another strong quarter for earnings I will note. However that there is some seasonality negatively affecting the transactions business in Q2.
Speaker Change: Given the impact of the holidays.
Speaker Change: And we should also see some increase in SG&A expense from Q1, as we had some delays in hiring new newly budgeted head count in the quarter.
As a result, we will likely see an adjusted EBITDA result that while being an increase year over year is sequentially down a bit from Q1.
Speaker Change: This will stack step back up again in Q3, and Q4, which are seasonally our strongest quarters for transactions as well as overall profitability and cash flow.
Speaker Change: Overall, we feel like we have reached an inflection point in the SaaS revenue mixed shift of our business.
Speaker Change: In addition to demonstrating the profit potential of our business model this increasing profitability and cash flow is better positioning us to take advantage of strategic opportunities such as M&A going forward.
Overall, we are pleased with the results for Q1 and look forward to posting another record year of earnings.
Speaker Change: I'll now turn the call back to Roy right.
Speaker Change: Right.
Roy Olivier: Thanks Bill.
Speaker Change: As we approach the one year anniversary of the acquisition side, we continue to be pleased with its growth and the upsell opportunities it presents within our platform.
Speaker Change: We recently hired southern cone as our new Chief revenue Officer, Stefan comes with a proven track record of building high performance sales teams generating significant ear or growth.
Speaker Change: He will help us create a strategic and standardized framework around a common language improving sales process and accountability as a professional sales organization.
Speaker Change: Our entire team will go through training starting in January as we rollout the new process. We're excited to have suffered and join us and we're very confident in his ability to help us execute moving forward.
Turning to M&A, we have started to see valuations come down and have seen an increase in opportunities, including multiple inbound opportunities. We've recently evaluated this.
Speaker Change: This increase in deal flow is primarily due to more realistic valuation expectations.
Speaker Change: And the recent transaction executions of resolute and site demonstrating our ability to get deals closed as.
Speaker Change: As well as our stronger balance sheet, thanks to our increased profitability and cash flow.
Speaker Change: We continue to evaluate M&A opportunities.
Speaker Change: And remain.
Speaker Change: Highly focused on looking at businesses that have the right valuation and fits into either our product strategy or something where we can unlock cross selling opportunities to create higher organic growth.
Speaker Change: Confidence in our organic plan remains high.
Speaker Change: Turning back to <unk> sales, we did have some nice successes in the quarter.
Speaker Change: Few of those include in part of Therapeutics, which is an article Galaxy, Peru, plus site deployment. It was a competitive takeaway initiated by our past articles Galaxy user who suggested that <unk> look at our solutions.
Speaker Change: The win was due to the trust and past experience with research solutions.
Speaker Change: Vac site, which isn't article Galaxy Pro deployment. This was also a past user that had used AG and our true previous companies. They looked at competition during the trial period and ended up choosing us through the past positive experience.
Speaker Change: We also closed a large academic deal with the University of California for our article Galaxy scholar product that will cover 11 libraries.
Speaker Change: In summary, despite the longer sales cycles. We are currently experiencing we remain well positioned within the research process and I believe there is significant opportunity to further strengthen our financial position.
Speaker Change: Connie improves.
Speaker Change: We've seen our strongest sales pipelines in the Companys history and feel confident in our future.
From a product perspective, we continue to focus on developing the capacity.
Speaker Change: As a SaaS an AI company.
Speaker Change: Enhancing our core offerings and site article Galaxy and references.
Speaker Change: Today all of our applications are SaaS based and include an AI assistant to help researchers at natural language questions and good results based on peer reviewed STM content with limited hallucinations or bad results.
Speaker Change: So it has unique capability in terms of a citation index on steroids, when compared to competition and a powerful AI assistant that focuses on near full text search of most of the content outside or behind paywalls site.
Speaker Change: So it is unique in both of those areas most of the newly announced companies. The claim to do this only have access to OE or free content and do not have the rights to search behind the paywall.
Speaker Change: The article Galaxy family of products is unique and that it is one of the only publisher independent solutions that offers access to the world's content in one system.
Speaker Change: Including access to electronic or print source materials print source means the article can only be found in our printed book.
