Good day, ladies and gentlemen, and welcome to this Research Solutions, Inc. Conference Call. At this time, all participants are in a listen-only mode, and later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to John Beisler with Investor Relations.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Research Solutions' third quarter fiscal 2024 earnings call. On the call today are Roy W. Olivier, President and Chief Executive Officer; and Bill Nurthen, Chief Financial Officer. After the market closed this afternoon, the Company issued a press release announcing its results for the third quarter of fiscal 2024. The release is available on the Company's website at researchsolutions.com. Before Roy and Bill begin their prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to Research Solutions' recent filings with the SEC for a more detailed discussion of the risks that could impact the Company's future operating results and financial conditions. Also on today's call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors. A reconciliation of those measures to GAAP measures is included in the earnings release issued earlier this afternoon. Finally, I would like to remind everyone this call will be recorded and made available for replay via a link on the Company's website. I would now like to turn the call over to Roy W. Olivier. Roy?

Roy, you may be on mute.

I'm on mute. You think I haven't done this before? Thank you, John, and thank you, Bill. As we've discussed on previous calls, it is our strategy to reimagine and improve the research workflow. Our recent acquisitions are a big part of that journey's success. After a few months of performance from Scite and Resolute, I remain excited and committed to the vision and how Scite and Resolute fits into that. We had strong quarterly results in terms of overall growth, adjusted EBITDA and cash flow from operations. The results are starting to show the ability of the business to scale as we continue this journey. The quarter represents a run rate of more than $48 million in revenue, with $16 million in SaaS platform revenue and approximately $32 million in document delivery or transaction revenue. I'm excited about the strategic and product progress we are making and what it means for our future growth. That said, I'm very excited about the financial transformation the business will undertake as we continue this journey and how it will translate to shareholder value creation. There's lots of moving pieces in the numbers. So, I'd like to pass it over to Bill to walk through our fiscal third quarter 2024 financial results in detail, and then I'll be back to discuss the businesses progress and quarterly accomplishments in more detail. Bill?

Thank you, Roy, and good afternoon, everyone. Before I begin, I'd like to remind everyone that our third quarter results now include a full quarter's contribution from both the acquisition of ResoluteAI, which closed on July 28 of last year, and the Scite acquisition, which closed on December 1, 2023. For fiscal year-to-date numbers, there are approximately eight months of ResoluteAI and four months of Scite factored into the numbers. Total revenue for the third quarter of fiscal 2024 was $12.1 million, a 17% increase from the third quarter of fiscal 2023. Our platform subscription revenue increased 76% to approximately $4 million. The growth was primarily driven by revenue contributed from the Scite acquisition, as well as a net increase of platform deployments from last year and the addition of platform revenue from the ResoluteAI acquisition. We ended the quarter with $16.6 million in annual recurring revenue, or ARR, up 82% year-over-year and about 6% sequentially. We added about $1 million of incremental ARR in the quarter, the vast majority of which was in the Scite B2C business. I wanted to take a few minutes to discuss the limited sequential increase we experienced in B2B ARR in the quarter. We did, in fact, grow both Scite B2B and Article Galaxy in the quarter. However, the vast majority of that growth was offset by churn in the ResoluteAI business. While this churn was material, it was not completely unexpected and was concentrated across three large customers, all of which had renewal dates in Q3. The downside of this is the effect that it had on ARR in the quarter. The upside is that we have now cycled through most of the ResoluteAI customers from a renewal perspective, and a good portion of the churn risk is behind us. This does not…

Thanks, Bill. In our last earnings call, I discussed our BHAG or big goal of $30 million in ARR by the end of FY '26. Our ARR at the end of Q3 is $16.6 million, which means we're pacing a little behind that goal. However, this was largely due to the churn Bill mentioned within the ResoluteAI business. Overall, our progress toward the BHAG will not be straight line, but I remain comfortable with where we stand today. In addition, I'm very pleased with our revenue, adjusted EBITDA, cash flow from operations performance in the quarter, but we have several areas we need to continue to work on. My top three priorities are as follows. First, integration across the new products that we've acquired as part of the Resolute and Scite acquisitions. We have completed the first phase of the Scite-Article Galaxy or AG integration. We now support single sign-on, so users can seamlessly jump between AG and the Scite product. We also have added the Scite badge to the Article Galaxy product. As a reminder, this unique feature of the Scite product allows for a FICO or Rotten Tomatoes score for articles, so the user can more quickly judge the quality of the article or articles, while an AG user can click on that badge and jump to the Scite product to see detailed results and all users in Scite can see pricing and availability of the articles in the Scite platform. The second is Article Galaxy growth. As a reminder, we have four drivers of Article Galaxy growth. The team will refer to as the new-new team, sells new logos and is on track to beat last year. The new existing team, which sells transaction-only customers, Article Galaxy, is also on track to beat last year. We continue…

[Operator Instructions] We'll hear first from Jacob Stephan at Lake Street.

