Good afternoon, everyone. And thank you for participating in today’s conference call to discuss Research Solutions Financial and Operating Results for its Fiscal Third Quarter ended March 31, 2022. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steven Hooser, Investor Relations. Please go ahead.

Thank you, operator, good afternoon, everyone. And thank you for joining us today for Research Solutions’ Third Quarter Fiscal 2022 Earnings Call. On the call with me 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 second quarter of fiscal 2022. That release is available on the company’s website at researchsolutions.com. Before turning the call over to Roy and Bill or 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 are 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 condition. 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 press release issued this afternoon. Finally, I would like to remind everyone that this call will be recorded and made available for replay via a link on the company’s website. With that, I will now turn the call over to Roy. Roy?

Thank you, Steven. And thanks to everyone joining us today. We are generally pleased with our continued progress in growing the business. It was our second quarter of net ARR growth over 500,000 and a record in terms of quarterly recognized revenue. We had a strong up-sell quarter, which is a good sign that the product upgrades we’ve been investing in are valuable to our customers. The up-sell number was also a company record and helped us to maintain over 110% net churn for the second quarter in a row and now in three of the last four quarters. The business also posted over 30% growth year-over-year and platform customer growth, ARR and platform revenue. Our net new customer deployments on a trailing 12 month basis was 168 and majority of these deployments are what we call new, new which means they are new customers to the company, not upgrades. I’ll provide some additional context after Bill walks you through the quarterly results in more detail. Bill?

Thank you, Roy and good afternoon everyone. Total revenue for the third quarter of fiscal 2022 was 8.8 million, a 5% increase compared to the third quarter of fiscal 2021 and as Roy previously noted a company record for quarterly revenue performance. Platform revenue increased 33% to 1.8 million, primarily driven by a net increase of platform deployments from last year, including 34 net new deployments in the third quarter, and strong up-selling of current platform customers. The third quarter is seasonally our best period for renewals and the company experienced its biggest up-sell bookings quarter ever increasing up-sells by 12% over the third quarter of last year. As a result of this and new customer bookings annual recurring revenue or ARR increased by 500,000 in the quarter and stood at 7.3 million as of March 31, 2022. This result represents a 32% year-over-year increase at a 7% sequential increase. We have added 1.8 million of ARR to the platform over the last 12 months and nearly 1.1 million of that has been generated in the last six months. Please see today’s press release for our definition and use of annual recurring revenue and other non-GAAP terms. Transaction revenue for the quarter was 7 million, essentially unchanged from the prior year quarter. I will note that Q3 is also seasonally a strong period for transactions as a result, while the year-over-year revenue was flat we were up sequentially about $700,000 or 11% over our performance in Q2 of this year. Due to seasonality, we expect transaction revenue to decline from this level in Q4. However, we continue to think that as we add more customers to the platform that over time transaction revenue will begin to grow again on a year-over-year basis. When this will happen, it’s hard to definitively…

Thanks, Bill. We continue to make good progress executing on our strategy to expand our offerings from document delivery to a robust set of tools that supports researchers. Our historic focus has been on helping customers acquire research documents that support their work. We will continue to develop and release tools with the intent of helping our research customers across the broader spectrum of discovery, acquisition, management, and creation of proprietary content and intellectual property. In the latter half of this calendar year, we will be expanding our reporting and analytics solution. As I have said previously, all of this is intended to provide the leading research platform used in the life sciences segment to the customers we have chosen to serve. During the quarter, we released our new reference manager product, which helps researchers manage their research documents inside the platform. It is the first of two releases, the second of which were released in July of this year. When complete, we believe we will have delivered leading functionality to our customers in terms of helping them manage their research. We are continuing to work on additional functionality in the discover or search phase, which we also intend to release later this calendar year. Early feedback on our reference manager product has been very good and we expect to see continued strong up-sells as customers adopt this optional feature. We continue to work on expanding our sales team as we progress toward FY ‘23 and we are working with a partner to conduct a study on how we might go to market in China, which is the second largest market for [STM] research in the world today. We continue to have a high level of activity in M&A, but I’m disappointed to have no immediate news to report. Valuation…

Thank you. [Operator Instructions] And the first question will come from Allen Klee with Maxim Group. Your line is open.

Good. Good afternoon, congratulations. It’s a really a breath of fresh air this quarter. It was very interesting what you said about how you are this quarter released a certain tool and other ones coming later this year or two other ones coming out. Could you just expand a little on what those add for the user experience? Thank you.