Speaker Change: In addition, our referenced management product continues to develop its overall features and AI capability, which is helping us appeal to our core customer segment and helped with the competitive takeaways like in cargo, which I mentioned earlier.
Speaker Change: We will continue to focus on expanding our capability in AI by continuing to work on integrating site in AG products. We have signed several new publishers to the site index and the agreements, which allow us to provide near full text search on those articles.
Speaker Change: We will continue to focus on adding additional publishers to the site platform.
Speaker Change: In addition, we started offering publishers and amendments in which our customers can purchase the text and data mining rights or Tdm rights for articles they've already purchased in addition to rights when they purchase new articles.
Speaker Change: We believe we're in a great position to offer the long tail of small and medium publishers.
Speaker Change: To help our large customers achieve their AI objectives by delivering that long tail of tdm right with one offering.
Yeah.
Speaker Change: With that I'd like to turn the call back over to the operator.
Operator.
Speaker Change: Thank you Mr. Olivier ladies and gentlemen at this time if you do you have any questions. Please press star one if you do find your question has already been addressed you may remove yourself from the queue by pressing star to once again star one please for questions well go first to Richard Baldry of Roth Capital Richard. Please go ahead.
Speaker Change: Thanks.
Richard Baldry: When I look into that.
Spending in the quarter it looked like the platform cost side actually fell.
Speaker Change: I haven't really seen that ever go down.
Richard Baldry: Like Jerry.
Richard Baldry: Like was there a reversal of some.
Prior cost or how does that fall and now is that sustainable forward.
Speaker Change: We don't.
Yeah sure Yeah. There was a couple of things contributing to it one is we removed one and some labor in that area.
Speaker Change: And the other is that we basically did some things to rework some of our hosting cost to bring that hosting cost down.
Yeah, which had been running kind of high, especially in the resolute business. So I.
I do think there are some sort of permanent reductions there from what we've seen before but you could see it.
Speaker Change: Pick back up a little bit we might add a little bit of head count back in and Theres also from time to time, where we need to run some things from an experimental basis basis that drive our hosting cost out. We just didn't have a lot of that this quarter. So it was just an unusually light quarter and Thats why I said in my remarks, you know you could see this misread.
Speaker Change: Salt, where this margin that we had of the 87, 4% does fall back lower than that I still think it'll be above 85 easily.
Speaker Change: But it was just sort of a.
Speaker Change: Yeah.
Speaker Change: In the quarter, where were you able to keep the hosting cost way down.
Speaker Change: Yeah.
Speaker Change: I mean look below into the Opex side.
Speaker Change: Yeah, the G&A was fairly level sequentially.
Kind of flipped.
Speaker Change: And marketing went up a decent amount in the R&D came down.
Speaker Change: Out how.
Speaker Change: How do we think about what those levels should look like on sort of a steady state basis.
Speaker Change: Is first quarter sort of indicative, where we you think you'd be or something sorry by unusual amount there.
Speaker Change: Yes, I think for for first quarter.
Speaker Change: The only thing you might see some youll, probably see some step up as we move into Q2 and beyond.
Speaker Change: And sales and marketing and in in a little bit less so to speak maybe in tech and product development in the sales and marketing side.
Speaker Change: We got into some of those.
Speaker Change: Summer months, we did cut back a little bit on the advertising spend on the BDC side. So we are sort of ramping that up as we head into the fall here and are gaining ground on subscribers.
Speaker Change: And then on the other side of things.
Speaker Change: As Roy mentioned, so we did hired a new CRO.
Speaker Change: So that'll be some additional head count in the business as well, which will drive some of that product development I think youll see some modest increase as well. So I think overall if you look at SG&A, it's probably gonna look more.
Speaker Change: Probably more like Q3 from last year just in total.
Speaker Change: With some of the caveats I mentioned in the buckets, there could be a little bit higher than that but.
Speaker Change: But that's that's.
Speaker Change: That's kind of where it's targeting right now.
Speaker Change: Okay then.
The commentary around expectations M&A valuations are coming in.
Speaker Change: Can you talk about that.
Speaker Change: You would have overlapping customer bases is that.
Speaker Change: Or are you kind of complementary opportunities to cross sell or is it.
Speaker Change: Pretty much across the board and I think there was a comment around.
