Q2 2025 Research Solutions Inc Earnings Call
Oh.
Hello.
[music].
Yes.
Please standby your program is about to begin if you need assistance during your conference today. Please press Star zero.
Operator: Standby.
Operator: Your program is about to begin. If you need assistance during your conference today, please press star zero.
Operator: Good day, everyone, and welcome to today's Research Solutions, Inc. second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star.
Speaker Change: Good day, everyone and welcome to todays Research Solutions, Inc. Second quarter 2025 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing star one on your telephone keypad, you may withdraw yourself from the queue by pressing star two.
Jess: Please note, this call may be recorded, and I will be standing by if you should need any It is now my pleasure to turn the conference over to Mr. Steven Hoosier, Investor Relations.
Speaker Change: Please note this call maybe recorded and I will be standing by if you should need any assistance.
It is now my pleasure to turn the conference over to Mr. Steven Hooser Investor Relations. Please go ahead Sir.
Jess: Please go ahead, sir.
Steven Hooser: Thank you, Jeff and good afternoon, everyone. Thank you for joining us for the research solutions second quarter fiscal year 2025 earnings call on the call with me today are Roy W. Olivier President and Chief Executive Officer, Don There, then Chief Financial Officer, and Josh Nicholson Chief strategy Officer.
Steven Hoosier: Thank you, Jess, and good afternoon, everyone. Thank you for joining us for the Research Solutions second quarter fiscal year 2025 earnings. On the call with me today are Rory W. Olivier, President and Chief Executive Officer, Bill Nurthen, Chief Financial Officer, and Josh Nicholson, Chief Strategy Officer.
Steven Hoosier: After the market closed this afternoon, the company issued a press release announcing its results for the second quarter of fiscal 2020. The release is available on the company's website at researchsolutions.com.
After the market closed this afternoon the company issued a press release announcing its results for the second quarter of fiscal 2025 releases.
Steven Hooser: The release is available on the company's website at research solutions Dotcom.
Steven Hoosier: Before we begin our prepared remarks, I would like to remind you that some of the statements made today will be forward looking and under and made under the Private Securities Litigation Reform Act of 1990. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to the 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.
Steven Hooser: Before we begin our prepared remarks, I would like to remind you that some of the statements made today will be forward looking and under and made under the private Securities Litigation Reform Act of 1095.
Steven Hooser: Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to the research solutions recent filings with the SEC frame more detailed discussion of the risks and uncertainties that could impact the company's future operating results and financial condition.
Steven Hoosier: 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 today's earnings press release as well.
Steven Hooser: 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 GAAP measures is included in today's earnings press release as well 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.
Steven Hoosier: 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.
Steven Hooser: I would now like to turn the call over to President and Chief Executive Officer right W. Olivier right.
Steven Hoosier: I would now like to turn the call over to President and Chief Executive Officer, Roy W. Olivier.
Roy W. Olivier: Roy? Thank you, Steven. Overall, I'm pleased with the second quarter results, net new ARR and deployments were strong and helped produce nice overall results on the top and bottom line. We delivered a record in terms of organic net new deployments, some of which was due to the reorganization of the sales team into a corporate-focused team and an academic-focused team. We saw strong results in academic and corporate sales teams during the quarter. We are not where we want to be in terms of churn and upsells, and we'll continue to focus on improving that area of the business.
Speaker Change: Thank you Steven.
Speaker Change: Overall I'm pleased with our second quarter results net new air are in deployments were strong and helped produce nice overall results on the top and bottom line we.
Speaker Change: We delivered a record in terms of organic net new deployments some of which was due to the reorganization of the sales team into a corporate focus team and an academic focus team.
Speaker Change: We saw strong results in academic and corporate sales teams during the quarter.
Speaker Change: We are not where we want to be in terms of churn and Upsells and will continue to focus on improving that area of the business.
Roy W. Olivier: That said, our customer acquisition costs, or CAC, and our CAC to LTV, or CAC to lifetime value, remain strong. The overall net ARR growth number is 1.5 million, which is where we need to be in terms of a quarterly run rate. However, it will take a few more quarters before we can consistently deliver that result every quarter. B2C had a strong quarter, and we continue to dial in the formula to maximize new ARR derived from digital spend by market. B2C slowed at the end of the quarter as the holiday break impacted new signups, and we expect that slowdown to impact January and then ramp up as we get into the second two months of the quarter.
Speaker Change: Our customer acquisition costs, or CAC, and our CAC to LTV or capped a long lifetime value remains strong.
Speaker Change: The overall net AOR growth number is $1 5 million, which is where we need to be in terms of a quarterly run rate. However, it will take a few more quarters before we can consistently deliver that results every quarter.
Speaker Change: <unk> had a strong quarter and we continue to dial in the formula to maximize new air are derived from digital spend by market.
Speaker Change: PVC slowed at the end of the quarter as the holiday break impacted new sign ups and we expect that slowdown to impact January and then ramp up as we get into the second two months in quarter.
Speaker Change: I'll review some of the steps, we're taking to improve our sales performance, but first I'd like to pass the call over to bill to walk through our fiscal second quarter financial results in detail.
Roy W. Olivier: I'll review some of the steps we're taking to improve our sales performance, but first I'd like to pass the call over to Bill to walk through our fiscal second quarter financial results in detail.
Roy W. Olivier: After Bill's portion, I'll be back to address where we are in more detail, and I ask Josh Nicholson, the founder of CITE and our Chief Strategy Officer, to join today to comment on some of the recent news regarding new entries into the AI space and how Research Solutions expects to win in the long term.
Speaker Change: After bill's portion I'll be back to address where we are in more detail and I'll ask Josh Nicholson, the founder of site and our Chief strategy officer to join today.
Speaker Change: Comment on some of the recent news regarding new entries into the AI space and how research solutions expects to win in the long term bill.
Bill Nurthen: Bill? Thank you, Roy, and good afternoon, everyone. Before I start, I would like to remind everyone that we closed the ResoluteAI transaction on July 28, 2023, and the CITE transaction on December 1, 2023.
