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Total Revenue: $44.6 million for fiscal 2024, an 18% increase from fiscal 2023.
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Platform Subscription Revenue: $14 million, a 61% increase from fiscal 2023.
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Transaction Revenue: $30.7 million, a 5.7% increase from the prior year.
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Annual Recurring Revenue (ARR): $17.4 million, up 84% year-over-year.
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Gross Margin: 44% for fiscal 2024, a 500 basis point improvement over fiscal 2023.
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Operating Expenses: $20.4 million, compared to $14.5 million in the prior year.
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Net Loss: $3.8 million, or $0.13 per diluted share, compared to net income of $572,000, or $0.02 per diluted share in the prior year.
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Adjusted EBITDA: $2.2 million, an 11% increase from fiscal 2023.
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Cash Flow from Operations: $4 million in the last half of fiscal 2024.
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Cash and Cash Equivalents: $6.1 million at fiscal year-end.
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Platform Customer Count: Exceeded 1,000 for the first time in the company’s history.
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Q4 Revenue: $12.1 million, a 22% increase from Q4 fiscal 2023.
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Q4 Platform Subscription Revenue: $4.3 million, an 86% increase from Q4 fiscal 2023.
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Q4 Gross Margin: 46.5%, a 710 basis point improvement over Q4 fiscal 2023.
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Q4 Operating Income: $662,000, a 159% increase from Q4 fiscal 2023.
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Q4 Adjusted EBITDA: $1.4 million, a 70% increase from Q4 fiscal 2023.
Release Date: September 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Research Solutions Inc (NASDAQ:RSSS) achieved record revenue of $44.6 million for fiscal 2024, including $14 million in platform revenue and $30.7 million in transaction revenue.
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The company completed the acquisitions of Resolute.ai and Scite.ai, enhancing its leadership in discovery and analysis capabilities.
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Annual recurring revenue (ARR) increased by 84% year-over-year to $17.4 million, with platform customer count exceeding 1,000 for the first time.
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Gross margin improved to 46.5% in Q4, driven by a revenue mix shift towards higher-margin platform business.
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Adjusted EBITDA for the quarter reached a new high at $1.4 million, a 70% increase from the prior year quarter.
Negative Points
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Net loss for the quarter was $2.8 million, or $0.09 per diluted share, compared to net income of $376,000 in the prior year quarter.
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Total operating expenses increased to $5 million in Q4, up from $3.7 million in the prior year quarter, primarily due to costs associated with acquisitions.
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The platform business recorded a slight decrease in gross margin to 85.3%, down from 88.1% in the prior year quarter.
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There is some seasonality in the business, particularly affecting B2C revenue during summer months, leading to potential softness in Q1 ARR growth.
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Macroeconomic headwinds and longer sales cycles are impacting the B2B segment, extending the days to sale from around 90 days to over 120 days.
Q & A Highlights
Q: Can you discuss the cross-selling success between Scite and Article Galaxy? What percentage of Article Galaxy customers also subscribe to Scite? A: We haven’t publicly disclosed those numbers, but it’s a single-digit percentage of the Article Galaxy customer base. There’s still a tremendous amount of opportunity to achieve our target, which is well into the double-digit cross-sells. – Roy Olivier, CEO
Q: Regarding the Q1 FY25 softness in ARR growth, can you provide more details on the overall impact? A: We typically have a strong end-of-quarter push. B2C has been challenging due to the summer months, but we’ve seen a strong pickup in September. On the B2B side, decision-making has been more deliberate, extending the sales cycle. We’re cautious about Q1 but will see how the quarter ends. – Roy Olivier, CEO
Q: How far along are you in the integration process of the acquisitions, both in terms of cost and pipeline alignment for cross-sell opportunities? A: The integration of costs is largely complete. Scite is well integrated with Article Galaxy and Article Galaxy Scholar. Resolute.ai’s integration is scheduled after further workflow improvements. The sales team is now fully trained to sell Scite, which should help with more penetration and new sales. – Roy Olivier, CEO & William Nurthen, CFO
Q: What is the outlook for M&A opportunities, and do you have the bandwidth for more acquisitions? A: There are ample targets ranging from startups to businesses with significant revenue. We believe we can handle one, possibly two, acquisitions a year, depending on size and whether they can run independently. We are being more selective to ensure alignment with our growth and EBITDA goals. – Roy Olivier, CEO
Q: Could you explain the seasonality in fiscal Q4 numbers that reduced operating expenses by around $200,000? A: We hold accruals on the sales team through the fiscal year, and some didn’t make their numbers, leading to a reversal of bonus accruals. This reduced expenses by $200,000 to $300,000. Q3’s run rate is more representative of our SG&A expense. – William Nurthen, CFO
Q: Why is academic the fastest-growing segment, and what opportunities are you targeting? A: Academic is growing due to the strong performance of Scite and Article Galaxy Scholar, and industry trends favoring our solutions. We are splitting the sales team to focus on both corporate and academic segments to accelerate growth. – Roy Olivier, CEO
Q: Are the 12% EBITDA margins sustainable going forward? A: Yes, we believe the business can maintain low double-digit EBITDA margins on a fiscal year basis, despite seasonal fluctuations. We manage based on the Rule of 40 and will communicate any changes in strategy. – William Nurthen, CFO
Q: How is the effort to expand the corporate customer base affecting the sales cycle? A: We are still focused on the same verticals. The increased days to sale are due to more deliberate procurement processes and longer evaluations by customers. However, our win/loss rate has not materially changed. – Roy Olivier, CEO
Q: Will the complexity of having multiple products be resolved by the end of fiscal 2025? A: We will continue to sell products as modules but will improve integration and workflow. Each product will remain individually priced, but better integration will enhance customer value. – Roy Olivier, CEO
Q: How are you managing the increased days to sale in the current market environment? A: The longer sales cycle is due to more thorough procurement processes by customers. We continue to focus on landing and expanding within accounts, despite the extended sales cycle. – Roy Olivier, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
