Thank you for your patience. This is the conference operator. Welcome to the Research Solutions Inc. First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. I will now hand the call over to John Beisler from Investor Relations. Please proceed.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the Research Solutions First Quarter Fiscal 2024 Earnings Call. On the call today are Roy 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 first 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 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. I would now like to turn the call over to Roy W. Olivier.

Thank you, John, and thanks to everyone for joining us for our first quarter fiscal 2024 results. During the quarter, we had some great things going on, including record ARR of over $11 million, 16% overall revenue growth, and completing the acquisition of Resolute AI. This acquisition will help us launch an advanced discovery search tool, which has been the number one requested tool by our customers. It will also help us create new sources of revenue, both in terms of new products and in new workflows that expand our total addressable market and represent a strong cross-sell opportunity for us. There's a lot of good things happening around the business, including in the marketing, sales, product, and M&A segments, which I'll discuss with you in more detail after Bill's comments. The quarter is a bit messy in terms of our EBITDA performance due to several costs that Bill will discuss in detail. I'm happy with the core business EBITDA performance in Q1. I'd like to pass the call over to Bill to walk through our fiscal first quarter 2024 financial results in detail, and then I'll wrap up with some comments.

Thank you, Roy, and good afternoon, everyone. Before I begin, I'd like to remind everyone that our first quarter results include the acquisition of Resolute AI on July 28 and as such, are inclusive of approximately 2 months of results from Resolute. Please note that we have integrated Resolute's operations into our existing business. As a result, it will not be practical to report on Resolute as a separate entity. That said, given it was only part of our operations for 2 months this quarter, I am able to provide some insight for this quarter only as to how it affected our ARR and P&L performance. Lastly, it should be noted, Resolute's revenue is all captured on the platforms line of our P&L. Total revenue for the first quarter of fiscal 2024 was $10.1 million, a 16% increase from the first quarter of fiscal 2023. The growth rate, excluding Resolute, was approximately 13%. Our platform subscription revenue increased 29% to $2.6 million. The growth was primarily driven by a net increase of platform deployments from last year and the contribution from Resolute, which added a little over $200,000 of platform revenue for the quarter. We ended the quarter with $11 million in annual recurring revenue, up 32% year-over-year, reflecting our continued sales and upselling efforts, low churn of existing platform subscribers, and approximately $1.35 million of new ARR associated with the Resolute transaction. Please see today's press release for how we define and use annual recurring revenue and other non-GAAP items. Our transaction revenue increased almost 12% from the first quarter of fiscal 2023 to $7.5 million, and our total active customer count for the quarter was 1,395, a net increase of 175 from the same period a year ago. The increases are primarily due to organic growth, with additional growth resulting from higher transaction volumes related to contracts transferred from the FIZ Karlsruhe transaction effective January 1, 2023. Gross margin for the first quarter was 40.1%, a 150-basis point improvement over the first quarter of 2023. The increase is due to the ongoing revenue mix shift towards our higher-margin Platforms business. The Platform business recorded a gross margin of 85.3%, a decrease compared to 88.6% in the prior year quarter. The decrease is related to the inclusion of Resolute's platform revenues, which generate a lower margin. Going forward, as we consolidate Resolute into our business, I suspect our platform gross margin will decrease. However, it should remain in a range between 80% and 85%. Gross margin in our Transaction business increased 90 basis points to 24.3%. The increase was primarily attributable to pricing initiatives, resulting in increased copyright margins. Total operating expenses in the quarter were $5.1 million compared to $3.2 million in the prior year quarter. This quarter's results include roughly $1.2 million related to a series of unique items, including $542,000 in proxy-related expenses, $339,000 in legal costs associated with our M&A activities and $280,000 in costs associated with the termination of our former Executive Chairman. These costs all appear on the G&A line of the P&L with the exception of about $80,000 of that cost, which is classified as stock compensation. In addition, Resolute added approximately $300,000 of operating costs in the quarter, most of which appear on the technology and product development line of the P&L. Lastly, stock compensation was also up an additional amount of roughly $333,000 related to the expense from the long-term equity bonus plan where restricted stock shares vest at higher stock prices, which are not implemented until Q2 of last year. Net loss for the quarter was $988,000 or $0.04 per share compared to net income of $215,000 or $0.01 per diluted share in the prior year quarter. Adjusted EBITDA for the quarter was negative $441,000 compared to a positive $433,000 in the year-ago quarter. Excluding the unique items I previously noted, adjusted EBITDA would have been approximately $637,000. Turning to our balance sheet. Cash and cash equivalents as of September 30, 2023, were $9.9 million versus $13.5 million on June 30, 2023. The decrease was primarily attributable to the cash used for the Resolute acquisition and payments related to the FIZ acquisition, which collectively totaled about $2.8 million. We did burn approximately $750,000 of cash in the quarter, primarily related to excess legal costs associated with the M&A activities and the proxy matter and the fact that Resolute is presently in a cash burn situation. In addition, I will remind everyone that we pay our executive bonuses and sales commission overages for the prior fiscal year in Q1. As we look ahead, going forward, there are a few key items I would like to note. First, our P&L should be less impacted by the items that affected us in Q1. The proxy costs and separation costs related to the former Executive Chairman have, for the most part, all been expensed. That said, we will continue to work heavily on M&A in Q2 and should expect higher than normal costs related to M&A through Q2 before it tails off from there starting Q3. Second, performance will still be hampered by a number of factors in Q2. Although expenses still have some bills to pay from the proxy matter, we will pay out the separation cost of the former Executive Chairman over time. When you combine this with the high M&A costs and Resolute still being in a burn position, Q2 will be another quarter of cash burn. Third, cash burn from Resolute will reduce over time and be offset by core cash flow performance as our business gets past the unique items affecting it in Q1 and Q2. Fourth, I will remind everyone that we have stated we are working on 2 other acquisitions, and both of these acquisitions are cash flow positive and will contribute to cash flow when they close. The net of all this is that I believe we will see improved P&L performance in Q2. However, cash flow will continue to be impacted. Once we hit Q3, however, as these items see an improved, more normalized run rate for the business. As I've stated in the past, we have unique items impacting the business currently and indeed, these items are material, anything that represents a change to the profit and cash flow profile of the business that we saw as we exited fiscal year 2023. Additionally, we are working on acquisitions that I think will positively affect those numbers.