Speaker Change: Bill.
Speaker Change: Thank you Roy and.
Speaker Change: Hey, good afternoon, everyone.
Speaker Change: Before I start I would like to remind everyone that we closed the resolute AI transaction on July 28 2023.
Speaker Change: And the site transaction on December one 2023.
Bill Nurthen: For Q2 comparisons, the Resolute AI transaction is now fully anniversaried in the business. However, last year, we only had one month of activity related to sites. Total revenue for the second quarter of fiscal 2025 was $11.9 million, a 15.5% increase from the second quarter of fiscal 2024. Our platform subscription revenue increased 47% to $4.6 million. The growth was primarily driven by a net increase of platform deployment. and the contributions from site, which, in addition to having a full three months of activity in the quarter, experienced over 75% pro forma revenue growth over the prior year quarter.
Speaker Change: For Q2 comparisons the resolute AI transaction has now fully anniversaried in the business. However, last year, we only had one month of activity related to site.
Speaker Change: Total revenue for the second quarter of fiscal 2025 was $11 9 million a 15, 5% increase from the second quarter of fiscal 2024.
Speaker Change: Our platform subscription revenue increased 47% to $4 6 million.
Speaker Change: The growth was primarily driven by a net increase of platform deployments.
Speaker Change: And the contributions from site, which in addition to having a full three months of activity in the quarter experienced over 75% pro forma revenue growth over the prior year quarter.
Speaker Change: Platform revenue accounted for about 39% of our total revenue for the quarter.
Bill Nurthen: Platform revenue accounted for about 39% of our total revenue for the quarter. compared to approximately 30% in the prior year quarter. We ended the quarter with $19.1 million in Annual Recurring Revenue, or ARR, up 23% year-over-year, reflecting strong growth in both B2B and B2C platform deployments. and our continued sales and upselling efforts. The ARR growth rate is now a purely organic measure, as for calculation purposes, both Resolute and CITE have been fully anniversaried as of the end of December. The ARR is broken down as 12.7 million in B2B ARR and approximately 6.4 million in normalized ARR associated with sites B2C subscribers.
Speaker Change: Comparing to approximately 30% in the prior year quarter.
Speaker Change: We ended the quarter with $19 $1 million in annual recurring revenue or <unk>.
Speaker Change: Up 23% year over year, reflecting strong growth in both b to B and B to C platform deployments.
Speaker Change: And our continued sales and up selling efforts.
Speaker Change: Okay.
Speaker Change: Our growth rate is now a purely organic in nature as for calculation purposes, both resolute and sites have been fully anniversaried as of the end of December.
Speaker Change: The <unk> is broken down as $12 7 million in <unk> and approximately $6 4 million and normalized they are are associated with sites bdcs subscribers.
Speaker Change: Net incremental or our growth in the quarter was approximately $1 5 million.
Bill Nurthen: Net incremental ARR growth in the quarter was approximately 1.5 million, and we had 61 net B2B platform deployment. As Roy mentioned, the NET61 platform deployments in the quarter were the highest organic performance the company has ever posted. We are pleased with the AR growth in the quarter, as it was not only strong, but also distributed across B2B and B2C, as well as multiple products. In addition, it was nice to see the seasonality we discussed on our prior call play out as we expected, as both Site B2B and B2C academic growth rebounded significantly from Q1. Please see today's press release for how we define and use annual recurring revenue and other non-GAAP terms. Transaction revenue for the second quarter was $7.3 million, a 1.7% increase from the prior year quarter.
We had 61 net <unk> platform deployments.
Speaker Change: As Roy mentioned, the net 61 platform deployments in the quarter were the highest organic performance the company has ever posted.
Speaker Change: We are pleased with our growth in the quarter as it was not only strong but also distributed across <unk> as well as multiple products.
In addition, it was nice to see the seasonality we discussed on our prior call play out as we expected as both site b to B and B to C academic growth rebounded significantly from Q1.
Speaker Change: Please see today's press release for how we define and use annual recurring revenue and other non-GAAP terms.
Speaker Change: Transaction revenues for the second quarter was $7 3 million or one 7% increase from the prior year quarter.
Bill Nurthen: It should be noted that Q2 is seasonally our weakest time for transaction revenue. Our total active customer count for the quarter was 1,384 compared to 1,398 in the same period a year ago. Transaction growth continues to be modest, as expected, with more growth coming from the academic side of the business. Gross margin for the second quarter was 48.9%, a 540 basis point improvement over the second quarter of fiscal 2024. The increase is due to the ongoing revenue mix shift towards the higher margin platforms business, which is helping us edge closer to producing 50% plus blended gross margin.
It should be noted that Q2 is seasonally our weakest time for transaction revenue.
Speaker Change: Our total active customer count for the quarter was 1384.
Speaker Change: Appeared to 1398 in the same period a year ago.
Speaker Change: Okay. It's actually growth continues to be modest as expected with more growth coming from the academic side of the business.
Speaker Change: Gross margin for the second quarter was 48, 9%.
Speaker Change: 540 basis point improvement over the second quarter of fiscal 2024.
Speaker Change: The increase is due to the ongoing revenue mix shift towards the higher margin platform business, which is helping us edged closer to producing 50% plus blended gross margins.
Speaker Change: Okay.
Bill Nurthen: Platform's business recorded gross margin of 86.5%, a 210 basis point increase compared to the prior year quarter. The result is primarily related to the labor component associated with our platform's business as it continues to remain constant and in some cases decline. at the Revenue Scale. Gross margin in our transaction business decreased 50 basis points to 25.2%. The decrease was primarily related to lower service fees, as we've been holding our service fees flat, and this quarter had slightly lower paid transactions versus the same quarter last year. Total operating expenses in the quarter were $5.7 million, compared to $4.9 million in the prior year quarter.
Speaker Change: Lastly, as business recorded gross margin of 86, 5%, a 210 basis point increase compared to the prior year quarter.
