Research Solutions, Inc

press release announcing its results for the third quarter of fiscal 2025. The release is available on the company's website at researchsolutions.com. Before we begin our 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 and uncertainties 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. 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. I would now like to turn the call over to President and CEO Roy W. Olivier. Roy? Thank you, Stephen.

Overall, I'm pleased with the Q3 results. The investments we have been making in sales and marketing are starting to pay off. We had strong gross and net ARR bookings across all three sales teams. The net new deployment number of 43 during the quarter takes us up to 150 on a trailing 12 month basis. And I'm happy with that number. We are all excited to have taken ARR above 20 million for the first time. And the 1.2 million incremental ARR for the quarter is a strong result as well. I also want to note that our AI based products are showing strong growth. On a year over year basis, Growth is strong across the board, but in the B2B enterprise license segment, we saw 180% increase over the previous year quarter. We will talk about our AI strategy in more detail later, but it is working, and I think the results should provide some comfort to our investors that we are on the right track and have the right strategy in place to provide AI-based solutions that research-intensive organizations need and want. I'm now going to pass the call over to Bill to walk through our fiscal third quarter financial results in detail. After Bill's portion, I will be back to address where we are in more detail. And Josh Nicholson, the founder of CITE and our chief strategy officer, will provide some additional context about our AI strategy. Bill?

Thank you, Roy, and good afternoon, everyone. Before I go through the financial results today, I would like to make a couple of statements. First, the site acquisition is now fully anniversaried. As a result, all comparisons for this quarter to the prior year quarter are now fully organic. Second, if you are a long-term investor, you have heard us discuss the transformational impacts of our ongoing revenue mix shift to SAS revenue. This quarter is a prime example of those impacts as we achieved a number of milestones and records in the quarter. Margins and cash flow have expanded as we have navigated the company from 10 million to 20 million ARR, and we expect similar type expansion as we continue to grow ARR onwards to our next target of 30 million. Turning to the results, Total revenue for the third quarter of fiscal 2025 was $12.7 million compared to $12.1 million in the third quarter of fiscal 2024. Our platform subscription revenue increased 22% to $4.8 million. The growth was primarily driven by growth in site B2B and B2C platform revenue. However, we also experienced growth in both revenue and net new deployments in our core Article Galaxy product. Platform revenue accounted for about 38% of our total revenue for the quarter, compared to approximately 33% in the prior year quarter, as this mix continues to move up and to the right. We ended the quarter with $20.4 million in annual recurring revenue, or ARR, up 23% year over year. The result was impressive for a couple key reasons. First, similar to last quarter, the growth was broad-based. across both site and article galaxy between both new sales and upsells and between both B2B and B2C. Second, B2B experienced net incremental ARR growth of 736,000, which is a company organic record for a quarter and compares to growth of only 38,000 in the prior year quarter. I will note that there was some one-time larger churn items in last year's Q3, However, regardless, the result is impressive. The ARR is broken down as 13.5 million in B2B ARR and 6.9 million in normalized ARR associated with sites B2C subscribers. Net incremental ARR growth in the quarter was approximately 1.2 million, and we had 43 net B2B platform deployments. Please see today's press release for how we define and use annual recurring revenue and other non-GAAP terms. Transaction revenue for the third quarter was $7.8 million compared to $8.2 million in the prior year quarter. Q3 is seasonally our best time for transactions, and while this quarter was the highest result of this fiscal year, it was down 4% to the prior year quarter. The reason for the decrease was that paid order volume was simply lower in the quarter compared to last year. It is too early to tell if this is something unique to this quarter or if it is a longer-term trend, perhaps economic or otherwise, but we will continue to monitor and report on it. Our total active customer count for the quarter was 1,380 compared to 1,426 in the same period a year ago. Gross margin for the third quarter was 49.5%, a 430 basis point improvement over the third quarter of fiscal 2024. The increase is due to the ongoing revenue mix shift towards our higher margin platforms business, and we are now on the doorstep towards pushing through 50% plus blended gross margins. In addition to the revenue mix shift, we also experienced gross margin improvements in both our platforms and transactions business lines. The platform's business recorded gross margin of 87.4%, a 180 point increase basis point increase compared to the prior year quarter. The result is primarily related to lower labor costs as we scale the business, partially offset by hosting costs which increased proportionally with revenue. Gross margin in our transaction business increased 30 basis points to 26%. The increase was related to higher copyright margins. I will note that these are really strong results for both platforms and transactions. As a result, it is likely you will see these margins dip down in future quarters, but we do not expect to see any material changes in what the company has experienced with respect to these margins over the last 12 months. Total operating expenses in the quarter were $5.7 million compared to $5.4 million in the prior year quarter. The increases were nearly all isolated to the sales and marketing line of the P&L where we are deliberately making investments. We are pleased to be able to make these additional investments in growth as we are largely able to hold the line on other expenses. Turning to profitability, the company reported income from operations of $557,000 compared to $88,000 in the prior year quarter. net income was 216,000 or one cent per diluted share compared to net income of 76,000 or nil per diluted share in the prior year quarter. I wanted to make a few statements here regarding the site earn out. First, we did not make any adjustments to the site earn out estimate for this quarter. Second, this earn out will be finally determined as we close our Q4 and we will provide an update then on the final earn out amount and any final adjustments required to our estimate. Lastly, GAAP requires us to present the present value of the earn out on the balance sheet and essentially unwind that present value through the other expense line as we start making payments on the earn out. This is why you see a negative other income in the negative below the line other income in the P&L as we expense $406,000 in the quarter related to this unwinding of the present value. Regardless of this expense, we were still able to generate $216,000 of net income in the quarter and have a beat to last year's results. Turning to adjusted EBITDA, we set a new company record in the quarter. Adjusted EBITDA was $11.4 million compared to $961,000 in the year-ago quarter and just edge over the prior company record for adjusted EBITDA, which was set in Q4 of last year. On a trailing 12 months basis, our adjusted EBIT is now 5.1 million, which represents a 10.4% margin. We believe crossing through the 10% adjusted EBIT margin to be an important milestone for the company and that this margin can continue to expand as ARR grows. While the adjusted EBIT result was strong, the thing I was pleased with most was our cash flow performance in the quarter. Looking at our balance sheet, cash and cash equivalents as of March 31, 2025 is now reported at 9.9 million versus 6.1 million on June 30, 2024. Cash flow from operations in the quarter was approximately 2.9 million compared to 2 million in the prior year quarter, and 4.8 million year-to-date compared to 1.6 million last year. On a trailing 12-month basis, we have now generated over $6.7 million in cash flow from operations. These are material increases over the prior year, and our cash balance continues to grow rapidly, positioning us well to pay the site burnout as well as remain flexible when it comes to using the cash for strategic considerations. As of quarter end, there were no outstanding borrowings on our revolving line of credit. In conclusion, we are very pleased with the results of the quarter and think they are in line with what we have been communicating to investors and indicative of the future value in the company that can be realized as we continue the ongoing revenue mix shift towards higher margin SAS revenue. As we look ahead, similar to prior years, we are expecting a strong finish in our final quarter of the fiscal year. Even if transaction revenue declines and is seasonally down sequentially, we still have the possibility to attain a Q4 adjusted EBITDA result that is similar to what we saw in Q3. Regardless, in many respects, it will be another record year for the company and one that continues to see us executing on our ARR growth plan. I'll now turn the call back to Roy.