Research Solutions, Inc. Q1 FY2025 earnings call

• Revenue growth: Total revenue up 20%, platform revenue up 67%, ARR up 60%. B2B contributed $12.2M, B2C $5.4M.
• Financials: Adjusted EBITDA $1.3M, cash flow from operations $800k. TTM adjusted EBITDA $4M, cash flow $5.1M.
• Sales/marketing: Hired Sefton Cohen as CRO to improve sales process.
• M&A: Valuations down, increased M&A opportunities, evaluating businesses fitting product strategy.
• B2B sales: Successes with Encarta Therapeutics, Backsight, and University of California academic deal.
• Product: Focus on SaaS/AI, enhancing Syte, Article Galaxy, references with AI assistants.

Total revenue for the first quarter of fiscal 2025 was $12 million, with a 20% increase year-over-year. Platform revenue increased 67% to $4.3 million, accounting for about 36% of total revenue. B2B contributed $12.2 million and B2C contributed $5.4 million to ARR, with B2C subscription ARR approaching $6 million. Transaction revenue was $7.7 million, a 3.4% increase from the prior year quarter. Gross margin was 47.9%, with platform business gross margin at 87.4% and transaction business gross margin at 25.7%.

• Q2 expected strong but seasonally affected for transactions, SG&A to increase. Adjusted EBITDA up Y/Y but down Q/Q, then up in Q3/Q4.
• M&A: Evaluating opportunities with better valuations and fit.

• Longer sales cycles affecting deployments.
• Higher than normal churn, including non-controllable churn from customer acquisitions and business closures.
• Seasonality impacts on transactions business.
• Resolute AI underperforming.

Q: How did platform cost side fall and is it sustainable?

A: Due to removing labor, reworking hosting costs. Hosting costs may tick back up but margin still above 85%.

Q: OpEx side breakdown and steady-state levels?

A: Sales/marketing and R&D have changes; SG&A expected to look more like Q3 last year.

Q: M&A focus on overlapping customer bases?

A: Look for businesses enhancing product strategy, right valuation, and cross-sell opportunities.

Q: Lower deployments in quarter driver?

A: Academic growth lower due to seasonality, sales execution issues, and market slowness.

Q: Demand rebounding in Q2?

A: B2C ARR growing, B2B pipelines record, but need to manage churn.

Q: New CRO priorities?

A: Standardized training, improving sales execution.

Q: Adjusted EBITDA margins and Q3 outlook?

A: Q3 expected to outperform Q1.

Q: Days to sale update?

A: CAC improved, but days to sale still around prior levels.

Q: Resolute AI tracking and outlook?

A: Resolute underperforming, pivoting to Article Galaxy and Syte.

Q: Academic vs corporate customer margin?

A: Gross margin similar, academic has lower ASP but higher transaction revenue.

Q: Corporate customer profile?

A: Most customers have revenue, 60% of revenue from top third customers.