Speaker Change: The result is primarily related to the labor component associated with our platforms business as it continues to rain remained constant and in some cases decline.
Speaker Change: As the revenue scales.
Speaker Change: Yeah.
Speaker Change: Gross margin in our transaction business decreased 50 basis points to 25, 2%.
Speaker Change: The decrease was primarily related to lower service fees as we've been holding our services flat and this quarter had slightly lower paid transactions for versus the same quarter last year.
Speaker Change: Okay.
Speaker Change: Total operating expenses in the quarter were $5 7 million compared to $4 9 million in the prior year quarter.
Bill Nurthen: The increases were related to additional costs in sales and marketing and technology and product development, which includes having a full quarter of site expenses in the period compared to one month in the prior year quarter. There were also increases in non-cash depreciation and amortization expense associated with the acquisitions completed in fiscal year 2024 and in stock compensation related to new grants and some vesting on our market-based restricted stock. Turning to profitability, the company recorded income from operations of $0.1 million compared to a loss from operations of $0.4 million in the prior year quarter. Net loss for the quarter was $2 million or $0.07 per share compared to a net loss of $54,000 or nil in the prior year quarter.
Speaker Change: The increases were related to additional costs in sales and marketing and technology and product development.
Speaker Change: Which includes having a full quarter of slight expenses in the period compared to one month in the prior year quarter.
Speaker Change: There were also increases in noncash depreciation and amortization expense associated with the acquisitions completed in fiscal year 2024, and in stock compensation related to <unk> grants and so investing on our market based restricted stock.
Speaker Change: Turning to profitability the company recorded income from operations.
Speaker Change: <unk> 1 million compared to a loss from operations of <unk>.
Speaker Change: $4 million in the prior year quarter.
Speaker Change: Net loss for the quarter was $2 million or <unk> <unk> per share compared to a net loss of 54000 or nil in the prior year quarter.
Bill Nurthen: This quarter's results include a $2.4 million provision related to increasing the projected contingent earn out liability for site. While we experienced little growth in site in Q1, the growth results in Q2 were quite dramatic, which caused us to revisit our earn out assumption. These assumptions do remain subject to further adjustment until the earn out is officially calculated, which will happen at the end of May this year. Adjusted EBITDA for the quarter was $963,000 compared to $318,000 in the year-ago quarter. This result is inclusive of $112,000 in commission-related expenses associated with working with our former chairman to assist him in exiting substantially all of his stock position in the quarter.
Speaker Change: This quarter's results include a $2 4 million provision related to increasing the projected contingent earn out liability for site.
Speaker Change: While we experienced a little growth in site in Q1 the.
Speaker Change: The growth results in Q2 were quite dramatic which caused us to revisit our earn out assumptions.
Speaker Change: These assumptions do remains subject to further adjustment until the earn out is officially calculated which will happen at the end of May this year.
Speaker Change: Adjusted EBITDA for the quarter was 963000 compared to 318000 in the year ago quarter.
Speaker Change: This result is inclusive of 112000 in commission related expenses associated with working with our former chairman to assist him in exiting substantially all of the stock position in the quarter.
Bill Nurthen: Typically, as I have noted on prior calls, there is some seasonality in our adjusted EBITDA results, with the lowest quarter being Q2 and our best quarters typically being Q3 and Q4. That said, we view Q2 as a strong performance, and on a trailing 12-month basis, our adjusted EBITDA is now $4.6 million, which represents a near 10% margin. When you combine this with the organic growth we are experiencing in the platforms business, we feel very good about the momentum in the business and where the company is heading. Turning to our balance sheet and cash flow, we experienced another strong quarter of cash generation.
Speaker Change: Typically as I have noted on prior calls there is some seasonality in our adjusted EBITDA results with the lowest quarter being Q2.
And our best quarters typically be in Q3 and Q4.
Speaker Change: That said, we view Q2 as a strong performance and on a trailing 12 month basis. Our adjusted EBITDA is now $4 6 million, which represents a near 10% margin.
Speaker Change: When you combine this with the organic growth we are experiencing in the platform business, we feel very good about the momentum in the business and where the company is heading.
Speaker Change: Turning to our balance sheet and cash flow, we experienced another strong quarter of cash generation.
Bill Nurthen: Cash and cash equivalents as of December 31st, 2024 were $7.7 million versus $6.1 million on June 30th, 2024. Cash flow from operations in the quarter was $1 million compared to $0.3 million in the prior year quarter, and $1.9 million year-to-date compared to a burn of $0.4 million last year. We are now heading into our strongest seasonal period for cash flow, Q3 and Q4, so we continue to expect our cash flow results to improve as we move through the fiscal year. On a trailing 12-month basis, we have now generated over $5.8 million in cash flow from operations.
Speaker Change: Cash and cash equivalents as of December 31, 2024 seven.
Speaker Change: $7 7 million versus $6 1 million on June 32024.
Speaker Change: Cash flow from operations in the quarter was $1 million compared to $3 million in the prior year quarter, and $1 9 million year to date compared to a burn of $4 million last year.
Speaker Change: We are now heading into our strongest seasonal period for cash flow Q3, and Q4 so.
Speaker Change: So we continue to expect our cash flow results to improve as we move through the fiscal year.
Speaker Change: On a trailing 12 month basis, we have now generated over $5 8 million in cash flow from operations.
Bill Nurthen: As of quarter end, there were no outstanding borrowings under our revolving line of credit. As we look ahead, we are very encouraged by the organic growth we are seeing across the platforms business. You will note that we did experience a sequential uptick in SG&A expenses for the quarter. Some of this was related to more permanent expenses and some was related to a few unique non-recurring type items that I previously discussed. We are cautiously investing in growth, primarily in sales and marketing, where we have hired a new CRO, and to some extent in technology and product development, where we have added some heads.
Speaker Change: As of quarter end, there were no outstanding borrowings under our revolving line of credit.