Sure. The one I mentioned that we recently released, and we’ll have a second release of it in July, is what we call references which is a reference manager application. Previously, our customers would be either emailed a link or emailed a PDF of the scientific article that they acquired. Now they’ll receive that article inside the platform. They will be able to create folders that are either individual folders or shared folders. They will ultimately be able to mark up that PDF, make comments on it, just like One Note the Microsoft application or several other markup applications. And they’ll be able to store all that inside the platform. It’s an important part of the research process. It’s an area that we have not really fully released a product into previously. We have a product that does a little bit of that, but we’re replacing that with the new references product. And as I mentioned, there’s two releases, one that’s already out, and then a more robust release that will come out in July. That’ll be followed by a couple of other things. The way the researchers work today is they are searching for that research in a variety of tools. Some are tools that they’re acquiring from another company. Some are free tools. The most popular of which are Google Scholar, and PubMed. And we historically had a widget that lived inside those search tools that allow you to pull in details by the article. What we’re doing is we’re building those tools directly into the platform. So you can do the search in the platform. You can acquire in the platform. You can receive the article and manage it in the platform. And that’s the search tools we’re building. And then the third thing I mentioned was analytics, which is where we have a massive amount of data underneath that platform of what people are doing with it. And we’re building out an analytics engine, which will allow those customers to run much more robust reporting, in terms of how much money the platform is saving for them, where they might need subscriptions, where they don’t have them, or the opposite, along with other analytical tools that will help them monitor they’re doing, let’s say battery technology research for a new electric car. And ultimately, we want to get the tie that in the world fees of grants, patents, apply for patents granted, or even press releases that mention similar technology to what they’re working on. So it’d be able to not only have an incredible analytics package on top of what they’re doing internally, but they’ll have a way to tie that to external news sources to monitor what’s happening in the world related to the research that they’re doing internally.

That’s great, thank you. Can you give us some color on how article Galaxy Scholar is performing?

Article Galaxy Scholar is doing I would say, okay, but I would also tell you that the two critical quarters for the academic market are the quarter we’re in ending June 30, and the first quarter of our next fiscal year, which is the July through September quarter. So we have spent a lot of time laying the groundwork for a number of sales and those two quarters. We expect the majority of our annual revenue, not a majority, we expect a significant percentage of our annual revenue to come from those two quarters. And I’ll report back on that in the next call.

Also could you give, this will be my last question, then I’ll get back and queue so other people can ask that. But I have a couple more after this. Can you give an update on where you are on hiring of additional sales force? How much you’ve done of what your goal was?

Yes. We’ve made some progress there. Not a majority of the progress but we feel like we’re on track with our plan, which was to hire most of those folks during this quarter. And of course we’re in early mid May. So we are making progress, but we’re not at the full headcount we want to be at.

Okay, congrats again, thank you so much.

[Operator Instructions] The next question will come from line of Peter Rabover with Artko Capital. Your line is open.

So I have kind of, I don’t know, if that’s a positive question, that’s probably not meaning for it to be negative. But I’m just kind of looking at the results and the operating expenses, kind of went pretty high in the last like six quarters. You went from a run rate of 9 million to almost 15. And that’s a pretty big expense given you are planning on acquiring somebody, I assume you will also acquire their SG&A and I’m not really sure, and your goal was for 20 million ARR which is probably 17 million in gross profit. I guess I’m just not really seeing the payback that you’re seeing given the marginal growth in gross profit, versus what you’ve already spent. So there’s some, there’s a disconnect somewhere and just try to figure it out?

Bill you want to take on that.

Yes. I’ll say a couple of things there. One, the increase in expenses has really been in technology and product development. So in the end, in G&A tech and product development, we’ve got some one time development costs going on related to a new product that was about 120,000 this quarter. We also have to prod new product managers that we brought in earlier this year. And again, I think, while those are permanent, I don’t see us ramping that up, dramatically going forward. G&A similarly, there’s been a number of sorts of expenses, which we can tamper down if we want to relate it to both organic and inorganic initiatives. Some of those organic ones are pricing and upgrade to our systems and the inorganic has obviously a lot to do with sourcing and doing some early diligence on some M&A stuff. When you look at gross margin if you assume that transactions stay flat rate if you’re looking at 10 million of platform revenue, that’s going to push the margin closer to 40%. You push it, again up to sort of our longer term goal of 20 million, that’s going to push it to 50%. And again, I do think if you sort of model that out, you’ll start to see some of the profitability come into play, as well as we tamper down some of these investments that were somewhat unique to this year. Go ahead and add anything to that. Yes. The other thing I would comment on is as we have mentioned previously, the board and Bill and I are very focused on this rule of 40 concept, that organic sales rate of the platform which is currently 32 plus the EBITDA margin, which is currently negative need to add up to 40. So these investments we’re making are either going to accelerate that 32 number to a number of big enough to offset negative EBITDA to total 40 or we will start dialing back this investment, generating enough EBITDA so that we meet the rule of 40. So, we’re not going to be able to get all the way to rule 40 in FY ‘23, but we expect to see a material step up in performance in terms of rule of 40. So I don’t know if that helps.