Speaker Change: More inbound inquiries are directionally people coming to you.
Speaker Change: Yes it.
Speaker Change: Is that.
Do you think that's still a decent way to find things that fit properly or are these people that you've done business with and that's why they are familiar with you. So that sort of makes sense from the get go.
Roy Olivier: Yes. This is Roy I mean, a couple of comments I think part of the inbound is just where now we've been recognized as somebody who does new deals with.
Roy Olivier: Companies in this space so people reach out to us as a result of that.
Part of it is also related to the founder Josh.
Right, who has very high profile in the industry, especially amongst startups and so a lot of folks saw what he did in want to explore.
Roy Olivier: Similar path.
Speaker Change: To your other question.
Speaker Change: What were looking for specifically is primarily things that enhance our product strategy. So when we think about the research workflow that the various user personas that we sell to utilize we look at that worked through a workflow through the lens of what steps are we providing today.
Speaker Change: What steps or other people, providing today, where should we partner where should we acquire and for me. The acquisition has to fit a few criteria. It has to give us a clear strategic advantage. It has to be something that from a valuation point of view makes sense and it has to have a very strong cross sell.
Speaker Change: Opportunity into our base, because I think a lot of value creation out of these acquisitions very little of it is going to come from expense for expense reduction a vast majority of that value creation is coming from cross selling into the base.
Speaker Change: We'd certainly like to look a direct competitor to take out but theres just not that many of those left that are actionable.
Speaker Change: So it's primarily what I mentioned a minute ago.
Speaker Change: Alright. Thanks.
Speaker Change: Thank you. We'll go next now to Jacobs Steven of Lake Street.
Jacobs Steven: Yeah, Hey, guys. Thanks for taking the questions.
Jacobs Steven: Right.
Jacobs Steven: There are some lower deployments in the quarter.
Speaker Change: I'm just curious what was kind of the driver despite.
Speaker Change: The comments about the new logo team hitting their targets.
Speaker Change: Yes, I had mentioned on the previous call that one of the new segments. We are pursuing much more aggressively than we have historically as academic and that is on the back of a strong site academic product as well in those.
Speaker Change: Continuing to enhance the article galaxies scholar product reserved in the product.
Speaker Change: And to give you some idea of numbers.
Speaker Change: In the first quarter. After we acquired site, we did about 240 250000 hours of AUR growth.
Speaker Change: Off of their base, when we acquired them of about 400000.
Speaker Change: In the second quarter, which was our calendar Q3, our fiscal Q4, we did about 280 $290000.
Speaker Change: <unk> growth and about half of that growth was academic.
Speaker Change: In our fiscal Q1, non academic growth number was tens of thousands it was less than $50000 because.
Speaker Change: In the academic space a lot of decisions are made around the December January timeframe, a lot of decisions are made around the June July timeframe.
So we expect that and actually budgeted for Q1 to be materially lower from a deployment point of view.
Speaker Change: And then Q4 was that said the two other things that affected our numbers negatively during that quarter was under performance by our up sell team and more churn than we expected. So there's various things hitting that some of it is seasonality some of it is.
Speaker Change: <unk> execution and some of it is just not a general slowness that we've seen in the market in the last few quarters.
Speaker Change: Okay got it that makes sense and maybe just kind of contrast that with the comments you made about the band rebounding here that youre seeing in Q2.
Speaker Change: Would you say that's kind of.
Speaker Change: The demand is rebounding back to above baseline are not quite the baseline or.
Speaker Change: Kind of what you would expect.
Speaker Change: Yeah on the BDC side.
Speaker Change: Think we did somewhere like 50 or 60000 here our growth in Q1.
Speaker Change: We are already over.
Speaker Change: I made a comment we're approaching 6 million. So that means were around 500000 here our growth on the BDC side as of now and we're halfway through the quarter.
Speaker Change: I Wouldnt flatline that two or three number because we will see slowness and some churn in December of students.
Speaker Change: Longer earn school, but I think we will have a very good quarter from a BDC perspective.
Speaker Change: Early indicators are we're seeing some nice activity on the <unk> side I mentioned, we've got record pipelines, we just have to execute and I think the other thing we need to do is do a better job managing churn. We've made some changes to how we run that process and I think the combination of improving execution there plus.