Speaker Change: As we look ahead, we are very encouraged by the organic growth, we're seeing across the platforms business.
Speaker Change: You will note that we did experience a sequential uptick in SG&A expenses for the quarter.
Speaker Change: Some of this was related to more permanent expenses and some was related to a few unique nonrecurring type items that I previously discussed.
Speaker Change: We are cautiously investing in growth primarily in sales and marketing, where we have hired a new CRO and to some extent in technology and product development, where we have added some heads.
Speaker Change: We do however continue to hold the line on G&A expenses.
Bill Nurthen: We do, however, continue to hold the line on G&A expenses. All that said, I do not expect SG&A expenses to shift materially upwards or downwards from where we saw them in Q2. And recall that on prior calls, I've indicated that a more normalized run rate for these expenses prior to additional growth investment was more like Q3 of last year, which was 5.4 million. That said, we are growing. So even at these levels, we continue to believe that Q3 and Q4 can be our strongest quarters for profitability.
Speaker Change: All that said I do not expect SG&A expenses to shift materially upwards or downwards from where we saw them in Q2.
Speaker Change: And recall that on prior calls I've indicated that a more normalized run rate for these expenses prior to additional growth investment was more like Q3 of last year, which was $5 4 million.
Speaker Change: That said we are growing so even at these levels. We continue to believe that Q3, and Q4 can be our strongest quarters for profitability.
Bill Nurthen: And as a result, we are looking forward to a strong finish over the next six months.
Speaker Change: And as a result, we are looking forward to a strong finish over the next six months.
Roy W. Olivier: I'll now turn the call back to Roy.
I'll now turn the call back to Roy.
Roy W. Olivier: Thanks, Bill. Regarding the quarter, we did see a nice net new ARR and deployment growth as a result of a few things. First, activity and bookings picked up noticeably after the election concluded. Second, our marketing team has been doing a nice job with B2B top of the funnel work, driving more pipeline. Third, we split our single sales team into a corporate and academic team, which has resulted in more deal flow in both teams. The academic team has a strong quarter and only its second quarter as a team. Finally, we brought in Sefton Cohen, our new Chief Revenue Officer in early November, and I think he had an immediate positive impact.
Roy: Alright, Thanks, a lot.
Phil: Thanks, Phil.
Phil: Regarding the quarter, we did see a nice net new <unk> in deployment growth as a result of a few things first activity in bookings picked up noticeably after the election concluded second our marketing team has been doing a nice job with b to be top of the funnel work driving more pipeline.
Phil: Third we spot we split our single sales team into a corporate and academic team, which has resulted in more deal flow and both teams.
Phil: Academic team had a strong quarter in only its second quarter as a team.
Phil: Finally, we brought in Suffolk, calling our new Chief revenue officer in early November and I think he had an immediate positive impact.
Roy W. Olivier: We have several priorities for the second half of the year that I think are notable. Some of those include. To reiterate, marketing has done a great job in driving B2C signups and has made huge progress in delivering B2B leads and positioning us as a thought leader in the scientific research and AI space. They've been driving a lot of activity that is generating results in terms of pipeline growth, and we will continue that focus during Q3 and Q4. We'll continue to focus as well, heavily on building out a professional and disciplined sales team. In early January, we flew 45 people, almost one third of our workforce, into Atlanta for extensive sales training and to help better standardize our sales process.
Phil: We have several priorities for the second half of the year that I think are notable.
Phil: Some of those include.
Phil: To reiterate marketing has done a great job in driving <unk> sign ups and has made huge progress in delivering <unk> and positioning us as a thought leader in the scientific research and AI space.
Phil: They've been driving a lot of activity that is generating results in terms of pipeline growth and we will continue that focus during Q3 and Q4.
Phil: We will continue to focus as well heavily on building out a professional and disciplined sales team in early January we flew 45 people almost one third of our workforce into Atlanta for extensive sales training and to help better standardize our sales process.
Roy W. Olivier: The team will use the standard approach moving forward with the intent of building predictable and repeatable results. We have already oriented the rest of the organization around those principles and are executing that plan daily. Part of that process may impact our results in the short term, but successful execution will be a huge positive in the long term. As Bill mentioned, you will see additional expenses, primarily in terms of sales and marketing investment in the next couple of quarters, and that will negatively impact CAC and CAC to LTV. That said, we expect to start seeing acceleration and bookings in Q4 and FY26's Q1, which will cause CAC and CAC to LTV to return to normal level.
Phil: <unk> will use the standard approach moving forward with the intent of building predictable and repeatable results we.
Phil: We have already oriented the rest of the organization around those principles and are executing that plan daily.
Part of that process may impact our results in the short term, but successful execution will be a huge positive in the long term.
Phil: As Bill mentioned, you will see additional expenses, primarily in terms of sales and marketing investment in the next couple of quarters and that will negatively impact CAC in CAC to LTV.
Phil: That said, we expect to start seeing acceleration in bookings in Q4, and FY 'twenty six as Q1, which will cause CAC and CAC to LTV to return to normal levels.
Roy W. Olivier: I remain optimistic and excited about what we're doing and that it is key to our long-term growth plans, both organic and non-organic.
Phil: I remain optimistic and excited about what we're doing and then it is key to our long term growth plans, both organic and Nonorganic.
Phil: Product also continues to be a priority and while we're working on numerous updates across our portfolio of products. Our focus for Q4, and Q3 will be to improve UX and CX across the site and article Galaxy platforms.
Roy W. Olivier: Product also continues to be a priority, and while we're working on numerous updates across our portfolio products, our focus for Q4 and Q3 will be to improve UX and CX across the site and Article Galaxy platforms. continuing integration of AI into the workflow of both products and improve our instrumentation and analytics. Instrumentation is primarily for us to know and measure what changes we make to the software and whether those changes are working or not. Analytics is both internal and external. Externally, it will continue to improve the reporting available to our customers and will provide a clear view of the ROI of the platform and customers' other investments in research.