It still kind of doesn’t like I’m just talking about just the platform’s business like I said, you gave guidance, a few looks at a few quarters ago for 20 million in ARR. And that roughly translates to about 17 million in gross profit from about four or five, a few months ago. And you’ve already added like 6 million in run rate of expenses. So I don’t know and I’m assuming with the acquisitions that you need to get to 220 they’re going to add probably 2 million or 3 million more. So is that like, I know are all we’re talking about is like an extra 3 million in gross profit in the next three years.

Well we could take this offline and it would be helpful because I’m not tracking with 6 million incremental expenses. So I don’t think we’re on track to do that.

Yes, the other thing. The other thing to keep in mind is…

86 few months ago or as of the quarter…

Yes. The other thing to keep in mind is…

Sorry. I’m looking at your summary that you have on your investor page. And on 930, your expenses were 2.4, which is approximately 9.2 million and right now they’re tracking, 14 and 5. So I don’t know, give or take 5 and 3 which is, maybe I’m rounding up a little bit.

Yes. So a couple points. Yes. If you look at trailing 12 months operating expenses this year we are at 12, basically 12, to 8 prior trailing 12 months, we were at 10 to 50 call it. Also keep in mind, within this year, we have had a CFO change which triggered a bunch of onetime costs related to separation from the CFO as well as acceleration of stock comp. So, again, within the cost there of that 12.750 sort of run rate there’s over there’s 1.1 million of stock comp. So that’s something that’s not going to sort of obviously recur. So I do think, again we could sort of tally through some of these costs that we’re incurring on the product development [Indiscernible] side. But there’s a material chunk of those that is either one time in nature, or can be tamp pulled back or tapered back, should we not see the resulting ARR growth that we want to see.

Okay, maybe I’ll appreciate the color. Maybe I’ll ask this another way. You are comfortable enough, given the guidance of goals of 20 million, and high 80s gross profit. Are you comfortable enough giving what you think your run rate of operating expenses is needed to support that?

I don’t think we are sitting here today. But I think in the next call, we could add some color in that regard.

Okay, well, look, I don’t mean to be like picking on you. You’ve been a longtime shareholder. But I guess I’m just overly concerned about a significant increase in operating expenses which does not seem to jibe with what’s with the ROIC that’s needed to given what you’ve given in the past. So that’s my only concern. I’ll get off the call.

That’s fair enough. Thank you.

[Operator Instructions] Our next question comes from Richard Baldry with ROTH Capital. Your line is open.

Thanks. If I look at nine month to date, ARR, incremental serve as a proxy for your sales growth. It’s up about 32% year-over-year which is, I think, a pretty good figure, sort of curious, do you feel like that people that you’ve already had in their seats just executing a little bit better or are you adding heads that are doing it? How much do you feel like you’ve got capacity to keep growing that ARR with the team you’ve got versus you’ve talked about hiring and I don’t know maybe discuss whether the hiring backdrop is tough how you feel or what do you think of the bring people on? Thanks.

Yes. In terms of the first question, I do think that obviously, the base gets bigger, it’s tougher to maintain 30 plus percent growth. But I’ve set expectations with the sales teams that I expect their bookings growth next year to start with a four to be somewhere in the 40s. And we believe we can do that with current buds and seats, not new hires. We do have some new hires that will roll in on top of that, and we’re hiring additional sales resources now so that we can roll in next year with some additional heads. But most of the performance improvement we’ve seen this year has been some improvement of existing productivity plus, I’ve mentioned in previous call we hired a resource in Japan last year. We hired a German speaking resource last year, and they’ve started to come up to speed and contribute this year. Japan’s been slow going, Germany has come up to speed much quicker. In terms of the hiring environment for sales I think it’s, I have not seen anything that leads us to be concerned there. Compensation expectations were a bit higher than we’d like them to be. But that’s probably a common theme across any software company out there today. So I’m not really worried about putting the folks in the seats. I’m more worried about filling the top of the pipeline with leads, because we have a very consistent close rate. And to the extent we can put the leads in the top of the funnel, we have consistently for several years now converted a specific percentage. So it’s just a matter of getting the top line lead funnel improved. And we brought on a new VP of marketing last quarter, which is intended to help with the marketing qualified leads. And today, a majority of our sales are coming from sales qualified leads. We want to improve that, but we want to see more improvement on the marketing side of the business. Did I address both your questions?