Speaker Change: Our new cero, plus some leading indicators we see.
Speaker Change: To me gives me hope that we will see a nice bounce back as we get into.
Towards the end of this quarter.
I'm also.
Speaker Change: Really excited to report I mean for the first time since I've been here, we've got $2 million of pipelines, which is a.
Speaker Change: Pretty nice pipeline for us and that's all being generated by the new marketing VP, who joined us a little bit less than a year ago. He is doing a nice job filling those pipelines in.
Speaker Change: Driving conversations, which ultimately for US result of the sale.
Speaker Change: Great and maybe just one last one.
Speaker Change: With the new Chief Revis.
Speaker Change: Officer coming in maybe.
Speaker Change: You gave us top two or three priorities.
Speaker Change: They kind of look at their role.
Speaker Change: Yes, he walked into the 90 day plan is first.
Speaker Change: First month is really just to learn so he has been a lot of time and a lot of our people learning how we do what we do.
Speaker Change: As we get into January we will as I mentioned in the call. We will have a standardized training not just address the sales that will address sales the CSM the executives of the company and anything that kind of touches sales.
Speaker Change: And his his successful track record is coming in.
Speaker Change: It's a new company, whether it's a turnaround or whether it's just trying to accelerate growth in an existing sales team that does a pretty good job. He has a very structured process.
Speaker Change: And has done a nice job fairly dramatically increasing ear our growth of the Companys as Julian So you know what I'm excited about what we think he can do here because I think sales execution is something we do pretty well, but I think we can do a better.
Speaker Change: Okay very helpful. Thank you guys.
Speaker Change: Thank you.
Speaker Change: And ladies and gentlemen, just a quick reminder, star one please for any further questions. This afternoon well go next now to Derek Greenberg of Maxim Group.
Derek Greenberg: Hey, guys. Thanks for taking my questions.
Derek Greenberg: I wanted to touch on adjusted EBITDA the margins the cadence there.
Speaker Change: Noted that there'd be a little bit of a sequential decline in the second quarter, but then we should see improvement.
Speaker Change: Strong performance in the third and fourth.
Fourth quarter I was wondering if you think of third quarter and may be an improvement.
First quarter, you then or if you think it will still be a little bit.
Speaker Change: Yeah.
Speaker Change: What we saw this quarter just due to the rapid cost.
Speaker Change: So I believe the answer to that one.
Speaker Change: Yeah sure Yeah, no I think traditionally.
Speaker Change: Our third and fourth quarter.
Speaker Change:
Has been our best quarters of the year, if you kind of just look back and Michelle.
Speaker Change: It's it's it's a bit early but.
Speaker Change: Our goal is to have that quarter would be an improvement over the.
Speaker Change: First quarter.
Speaker Change: Typically we will.
Have a nice Q1, you might take a little bit of a step down in Q2 like I talked about just because of some of the seasonality.
Speaker Change: And usually we are bringing some additional costs for the new year, but then I you know our goal in Q3 would be definitely to outperform what have you done what we've done here in Q1.
Speaker Change: Okay, great. Thank you that's helpful.
Speaker Change: And then I wanted to touch on you were talking about some of the B to B.
Speaker Change: Just sales data sales as kind of being extended by Walker.
Speaker Change: Blogger review processes and all that.
Speaker Change: Factors.
I was wondering I think you had cited a metric on the last call that Hey, Phil had expanded to over 120, whereas historically its been closer to around 90.
Speaker Change: Wondering if there were any updates there or if we're still kind of seeing similar levels to what we saw on the last quarter.
Speaker Change: Yes, that's a good question I did not looked at our days to sales statistics.
Speaker Change: For the call.
Speaker Change: But I can tell you are.
Speaker Change: Pack, which is our customer acquisition costs.
Speaker Change: It's running one month better than it was in the previous three quarters.
Speaker Change: So it's shortened a little bit which would lead me to believe.
Speaker Change: Because we have not reduced expenses that.
Speaker Change: Time involved a little bit lower.
Speaker Change: But I'd have to look up days the sale I think it is still about where it was when we had our last earnings call, but it may be.
Speaker Change: A little bit different but I don't think it's materially changed.
Speaker Change: Okay got it.