Phil: With the integration of AI into the workflow of both products and improve our instrumentation and analytics.
Phil: Instrumentation is primarily for us to know and measure what changes we make to the software and whether those changes are working or not.
Phil: Analytics is both internal and external externally it will continue to improve our reporting available to our customers and will provide a clear view of the ROI of the platform and customers other investments and research.
Roy W. Olivier: From a business development standpoint, we continue to look at many options, but have nothing to report today and nothing we think is actionable in the short term. We continue to look for things that will enhance our product roadmap, add customers or content, and will be accretive to our revenue and EBITDA target.
Phil: From a business development standpoint, we continue to look at many options, but I have nothing to report today and nothing that we think is actionable in the short term.
Phil: We continue to look for things that will enhance our product roadmap add customers or content and will be accretive to our revenue and EBITDA targets.
Josh Nicholson: Now I'd like to turn the call over to Josh Nicholson to provide some context around all the recent AI news. Josh. Thanks, Roy. And first, thanks for having me. I'm excited to join this call, and I appreciate all the investors dialing in, many of which I've met in person over the last year.
Speaker Change: Now I'd like to turn the call over to John Nicholson to provide some context around all the recent AI news Josh.
John Nicholson: Thanks Roy.
John Nicholson: First thanks for having me I'm excited to join this call.
Roy: Great all the investors dialing in many of which I have met in person over the last year.
Josh Nicholson: I joined Research Solutions 14 months ago with the acquisition of SITE. Since then, we've been heads down and hard at work transforming the business. And I'm happy with our progress we have made and the continued momentum, both from SITE and Research Solutions as a whole.
Roy: Hi, Joe and research solutions 14 months ago with the acquisition of sites. Since then we've been heads down hard at work transforming the business and I'm happy with our progress progress we have made and the continued momentum both from site and research solutions at the hall today I want to talk about how we think about AI and how that relates to recent advances from open AI deep sea.
Josh Nicholson: Today, I want to talk about how we think about AI and how that relates to recent advances from OpenAI, DeepSeq, and others. We can all appreciate there's an AI arms race happening amongst the biggest companies and even economies in the world. How do we fit in? How do we win?
Roy: And others.
Roy: We can all appreciate theres, an AI arms race happening amongst the biggest companies and even economies in the world how do we fit in and how do we win.
Josh Nicholson: In 2022, I published a paper entitled how to build a GPT-3 for These are the early days of chat GPT and most use cases seem to be absurd or exploratory. You could create an image of velociraptors working on a skyscraper in the style of lunch atop a skyscraper of 1932. You could use Dolly. If you wanted to create an image, an imaginary stand up comedy show with Peter Thiel, Elon Musk, and Larry Page, you could use chat GPT.
Roy: <unk> thousand 22, I published a paper entitled how to build a CPT three per side.
Roy: These are the early days of chat GPT and most of these cases seem to be a third or exploratory you could create an image of velociraptor is working on a skyscraper in the style lunch atop a skyscraper of 1932, you could use Dolly if you wanted to create an image.
Roy: Imaginary standup comedy show with Peter keel, Elon Musk and Larry page you could use chat GBT do you want.
Josh Nicholson: If you wanted to deeply understand Alzheimer's research or any science topic in seconds, based on facts and figures from the world's leading research, you better learn how to do a Boolean search, read scientific papers, and maybe get a PhD. There was and still is a gap for using ChatGPT or any LLM for real research.
Speaker Change: Wanted to deeply understand Alzheimers research or any science topic and second based on facts and figures from the world's leading research you better learn how to do a boolean search read scientific papers and maybe get a ph D. There was and still is a gap or using chat GPT or any LLM for real research. We started site building AI native.
Josh Nicholson: We started CITE to build an AI-native tool to help researchers do better research. We joined Research Solutions to accelerate that mission and to build the AI solution for research. We believe that AI applied to the workloads of specific verticals is how companies like Research Solutions will win. At Research Solutions, we're leveraging our unique content access and AI rights to the world's research. Combined with a deep focus on researcher workflows, we can solve problems for researchers that even the biggest AI companies cannot. As AI advances, these benefits will compound, and it is what allowed us to create SITE in the first.
Speaker Change: Tool to help researchers do better research, we joined <unk> solutions to accelerate that mission and to build AI solutions for research, we believe that AI applied to the workload specific verticals and how companies like research solutions will win.
Speaker Change: At research solutions, we're leveraging our unique content access and AI rights to the world's research combined with a deep focus on research workflows, we can solve problems for researchers that even the biggest AI companies cannot.
Speaker Change: AI advances these benefits will compound and it is what allowed us to create site in the first part.
Josh Nicholson: We recently put out a press release highlighting this, showing that despite site assistant usage growing orders of magnitude, our costs were declining. The key, and I will repeat this some more, is the vertical focus of site and application of AI to proprietary research. We can plug in any LLM, whether it's a customer's homegrown model, one we develop, or one that will come out tomorrow. Plugging LLMs into research is, however, something only we can do.
Speaker Change: We recently put out a press release, highlighting this showing that despite site assistant usage growing orders of magnitude our costs were declining.
Speaker Change: Key and I'll repeat this some more as the vertical focus on site and application of AI to proprietary research data, we can plug in and yellow whether it is customers homegrown model, one redeveloped or one that will come out tomorrow plugging Llm's into research is however, something only we can do.
Josh Nicholson: Summarized, we think the researcher will see more value in a tool that has the flexibility to use one or more LLM as a tool built into their workflow at the right pain points, is focused only on quality research, and comes with the access rights to provide better results through searching pre-content as well as content behind the paywall. That is and will remain our focus going forward.
Speaker Change: Summarized we think the research you will see more value in a tool that has the flexibility to use one or more.
Speaker Change: That's a tool built into their workflow at the REIT pinpoint is focused only on quality research and comes with the access rights to provide better result through searching free content as well as content behind the paywall that is and will remain our focus going forward with that I'll say, thanks again for having me join and I'd like to turn the call back.