Yes. Last one for me maybe. It does look like the government is letting inflation get a little bit out of hand. So I am sort of curious your thoughts on that impact whether it’s on the revenue pricing side or cost. It seems like your end clients are not necessarily famous for being shy about passing on price increases but that’s universities, pharma, tech whatever. So how much do you feel like you will be able to press that lever at least to maintain kind of operating leverage you have got now? Thanks.

Yes. That’s great. We do have kind of automatic built in price increases at renewal, typically f4% or 5%. But this year, going into July 1, we plan on increasing pricing. More than that, it is a complex formula, because it depends on what features they have turned on or not, it can range anywhere from the minimum which is typically 4% or 5%, up into double digit percent. So I can’t really comment that we’re going to see a 10% or 15% increase, but we are going to, frankly, take advantage of the current environment and materially raise prices on the base platform. And then these new releases that we’re doing, they’ll be 110%, 115% or 120%, of the base platform fee. So that’s why I mentioned in a conference call script that we would expect us to continue to see strong up-sells in the next year. Some of that’s going to come to these price increases. Some of that’s going to come from these new features which if you want to turn them on is going to change your base fee from what it is today to what it is July plus the price increase times 110 or 120 or in some cases, even more than that.

Maybe one last one. I know you’ve got a successful background M&A and prior lines. So in the current environment and current entity, you talk about sort of the challenges that you’re seeing now that you’re trying to bring that as another part of your growth engine. Is it the uncertainty around a macro? Is it just finding the right targets? And obvious valuation disruptions lately has that become another obstacle? How do you feel about what you’re seeing and where you might be sitting a year from now? Thanks.

Yes. I mean, the biggest challenges we definitely have are valuation followed by if we run into something larger our ability to raise capital to acquire something that big. And then kind of closely behind that is a number of the targets that were in our original list, either had VC invest on our PE, either acquired by PE or had PE investment which kind of, of course throws a monkey wrench into the discussions we were having. So we don’t have as many kind of entrepreneurial owned businesses that we’re running into as Bill and I had in a previous life. But we are finding good opportunities that line up with the strategy and what enhance the product. I think I’ve painted our vision in terms of where we’re going from a product point of view. And big challenge always is either valuation or our ability to fund the price point even if we could get over the valuation hurdle or a combination of the two. In terms of where we’ll be a year from now, I think we’ve made some adjustments to looking at smaller businesses where we think that technology is worth more bolted into our platform than that business might be worth as a standalone business to us. And we’ll continue to work those but I’ve been frustrated at our slow pace here.

[Operator Instructions] Next question comes from a line of [Indiscernible]. Your line is open.

Hey, thanks for taking my question. Just a quick question and observation. It’s my impression that when you join the company, Roy, it was moderately under managed and that there were some deficits in the technology and culture and other areas. So you need to bring people on board to overcome those deficits. And then once you do, you can sort of scale up this operating leverage. So I don’t know if you agree with that or not. But I just wondered within that context, how far along are you in getting the right people in place in the technology side, and in the sales and marketing side to get this to a place where you’re comfortable and it represents sort of your level of benchmark of management?

Yes. I mean, that’s difficult to answer on a public call. But I would say we’ve made some progress. But we still have work to do there. So it’s tough for me to be any more specific than that.

Our next question will be a follow up from Allen Klee with Maxim Group. Your line is open again.

Yes, hi. Your average selling price picked up compared to where it had been the last two quarters and was roughly flat year-over-year where I think the expectation had been that it would probably be down because your incremental customers smaller than the existing ones. So what would you attribute it to what I saw is better than expected pricing?

You want to push on that Bill?

Yes, sure. It was just a bit of a unique thing in the quarter. So we actually, if you’d looked at the deployments, this quarter versus last quarter, we had less deployment, but they were much larger sales. And so the sales team had just completed a number of deals with larger customers that had larger seat counts. And that pushed the ASP up this quarter over last where it had been running kind of in the 10, 6 range, it’s around 70. I do expect over time in the longer term that it will come down and we will have more customer deployments as well. But I think it’s just more of a nature of some of the deals that were closed this past quarter.

Great, thank you so much.

And there are no further questions pending. I’ll turn the call back to Hooser. Please continue with your presentation with your closing remarks. Thank you.

Well, thanks, everyone for joining us today. And as a reminder, we will be participating in a three part advisors virtual ideas conference in June. For more information on that event, please contact your three part advisors. And we look forward to speaking you in September to discuss our fourth quarter and full fiscal 2022 results. Have a good night.

And all that will conclude the conference call for today. We thank you very much for your participation. You may now disconnect.