Thanks, Bill. The quarter was promising in terms of new business as our collective bookings of new existing and Article Galaxy Scholar showed strong growth versus last year. All 3 of those areas overperformed expectations, which is a nice improvement over last year's results and speaks to the improvements we have made in the sales process, sales materials, and marketing lead generation efforts. We underperformed expectations in churn and in upsells. While our net churn rates continue to be over 100%, we remain concerned about our performance in those areas as some of our customers are downsizing or continue to operate with tight budgets. The good news is that we are seeing very strong lead generation results in the past 2 months, which leads us to believe that we will see continued strong performance in the new, new, and new existing sales teams. We've also not seen any material change in our competitive position. Very little churn is due to competitive takeaways, and the upsell headwinds continue to be a function of our customers tightening their spending. We did launch some new pricing bundles to drive additional upsells in Q2 that are generating a nice pipeline that we think will help in Q2 and Q3. Turning to product, we did several releases during the quarter, including expanding our AI-related offerings in the platform. We released our beta ChatGPT assistant to expand our capability in the platform, allowing our customers to quickly create ChatGPT article reviews for supported publishers. This is in addition to our AI-based recommendation engine in Article Galaxy and our post-market surveillance tool, where we accelerate the review process using this technology. We have one small sale with the Resolute AI product during the quarter. As a reminder, most of the value creation with this product will be through cross-sell activities, which are dependent on product enhancements. We remain on track to include document delivery inside the Resolute AI platform, advanced discovery or search tools in the Article Galaxy platform, and several new workflows in Q2 and Q3, which is when we can expect to start generating revenue, primarily in the back half of fiscal 2024. We did bring on a new enterprise sales professional that will focus on the Resolute products, both new and upsells. He has extensive experience selling these products for publishers, and we remain excited about the possibilities as we move forward. With the proxy matter largely behind us, we are focused on executing our plan and are closely monitoring employee morale and engagement so we can make sure that there are no distractions to hitting our goals for Q2 and the remainder of the year. Regarding M&A, we continue to work on 2 additional acquisitions, and barring any diligence problems, we expect to close one of them shortly. As a reminder, both are accretive to our growth objectives and our EBITDA objectives. Regarding our outlook for fiscal 2024, I have an optimistic view. I remain concerned about the economic headwinds impacting our upsell and churn rates, which in turn will affect our overall growth rate. That said, the acquisitions we are working on, if and when they close, will result in strong ARR as we roll into fiscal 2025, and they will result in nice EBITDA growth as well. I'm also confident that we will produce respectable bottom line performance versus last year from our base business as we put the proxy matter behind us and wind down our M&A activities. In my mind, our biggest challenge for fiscal 2024 and the beginning of 2025 will be to effectively integrate the products we have acquired and transition our sales and marketing efforts to successfully cross-sell those products. In short, we will be focused on integrating what we have acquired, resulting in us being much more selective about what other acquisitions we take on in the future. I am excited about the months ahead for our business. As we execute on our plans, I think it will give investors a much clearer picture regarding what we are trying to build. I think we have a great opportunity to finish the back half of the year with a great deal of momentum, which will be evident both in our integrated product suite and our financial performance. We will be presenting at the Roth Technology Conference in New York next week on November 15 and the Southwest IDEAS Conference in Dallas on November 16. Qualified investors that would like to attend or schedule a meeting should contact 3-part advisers. With that, I'd like to turn it over to the operator for Q&A.

Our first question comes from Richard Baldry of Roth MKM.

Thanks. When I back out the one-time items from the OpEx side, it's well below your recent trends, and even it looks like a little bit down year-over-year. Were there any one-time things that held back the normalized spend? I might have thought it would go up a little bit even given Resolute's integration.