Operator: With that, I'll say thanks again for having me join, and I'd like to turn the call back over to the operator for Q&A. Thank you. At this time, if you'd like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Again, that is star 1 to ask a question. And we'll pause for just a moment to allow everyone the opportunity.
Speaker Change: Over to the operator for Q&A.
Speaker Change: Thank you at this time, if you'd like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star two.
Speaker Change: Again that is star one to ask a question.
Speaker Change: And we'll pause for just a moment to allow everyone the opportunity to signal.
Speaker Change: We'll go first to Jacob Steven Lake Street capital markets.
Jacob Stephan: We'll go first to Jacob Stephan, Lake Street, Capital. Hey guys, thanks for taking my questions and congrats on the results and platform deployments here. Just kind of wanted to help, maybe you could help us understand a little bit better on kind of new logo wins versus kind of cross sells in that one and a half million of incremental ARR in the quarter.
Jacob: Hey, guys. Thanks for taking my questions and congrats on the results and platform deployments here.
Jacob: Kind of wanted to help maybe you can help us understand a little bit better on kind of new logo wins versus kind of cross sells in that one 5 million of incremental <unk> in the quarter.
Yes, I can start on that.
Bill Nurthen: Yeah, I can start on that and then Roy can add if he'd like. A lot of the quarter was driven by net new sales, and so a lot of new logos, I would say it was an outperformance from a new logo perspective, and we are still producing well, but underperforming to our expectations on upselling customers. I would say the one exception to that is we are, we continue to be very successful at cross-selling site into some of our existing Article Galaxy customers, but again, the real outperformance in the quarter was new logo generation.
Roy: And then Roy can add if he'd like.
Roy: A lot of the quarter was driven by net new sales.
Roy: And so a lot of new logos I would say it was an outperformance from a new logo perspective.
Roy: And we are still producing well, but underperforming to our expectations on upselling customers.
Roy: I would say the one exception to that is we are we continue to be very successful at.
Roy: Cross selling of sight into some of our existing article galaxy customers, but again.
Roy: The real outperformance in the quarter was new logo generation.
Roy: Yes, sorry about that I was on mute, but built mills, 100% accurate. It was primarily new logos. There is some side up sells into our basin there.
Roy W. Olivier: Yes, sorry about that. I was on mute. But Bill's 100% accurate. It was primarily new logos. There is some site upsells into our base in there. And our upsells of Article Galaxy features into the Article Galaxy products continues to do okay, but is not performing at the level it was a couple of years ago. Okay, got it. That's helpful.
Roy: And our Upsells into our Upsells of article Galaxy features into the article Galaxy products continues to do okay, but it is not performing at the level. It was a couple of years ago.
Roy: Okay got it that's helpful.
Roy W. Olivier: And then, you know, you kind of alluded to this earlier in your comments, Roy, but, you know, in December, you do kind of see that seasonal impact of students, you know, as they end classes in the, for the semester, you know, maybe January starts out a little bit slower, but could you kind of help us think about the impact to kind of overall B to C as we as we look at our models? Yeah, Josh, we have some commentary on this as well. B2C business is usually fairly strong in our physical Q2 and Q3. You have that little pause in, you know, mid-December to mid-late January in there, but we typically would expect to see good performance in this quarter.
Roy: And then you kind of alluded to this earlier in your comments ROI, but you know in December you do you kind of see that seasonal impact of students.
And classes in the for the <unk>.
Roy: Semester.
Speaker Change: Maybe January starts out a little bit slower, but could you kind of help us think about the impact to kind of overall b to C. As we as we look at our models.
Roy: Yeah.
Roy: Josh May have some commentary on this as well the b to C business is usually fairly strong in our fiscal Q2 and Q3 you have that little pause in mid December to mid late January in there, but when you typically would expect to see good performance in this quarter.
Josh Nicholson: And then, you know, it slows down, obviously, at the end of our Q4 as people get out of school for the summer.
Roy: And then it slowed down obviously at the end of our Q4 as people get out of school for the summer.
Josh Nicholson: But Josh, you want to add anything to that? Yeah, I don't have too much more to add to that. The seasonality of universities, whether you're an undergraduate student or a professor, you know, impacts the business. Okay, got it.
Speaker Change: So Josh you want to add anything to that.
Josh Nicholson: Yeah, I don't have too much more to add to that the seasonality of universities, whether youre an undergraduate students are a professor impact.
Speaker Change: Impacts the business.
Speaker Change: Okay got it.
Josh Nicholson: Maybe just one last one, kind of honing in on the cost of AI and, you know, how that's trended over time, you know, Josh, maybe if you had any color on kind of, you know, what, how things started, how they're, how costs are looking now for AI, and where do you think they could go, maybe over the next 12 months, so to say? Yeah, so for costs, you know, as new models are deployed, we're able to assess a variety of different models from the cost of it to the performance of it. And I think we take a measured approach, evaluating is there a good ROI on switching this model to a new model?
Speaker Change: Maybe just one last one kind of.
Speaker Change: Honing in on the cost of AI and how that's trended over time.
Speaker Change: Josh maybe if you had any color on kind of what.
Speaker Change: How things started.
Speaker Change: How costs are looking now for AI and where do you think they could go maybe over the next 12 months so to say.
Speaker Change: Yes, so for costs.
Speaker Change: As new models are deployed we're able to assess.
Speaker Change: A variety of different models from the cost of it to the performance of it and I think we take a measured approach evaluating is there a good ROI on switching this model to a new model.
Bill Nurthen: And so the cost since joining Research Solutions largely halved, and as we explore different models, they could go up, but again, with the progress in AI, the efficiency of the performance, all this really kind of is not long, right? And so even the most expensive model this week might be a lot cheaper in a month or two.
And so the cost since joining research solutions largely haft.
Speaker Change: And as we explore different models they could.
Speaker Change: Go up but again with the progress in AI.
Speaker Change: <unk> fees the performance all that's really kind of it's not long.