My last question's just on rapidly they are.
Speaker Change: It's tracking and I think.
Speaker Change: More recently you had said.
Speaker Change: Essentially planning some cost reductions in that segment I was just wondering what the outlook looks like that.
Speaker Change: Yes, I mean, I think Roseland continues to be a concern we still see value in the databases and resolute and ultimately adding them into the combined <unk> platform resolute as a standalone platform has had a few sales.
Speaker Change: The last six months, but it's the bulk.
Speaker Change: Bulk of our sales are coming from either side, one of the article golf Galaxy products. So.
Speaker Change: I'm sorry at Resolute is certainly underperforming to where we thought it would be.
Speaker Change: In terms of new sales, but that said we have pivoted.
Speaker Change: A lot of our activity to article Galaxy and site and getting that integration done in order to drive growth in those products, which have.
Speaker Change: <unk> been much more successful.
Speaker Change: Okay got it thanks for taking my questions.
Thank you well go next now to Avi Fisher of long cast advisers.
Speaker Change: Hi, Thanks for taking the call can you.
Speaker Change: I Wonder if you could talk about two different things one is sort of a difference between academic and a corporate customer.
Speaker Change: Is there a difference in the margin profile at all either way.
Speaker Change: I think the gross margin Bill can comment exactly is very similar to the average sale prices lower and academic customer average sales price.
Speaker Change: It is.
Speaker Change: Probably between 3500 4000, and as you know the average sale price on the business overall is about 11000, so it's a lower ASP, but has a lot more transactional revenue typically associated with it.
And.
Speaker Change: But that's the big difference financially Bill do you have a comment on the gross margin.
Yes, the gross margins similar it's just typically.
Speaker Change: At a lower price point as Roy noted.
Speaker Change: And the flip side being as a percentage of their platform fee. They generate they tend to generate a lot more transaction revenue.
Speaker Change: Which is lower margin, but it does help the bottom line a bit.
Speaker Change: Right and what is.
Speaker Change: What is the expected transaction revenue from a new academic customer is it significant or.
Speaker Change: Well I think I've mentioned in previous calls that are you know on average a customer spends about two and a half times their platform fee and transaction revenue in the academic side.
Speaker Change: <unk>.
Speaker Change: It's much much higher than that.
Speaker Change: Sometimes it's 20 times.
Speaker Change: However, there is a lot of variability depending on the size of the library. So for example, we have no idea sitting here today, what uterus, California is going to be.
But we'll start to see that in the next quarter and may be able to comment as to what impact that's going to have on the transaction side of the business.
Speaker Change: Well that was my other question in terms of the University of California, when do we expect that to roll out and can you talk a little bit about that competitive environment. Okay.
It sounds like a big win.
Speaker Change: Yes, I think it was it was a good win for us.
Speaker Change: No we do.
Speaker Change: They look at.
Speaker Change: Everybody in the space, but we have a very unique offering in the workflow and libraries shoulders, frankly, nobody out there that can do what we do in terms of article Galaxy scholar.
Speaker Change: And so that's been a nice win and that's also a library that at some point, we'd like to circle back to even talk about site, there's a search solution for them.
Speaker Change: But yes. It was a it was a nice win and it was a competitive win.
Speaker Change: And can you also talk about the competitive environment, you're seeing in the corporate side.
Speaker Change: The corporate customer side I mean.
Speaker Change: Yes.
Speaker Change: Just a little cautious on your what Youre seeing in corporate new ads talking a lot about churn.
Content customers going out of business.
Speaker Change: You haven't touched on the competitive side and I'm curious about that.
Speaker Change: Yes, it's interesting when I was running the analysis for our board meeting recently I was very surprised frankly to see that competitive churn to competitors is down double digits.
Year over year in terms of year to date and a forecast for the full year, which for US. We just look at the first four months of the year in Flatlining out and see where the numbers come out compared to last year and it's down double digits now that is a lumpier part of churn in other words, you there could be one medium sized deal that moves that number but the point is.
Speaker Change: We're not seeing a lot of competitor to competitor losses, what we're seeing is customers want to dial back on their budget, which means less users.
Speaker Change: Customers going out of business customers cutting cutting the budget entirely.