Appreciate you. Congrats on the quarter as well. Roy, you made a comment kind of regarding churn and how it's usually not due to competition. I'm just curious how you're kind of seeing the opportunity to win market share from some of your competitors and kind of how you're positioning yourself there?

Yes. That's a great question. I think our strategy is to have a superior product in the categories that we participate in, which include discovery tools, which is where Scite and Resolute come in. We continue to add functionality to Article Galaxy, which is our core access or document delivery platform. And we continue to add functionality to the references product, which is the reference management software. So moving forward, as we more tightly integrate these tools together, we think that's a competitive advantage and that you're not exporting from one tool and importing into the next tool. And integrating some of the unique features like the Scite badge and additional AI capability into the platforms, we think adds real value. In addition to the fact that our objective is to simply be the easiest and fastest research tool out there today. So it's a much longer conversation with that, but I feel like we have made progress and continue to have a good strategy to be competitive and take share as we move forward.

Got it. Understood. And maybe just one more. You guys had a solid quarter and kind of B2C expansion. You noted kind of sales and marketing efforts are going to be implemented kind of in Q4 here. But I guess, how should we think about kind of sales and marketing moving forward? We saw your first quarter over $1 million in expense here in Q3. But maybe just any sense on how we can see that trending over the near term here.

Yes. I'll let Bill comment on the numbers. I mean, big picture, as Bill mentioned, we will invest a bit more in digital ad spend as we continue to experiment with the right spend that drives trials and subscribers on the B2C side. On the B2B side, we don't expect any big changes as we roll into Q4. We may add some additional costs as we go into next year, but I think it will be negligible. But Bill, any comments?

Yes, a couple. First, this was the first quarter that we fully had Scite represented from a cost base perspective. And so that's what's kind of pushing us to the $1.1 million we had this quarter. And I do think that's sort of a reasonable run rate with the one exception of marketing spend. I think we're going to -- we'll experiment. We'll probably do anywhere, $150,000, maybe $200,000 of additional marketing spend in the quarter. And there are metrics that we'll be looking at to see what kind of return we're getting on that expenditure and whether that will kind of continue going forward or not. And so it is something that, one, we get a very quick read on how it's working. And then two, we can adjust quite rapidly, turn on or turn off if we're not seeing the results that we want. So, I think that's how I would look at that line on the P&L on a go-forward basis.

Okay. Yes. I appreciate that. And maybe -- sorry, just hop in with one more. Maybe kind of help us think about the overall B2C opportunity. Obviously, it was a nice quarter of ARR growth. But how are you thinking about kind of the overall opportunity here and growth rate -- growth expectations?

Yes. I think B2C is new to us, and we don't know what we don't know relative to what really are good churn rates. I mean, when we compare it to the churn rates of the B2B business, they're obviously materially different, but the onboarding rate of new customers is also very, very different. So in terms of TAM for that business, we know that there's roughly -- I'm looking at the exact number, 25 million to 50 million researchers out there or when I say out there, I mean, that subscribe to a platform that focuses on research. So, we think there's a very large TAM, especially in comparison to how many users we have today. The question is, can we continue to deliver value to expand the lifetime value of the customer that signs up in addition to continuing to onboard customers? And so far, as we've increased spend, we've not seen a material change in terms of the cost per trial or the trial, the subscriber conversion rate. And that's why, as Bill mentioned, I mentioned, we're going to dial up that spend and see where the point is where we see any material change in those numbers. All that said, it has more seasonality than the rest of our business. So, we're dialing up spend this much -- this month, I'm sorry. We're going to be careful about June, July, August and then dial-up spend again as people get back to school. Anything you want to add, Bill?

No, I think that covers it, Roy.

[Operator Instructions] We'll hear next from Allen Klee at Maxim Group.