Speaker Change: The most expensive model.
This week might be a lot cheaper than a month or two.
Bill Nurthen: Bill, maybe you want to say a bit more on that? Not too much. I mean, I think you've covered it pretty well. You know, the main point being is, as you know, we've, we've been, you know, I think Josh has talked about the advantages that we have. And that was what the press release we put out as well with our AI solutions. But yeah, the costs have been, you know, coming down as we're scaling up the searches there. But I don't see that sort of materially impacting our numbers, at least in the short Okay. Got it.
Speaker Change: Bill maybe you want to say a bit more on that.
Speaker Change: Not too much.
Speaker Change: You've covered it pretty well.
Speaker Change: The main point being is.
Speaker Change: We've been I.
Speaker Change: I think you guys just talk about the advantages that we have.
Speaker Change: And that was what the press release, we put out as well.
Speaker Change: With our AI solutions, but yes, the costs have been coming down as we're scaling up the searches there.
Speaker Change: But I don't see that sort of mid materially impacting our numbers at least in the short term.
Speaker Change: Okay got it understood.
Operator: Understood. I appreciate the color, guys. Good luck. Thank you.
Appreciate the color guys. Good luck.
Speaker Change: Thank you.
Allen Klee: Once again, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Roy W. Olivier: We'll go next to Allen Klee with Max. Yes, hi. When I heard you talking about AI, Did I understand that the way you think of your competitive advantage is that you have kind of some exclusive access to the content? Or was there something else you would also? Yeah, I'll add some commentary and then go ahead, Josh. Yeah, I would say that the exclusive access, you know, really underpins this advantage. But I think, you know, looking at AI across different industries, and really why I said vertical AI is, you know, going into the workflows of researchers and applying AI in a specialized way, that a more generalized tool like ChatGPT is not going to do, I think is also the focus and also a differentiator.
Speaker Change: We will go next to Allen Klee with Maxim Group.
Allen Klee: Yes, hi.
I heard you talking about.
Speaker Change: Yes.
Speaker Change: Did I understand that you are.
Speaker Change: Where you think of your competitive advantages that you have kind of some exclusive access to the content.
Speaker Change: Was there something else you would also say.
Josh Nicholson: You know commentary and then I'll go ahead Josh.
Josh Nicholson: Yes, I would say that the exclusive access you know really underpins this an advantage, but I think looking at AI across different industries.
Josh Nicholson: Why is that vertical AI is going into the workflows of researchers and applying AI and a specialized way that a more generalized tool like chat GPT is not going to do I think it's also the focus and also a differentiator.
Roy W. Olivier: And so we're, you know, really kind of focused from a data advantage, and then also, you know, going deep on the workflow of research.
Josh Nicholson: So we're really kind of focus from a data advantage and then also going deep on the workflow of researchers.
Bill Nurthen: Thank you. My other question was, you mentioned that you're going to calculate the earn out and what it'll be in May. When does that get paid over eight quarters? Is that right? And it's cash and stock? And when does it start getting paid? Yeah, sure, that's correct. Once it's calculated in May, the payout is half cash, half stock, over eight quarters. It just depends on some timing of the acceptance of the numbers and things like that, but I would expect the payments to start sometime in the July time frame this year. July. Yeah, probably July time.
Speaker Change: Thank you my other question was you mentioned that the.
Josh Nicholson: Youre going to calculate the earn out.
Josh Nicholson: It will be in May.
Josh Nicholson: When does the mine.
Josh Nicholson: Does that get paid over eight quarters is that right and it's cash and stock or.
Josh Nicholson: When does that start getting paid.
Josh Nicholson: Thank you.
Speaker Change: Yes, sure that's correct once it's calculated in may the payout is half cash half stock over eight quarters.
Speaker Change: It just depends on some timing of the accepted symphony numbers and things like that but I would expect the payments to start sometime in the July timeframe. This year.
Speaker Change: July yet probably July timeframe.
Okay. Okay, maybe one last question.
Bill Nurthen: Well, okay, maybe one last question. Is your queue out yet? No, that will be filed tomorrow. Could there, can you just tell us then what the, on the front page, you usually say what the share count is as a kind of yesterday or something, what that number is? Yes, it's roughly $32.6 million.
Speaker Change: As your Q out yet.
Speaker Change: Sure.
Speaker Change: No that'll be filed tomorrow.
Could there can you just tell US then what the.
Speaker Change: On the front page you, usually say with the share count is as a brand.
Speaker Change: Late yesterday or something what that number is.
Speaker Change: Yes, it's roughly $32 6 million.
Bill Nurthen: Okay, great. Thank you so much.
Speaker Change: Okay, great. Thanks, Thank you so much.
Speaker Change: Okay.
Peter: We will go next to Peter <unk> with Arco capital.
Peter Rabover: We'll go next to Peter Rabover with our co-candidate. Hey, guys. Josh, congratulations on the earn out. And I guess on that, like, can you guys just hone in on the 75% growth that I think you guys talked about for at least one of the segments or the whole site thing? And I know, and how much of that 75% was the cross selling that you mentioned versus what's organic? And, you know, how did you get there? Like I said, I mean, it's a great number. I'm just kind of curious what go about. Thank you.
Peter: Oh, Hey, guys.
Peter: Congratulations on the earn out.
Peter: And I guess on that.
Can you guys, just holding them at 75% growth that.
Peter: I think you guys talked about for <unk>.
Peter: Well at least one other segment or at least or the whole site.
Speaker Change: No how much of that 75% was the cross selling that.
Peter: You mentioned versus what's organic.
Peter: How did you got that right I mean, that's a great number and just kind of curious what drove that.
Peter: Right.
Milton: Milton you want to touch the first part of it yeah.