Bill, do you want to touch that?

Yes, if I understand your question correctly, Rich, we basically held tight on a lot of other spend just given some of what we knew was coming with the proxy cost and the M&A-related costs. I'll also say as we budget for a fiscal year at times, we'll put a few new heads in the budget, but it does take some time to get them on board and hired, and that might have affected things a little bit as well. But we tried to run it pretty tight, knowing we're going to have some of these costs hit us in the quarter.

And when you talk about customers have been asking for a search feature, top of their list. Can you walk through what you need to do to integrate Resolute and its technologies into the core platform? Are there meaningful challenges to that? Or is it just basic stuff like APIs?

I would say it's probably somewhere between basic and complex. However, we expect that integration to be complete and the first version of that product to be released late Q2 or early Q3, and then we'll continue to enhance it from there. And what I mean by that is we have 2 different platforms that in the first version will link to each other, so you would do the search in Resolute and then jump over to Article Galaxy. Where we want to go ultimately is that the platform is completely integrated into Article Galaxy, so you don't have 2 things talking to each other. You have one seamless experience. But V1, which gets us to cross-sell capability is sometime between very late this quarter and very early in Q3.

And lastly, the cash came down a little bit. You did the acquisition in the quarter. Talk about when you're looking at other acquisitions, how comfortable are you with the cash position? Or how comfortable carrying debt for at least an intermediate period of time? Would you look to use more equity as the cash balance comes down just to understand the funding backdrop to those M&As? Thanks.

Yes. I'll not comment further. I think I will say Bill and I had a number of conversations about what our cash floor is. And our cash flow is $3 million to $4 million. So we're not going to run this thing with $1 million in the bank. We're going to minimally have $3 million to probably $4 million in the bank. Bill, do you want to address the remainder of that question?

I think as we start to announce some of these, Rich, we all get a little more flavor for how we intend to finance it. But obviously, the larger some of these deals get, the first thing we want to do is try to use cash, but we will likely do some equity to complete some of these transactions. We continue to basically look at all sorts of options. If you look at what Roy and I have done in the past, we've used seller notes and announced things like that. So I think that will also be part of the structure, while at the same time, as Roy mentioned, making sure we keep a reserve amount of liquidity in the business to ensure that we can execute on our plans and don't run into any issues.

Last one. The ASP jumped more meaningfully than we've seen in a while. Is that really an impact of Resolute coming in? Or is there more to it than that?

Resolute, yes.

Our next question comes from Allen Klee of Maxim Group.

Yes, hi. Could you give us a sense of how much of the incremental ARR that was added in the quarter came from the core business, excluding Resolute?

I mentioned in my script, Resolute brought about $1.35 million of ARR. I think we had about not quite 16 of incremental in the quarter and $135 million of that came from Resolute.

And then if we're going to think about there's still a little left over incremental one-time, well, not recurring type spending related to the things you mentioned mostly next quarter. Is there a way to think of what the magnitude of that might be compared to what you just had in the fiscal first quarter?

I think we itemize those costs out that affected this quarter. Of that, the proxy stuff goes away pretty much and the Chairman costs go away pretty much. So it's really around $350,000 of legal, I would say, probably legal over and above normal related to M&A type stuff would be the impact.

On the M&A that you're looking at, could you remind us in terms of what you're looking for, what these new businesses will be doing? What they'll be contributing to the type of stuff that you offer compared to what you offer today?

Well, yes, obviously, we have to narrow our comments on this, but we're looking for unique capability that we do not have today that allows us to provide a unique value proposition to our user base. We also are highly interested in complementary adjacent markets where we're not as successful as others. For example, we are very strong in corporate, not as strong in academic or government. So companies that are strong in academic or government and maybe not in corporate would be of interest to us. And then if I point you back to the investor deck that we've used over the last 30 or 60 days, there are a number of capability slides that point out here's where we were when we just had Article Galaxy, here's where we were with Article Galaxy Q data and references, and here's what Resolute does for us. But even with that Resolute deck, there are a few empty boxes. So the way that we think about it is, is there a capability that we can acquire that also has strong cross-sell capability? They also have strengths in a segment of the market that we're not necessarily strong in that we can acquire that will fill out that portfolio and allow us to have another strong cross-sell opportunity both ways. So I would just point you to the currently filed investor deck, which an updated version will be filed probably tomorrow, if not today. If you go to the slide titled innovation value chain, there are three empty boxes there that are interesting to us in terms of M&A targets as long as they meet the other requirements, which have to have cross-sell capability, have to have strengths we don't have, and they've got to be accretive to our organic growth and EBITDA targets.

This concludes the question-and-answer session. I would like to turn the conference back over to Roy Olivier for any closing remarks.

Thanks, everyone, for joining us today. And as a reminder, we will again be presenting at the Roth Tech Conference in New York on November 15 and the Southwest IDEAS Conference in Dallas on the 16th. If you'd like to attend, please reach out to 3-part advisers. We look forward to speaking to you in February and have a great day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.