You gave your fiscal 2026 guidance for annual recurring revenue. How do you think about how it ramps up over the next two-plus years to get there? Does it kind of accelerate in your mind? Or is it kind of a steady Eddie? Or how do you think about that?

Yes. Just to be clear, I wouldn't call our $30 million target guidance. For me, it's a BHAG. It's a big hairy goal that we're chasing. And we typically don't provide guidance on the top or the bottom, but as you know, three years ago, I provided a BHAG of $20 million. That's what we were chasing, and now I've moved it to $30 million. Back to your question, though. No, I think we'll see acceleration in the number. Keep in mind, we've not fully integrated the products. We haven't built all of the new products we're going to build out of the combination of the three companies; Research Solutions, Scite and Resolute. We've also not finished implementation of a lot of things we think will drive road into the future. So me being relatively conservative, I'm looking for $1.5 million or $1.44 million in growth -- net ARR growth per quarter, but we won't hit that in these early quarters, but I believe we'll outperform that as we start to get into certainly the second half of FY '25 and then throughout '26.

That's great. Just a housekeeping question. What's your current share count?

Bill?

Yes. It's right around [30 million to 35 million], I want to say, let me just confirm, $32.3 million roughly.

And you announced two new products or features recently. Can you talk about those features and if you can give any sense of the opportunity from them?

Yes. We think within the organizations we serve, there's typically departments that are focused on clinical trial or tech landscape. And the way those products work is we're basically using one of our search engines to allow you to put in criteria. It will then gather together a tremendous amount of information. Some of it is in the peer-reviewed scientific articles. Some of it is in the external data sets that Resolute has, and it will literally write a summary of the tech landscape for the subject matter you search for or write a summary of the clinical trial research that you ask it to run. So effectively, what it does is it dramatically reduces the amount of time it takes to do those functions within heavy research-intensive organizations. These tools, we don't expect to be 10s of millions, but we do expect them to grow over time. However, I think the TAM for that is certainly smaller than Article Galaxy or Scite. Any of the versions of Scite's simply because the research organizations in the companies that are our targets are typically 10s, hundreds, even thousands of researchers, whereas the departments that are doing that type of work are much smaller. So, they're exciting products. They line up with our strategy of helping all the various steps and departments involved in the research process. But I would not think of them as an opportunity anywhere near the size of Scite, SciPro or Article Galaxy or Article Galaxy references.

Last question on your increase in sales and marketing as you've gotten good results for that. How do you think about like the hopeful, the cost to acquire, if you spend an extra dollar in sales and marketing, what you hope to get for that?

Yes. I mean, I can pull something up here and give you some context. When we invest -- well, Bill, do you want to comment on the B2C side, and I've got a couple of comments on the B2B side.

Yes. So typically, on B2C side, we're typically looking at two metrics. One is the customer acquisition cost and the time to pay back that cost and the other is the lifetime value of that customer as a ratio compared to the cost to acquire that customer. And so, obviously, as we're spending more, we're looking to see if those metrics are improving, not improving, and where can we kind of optimize those. In general, looking for pretty quick payback like under six months or so, under 12 months is more of the standard, but we're looking maybe a little bit more aggressive there and trying to minimally be above kind of 3x lifetime value to CAC. So, those are things we're looking at, but it's really more -- are these trends? Are these numbers improving as we add spend? Are they starting to deteriorate? And that's what we're monitoring.

Yes. We have a similar approach on the B2B side. Just the numbers are a bit different. So, we typically have experienced between 12- and 18-month payback period, and we typically have a very large kind of lifetime value because customers don't churn out at a fast rate. So, again, our CAC LTV numbers there are very good, and that's another area of the business where I think we've done a nice job in the past few months of calibrating spend to maximize traffic that converts into sales pipeline. So, I think we've got -- made a lot of progress there. And I think that will start to show up in the numbers as we get into beginning of FY '25.

And this does conclude our Q&A session for today's conference. I'm happy to turn the floor back to Mr. Olivier for any additional or closing remarks.

Well, thank you, and thanks, everyone, for joining in the call today. We will be participating in the Three Part Advisors IDEAS Conference in New York City on June 12. Hope to see you there. Qualified investors that would like to attend or schedule a meeting should contact Three Part Advisors, and we look forward to speaking with you again in September to discuss our full-year and fourth quarter fiscal 2024 results. Have a great day.

This does conclude today's teleconference, ladies and gentlemen, and we thank you for your participation. You may now disconnect your lines.