Bill Nurthen: Bill, you want to touch the first part of that? Yeah, yeah, I'll start. I'll start with a few comments. Yeah, so yeah, we basically took kind of where we had one month and we took the two months pre-acquisition together and then compared to this year. And that's what's producing 75% pro forma result. I would say it is definitely a mix of cross-sell and new sale, but most again emphasis on the new sale. I think we still have a lot of upside for cross-sell within the article galaxy base, which is a positive thing for kind of future growth.
Milton: Yes, I'll start.
Milton: I'll start.
Milton: A few comments yeah. So yes, we basically took kind of where we had one month in we took the two months pre acquisition together and then compared to that this year and that's what's producing 75% pro forma result.
Milton: I would say it is definitely a mix.
Milton: Ross sell a new sale, but most again emphasis on the new sale I think we still have a lot of upside for cross sell within the article Galaxy base, which is a positive thing for kind of future growth but.
Bill Nurthen: But, you know, when you think back through site, you know, site had a great product, but it was not a large team and really didn't have a lot of sales capacity, you know, as a standalone. So, you know, once we're able to get site under our umbrella, get our sales teams trained, get some marketing behind it, and also then say, hey, we've got some warm customers we can take you to, that has really led to a lot of growth. I think the other thing, which where I alluded to is, you know, site sort of focus us to say, hey, we have to have some specialization around corporate and academic and really focus in on academic.
Milton: When you think back to the site had a great product, but it was not a large team and really didn't have a lot of stuff.
Milton: Sales capacity.
Milton: As a stand alone. So once we're able to get site under our umbrella get our sales teams trained get some marketing behind it.
Milton: And.
Also then say hey, we've got some warm customers, we could take you to.
Milton: That has really led.
Milton: Led to a lot of growth I think the other thing, which I alluded to is site sort of focus to say hey, we have to have some specialization around corporate and academic and really focusing on academic and.
Roy W. Olivier: And, you know, that's why we split those sales teams and that academic sales team has had a lot of success. And it's a, it's a, it's a very cohesive group that really produced a bunch of sales towards the end of the quarter in December. And so there's just a nice ramp there and that that's really a lot of where we're getting this nice growth out of sight.
Milton: That's why we split those sales teams and that academic sales team has had a lot of success and it's so it's a very cohesive group.
Milton: That really produce a bunch of sales towards the end of the quarter.
Milton: In December and so there's just a nice ramp there.
And.
Milton: That's really a lot of where we're getting this nice growth out of sight. So ROI, Josh I don't know if you want to add to that.
Josh Nicholson: So Roy, Josh, I don't know if you want to add to that. No, well said, Josh. No, I don't have anything to add to that. No, I mean, look, that's great. Like, just to know that there's a piece of, you know, a big piece of the business that's growing organically at such a high rate. I mean, I think that's like a very important highlight. And I appreciate you calling that.
Milton: No well said Josh.
Milton: No I don't have anything to add to that.
Speaker Change: No I mean look that's great to know that there is a piece.
Speaker Change: You know a big piece of the business that is growing organically at such a high rate I mean, I think that's very important to highlight.
Speaker Change: I appreciate your color that and yeah, I mean, Josh at what point do you think.
Josh Nicholson: And yeah, I mean, Josh, at what point do you think people will start to get the moment where, like, Chad, GBT is not enough, and they think they need more. And then they search for more and realize that, you know, site is the one with most of the information. Like, how do we get there, where the aha moment, where our competitive advantage lies, happens? Yeah, I mean, I think people are starting to see that on the long tail where you have researchers and, you know, research intensive organizations taking a look and, you know, site winning out on contracts versus some of these others.
Speaker Change: People will start to get them, a little bit where like China GDP is not enough and they think they need more and then they search for more realize that right.
Speaker Change: The one with both of the information they cut how do we how do we get there.
Speaker Change: How about that.
Speaker Change: What are our competitive advantage lies.
Speaker Change: Yeah.
Speaker Change: Yeah, I mean, I think people are starting to see that on the long tail, where you have researchers.
Speaker Change: Research intensive organizations, taking a look and site winning out on contracts versus some of these others.
Josh Nicholson: Obviously, we're a lot smaller, have a lot smaller marketing spend than these groups you mentioned. And so I think, you know, keeping our heads down and focused on really building specialized workflows and leveraging the AI to that is kind of how we'll win. And so I expect, you know, we might be the flashiest, but really leveraging that data and going deep on the workflows is, again, kind of the advantage that we need to take.
Speaker Change: Obviously, you are a lot smaller a lot smaller marketing spend these groups you mentioned.
Speaker Change: <unk>.
Speaker Change: And so I think keeping our heads down and focused on really building specialized workflows and leveraging the AI.
Speaker Change: To that.
Speaker Change: It's kind of how we will win.
Speaker Change: And so I expect you know we might be the flash, yes, but really leveraging that data and going deep on the workflow. This again kind of the advantage that we need to take.
Operator: Okay, well, thanks for the call, guys.
Speaker Change: Okay.
Speaker Change: Great. Thanks for the color guys.
Operator: It appears that we have no further questions at this time.
Speaker Change: And it appears that we have no further questions at this time I'll turn the program back over to Mr. Olivier for any additional or closing remarks.
Roy W. Olivier: I'll turn the program back over to Ms. Olivier for any additional or closing Yeah, thanks, everyone, for joining. As a reminder, we will be participating in the Roth Conference in Dana Point, California, March 16th through the 18th. Qualified investors that would like to attend or schedule a meeting should contact either their Roth sales rep or three-part advisors.
Speaker Change: Yes, thanks, everyone for joining as a reminder, we will be participating in the Roth Conference in Dana point, California March 16th through the 18th qualified investors that would like to attend or schedule, a meeting should contact either their roth sales rep or three part advisors.
Roy W. Olivier: We look forward to speaking with you in May to discuss our third quarter fiscal 2025 results.
Speaker Change: We look forward to speaking with you in May to discuss our third quarter fiscal 2025 results have a great evening.
Operator: Have a great evening. Thank you.
Speaker Change: Thank you. This does conclude today's program. Thank you for your participation you may disconnect at anytime.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yeah.