Speaker Change: Customers that are being acquired by someone else and forced to use their tech platform, but there is an element of churn that is controllable by us in terms of the ROI of a software or other things they need to software to do and we're very very sharply focused on correcting those issues.
Speaker Change: To control, what we can control and the rest of it we really can't control.
Speaker Change: Are your competitors, leaving the space or are they just not as aggressive marketing in this space or is.
Speaker Change: As a softball question or are you just improved so much.
Speaker Change: I don't think they're leaving the space I think.
Speaker Change: I think we have improved and.
Speaker Change: In some cases.
Speaker Change: We execute better than Amazon, there are cases, where they execute better than us, but I think all in all we stack up very well against our competitors because we have some unique capability article Galaxy has some unique capability and I think if we communicated effectively to the customer it's a pretty easy decision, we haven't lost deals where I get pretty frustrated because we're not.
Speaker Change: Listen to the call because we can we recorded all the calls with an AI engine I can listen to them.
Speaker Change: We may not share some of the differentiating features that I think makes the difference for us and that's where I think sales execution comes in but all in all I think we we execute pretty well they are not leaving the space and I think our products are very competitive with our products.
Speaker Change: I appreciate I have I'm, just going to ask one more quick question and then jump off the call.
You have you reported about 1074 corporate customers can you sort of paint for us sort of a pie chart of sorts.
Speaker Change: What percentage of those customers are pre revenue what percent of those customers are.
Zero to $10 million revenue in <unk>.
Scale is $10 million to $100 million or something like that.
Speaker Change: I don't know bill might have some color on that I don't think we have any left that are pre revenue most of those got killed.
Speaker Change: Year or two ago during the economic meltdown.
Speaker Change: D C would no longer fund them or whatever and so on.
Speaker Change: I think most of our customers have revenue and my gut feel is most of our customers are significant revenue numbers. We have some smaller customers that are 10-C <unk> C. But.
Well, let me put it this way I mean, I think 60% of our revenue comes from the top third of our customers.
Speaker Change: So you know there are some small ones there, but they are typically smaller chunks of revenue.
Speaker Change: Bill do you have anything you want to add.
Bill: Yeah, I think so the metric I think royalties quota was more on the platform spend but that debt <unk> thousand.
74, count is basically I think the accounts you're referencing is the transaction customers. So that that is probably more representative of the entire customer base Avi and that's what I said to be a nice count you have to be actively doing transactions. So theres nobody pre revenue in there.
Bill: Alright.
Expect yeah, I expect the concentration.
Bill: Is probably.
Bill: Again, a little bit more spread out than the 60% number.
Bill: That ROI game, but it is accurate that we have certain customers that are.
Bill: You have a bigger chunk of the business.
Bill: There yeah I always confused.
Bill: Customer platform and transaction customer I apologize, but just.
Bill: I mean, yeah within the platform space.
You still have are there a whale customers youre trying to sell to or like large whale customers trying to answer where are you trying to sell to sort of medium and small sized business I'm just trying to understand that.
Bill: Process.
Speaker Change: I think if you look at a trailing 12 month deployment number a bulk of those are kind of medium sized customers as a few small is in there, but those meetings, but yes, we are.
Speaker Change: We released the stat that says we're in 70% of the top 20 pharma.
Speaker Change: We think it's our right to get the other 30 and then there's a whole another chunk of very large customers below that below that top 20 line that certainly we chase those are longer more complex sales cycles.
Speaker Change: But.
Speaker Change: Those are priorities for us because those are the ones that really move the needle.
Speaker Change: I appreciate your taking the questions. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you and gentlemen, it appears we have no further questions. This afternoon, Mr. Olivier I'd like to turn things back to you Sir for any closing comments.
Roy Olivier: Yes, so as a quick reminder, on bill and I will be participating in the southwest ideas conference on November 20th in Dallas.
Roy Olivier: If you're interested in participating please reach out to three part advisors. Thanks for your time today, we look forward to speaking to you in February about our Q2 results and have a great day.
Speaker Change: Thank you Mr. Olivier, ladies and gentlemen, again that does conclude the research solutions first quarter fiscal 2025 earnings call again, thanks, so much for joining US everyone and we wish you all a great evening Goodbye.
Speaker Change: [music].