Earnings Call Transcript - RSSS Q2 2022

Operator, Operator

Good afternoon, everyone. And thank you for participating in today’s conference call to discuss Research Solutions Financial and Operating Results for its Fiscal Second Quarter ended December 31, 2021. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steven Hooser, Investor Relations.

Steven Hooser, Investor Relations

Thank you, Carl. And good afternoon, everyone. Thank you for joining us today for Research Solutions Second 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 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 Olivier. Go ahead, Roy?

Roy Olivier, CEO

Thank you, Steven. And thanks to everyone joining us today. We continue to make good progress in aligning our executives with the interests of our shareholders, focusing on issues that will deliver shareholder value and improving accountability throughout the organization. Our second quarter results show that our product and sales strategy is beginning to yield results. We welcomed more new customers to the platform and have experienced record upsells as existing customers upgrade their features and seat counts. Our net churn rate, which reflects the churn or dollars lost and upsells for features and additional seats, has historically been in the high-single digits, indicating that our upsells have exceeded our churn by high-single digits on a percentage basis. In the second quarter, we achieved double-digit upsells for the first time. This means our upsells exceeded our churn by over 10% in annual recurring revenue. Both the new and existing customer sales teams are performing exceptionally well, achieving a record of 56 new platform deployments for the quarter. Coupled with our low churn and upselling of renewal customers, we reported a 36% year-over-year increase in annual recurring revenue, 56 new platforms, and 566,000 in net annual recurring revenue growth, with the latter two being records. Additionally, I am thrilled that we are nearing a net annual recurring revenue growth of $500,000 per quarter as we head into the second half of the year, typically a stronger period. In the first six months of fiscal 2022, we had 93 new deployments, and 185 on a trailing 12-month basis, compared to 60 and 123 in the same periods last year. The improvements we've made regarding our total addressable market are starting to provide value by expanding our prospecting database. Alongside the expansion of our prospect database, our sales teams, including those recently added, are performing strongly. This gives me great confidence in our performance for the second half of the year and reinforces that our strategy to expand our total addressable market and add more sales resources will drive strong performance in fiscal year 2023. Revenue in our transaction segment increased for the first time in six quarters. Recently, transaction revenue had been flat to declining due to customers shifting towards our platform offerings and an uptick in downloads through non-revenue sources like tokens or open access. It is too early to determine if this trend will persist in the long run, but we believe that our overall platform growth and some changes we are implementing will enhance transaction revenue in the short term. Our platform assists customers in optimizing their spending on articles in various ways. It provides the most cost-effective options to the researcher, helping to lower their average article costs over time. For example, reuse rights allow researchers to see if someone else in their organization has already purchased an article, enabling it to be downloaded again for free. Additionally, our platform facilitates easier access to free or open access articles or allows subscriptions and tokens to secure articles through our platform without incurring a research solutions fee. This represents significant value for our customers but poses a challenge in growing our article sales year over year. Nonetheless, this revenue savings for our customers leads to a higher return on their investment in our platform, resulting in a low churn rate for us. In fact, our churn turns negative as we upsell features to a number of users during the renewal process. In summary, our second quarter performance positions us well as we enter the typically stronger part of the fiscal year. I will share more details on our transaction customer count and our recent activities and strategic direction shortly, but now I will hand the call over to Bill to discuss our fiscal second quarter results. Bill?

Bill Nurthen, CFO

Thank you, Roy. And good afternoon, everyone. Total revenue for the second quarter of fiscal year 2022 was $7.9 million, a 5.7% increase compared to the second quarter of fiscal 2021. As we experienced growth in our SaaS platform business as well as some modest growth in the transaction revenue. Platform revenue increased 31% to $1.6 million, primarily driven by a net increase of platform deployments from last year, including 56 net new deployments in the second quarter, and strong upsells of current platform customers. As Roy mentioned, the 56 net new customers in the quarter was a company record, topping the previous company high of 51 net new deployments, which occurred in the third quarter of fiscal year 2021. Also, a record was the incremental annual recurring revenue or ARR added in the quarter, which was $566,000. We have now added $1.8 million of ARR to the platform over the last 12 months. As a result, annual recurring revenue at the end of the quarter stood at $6.8 million, up 9% sequentially and 36% year-over-year, reflecting our continued sales and upselling efforts and low churn of existing platform customers. 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 $6.3 million compared to $6.2 million from the prior year quarter. This represents the first increase in transaction revenue since the fourth quarter of 2020. Although transaction revenue has declined over time as our platform's core value is that it saves our customers on transaction costs, we do feel there will be a point where transaction revenue can potentially begin to grow again, as we add more incremental customers to the platform. We are not ready to make a call that this is a return to growth for transactions, especially given the Q2 performance from a year ago was a low bar. However, we do view the result this quarter as a positive indicator. Transaction customer count for the quarter was 1179 versus 1153 in the first quarter of fiscal 2022 and 1109 in the year ago quarter. The increase was driven by an increase in both corporate and academic customers. The platform business recorded a gross margin of 85.6%, a 340 basis point increase from the prior year quarter. We have previously quoted a gross margin target range for the platform business of high 70% to low 80% and now feel comfortable elevating this target range to between 80% and 85%. As we have continued to be able to onboard customers with proportionately less labor cost. Gross margin in our transaction business increased 110 basis points to 23.4%. The increase was primarily attributable to reduced copyright costs as we were able to lighten some of our copyright reserves in the quarter. On a normalized basis, we expect transaction gross margin to stay roughly at 22%. Total gross margin for the second quarter was 36%, up from 32% in the second quarter of fiscal year 2021. The overall result was somewhat positively impacted by the improvement in transaction gross margin in the quarter. However, even if you normalize that the results still represent five straight quarters of company gross margin growth. We feel this is one of the most meaningful metrics for the business and one we will continue to focus on in the future, as it demonstrates our ability to profitably scale the business as we continue to grow platform revenue. Turning to operating expenses. One item of note is that in Q2, we booked all of the costs associated with the transition of the CFO role, which took place in the Quarter. This resulted in about $172,000 in additional operating expenses and about $147,000 in additional stock compensation expense in Q2. Total operating expenses in the quarter were $3.3 million, compared to $2.7 million in the prior year quarter, due primarily to higher technology and product development and G&A costs. Net loss for the quarter was $482,000 or $0.02 per share, compared to a net loss of $261,000 or $0.01 per share in the prior year quarter. Adjusted EBITDA was negative $165,000 compared to positive $161,000 in the year ago quarter. Turning to our balance sheet cash and cash equivalents as of December 31, 2021, were $10.7 million versus $11 million on June 30, 2021. The year-over-year performance from a bottom line profitability and cash flow perspective was expected as we have intentionally made investments in product development and sales. We remain comfortable making these investments providing we are seeing corresponding growth in platform revenue and corporate gross margin. However, it is something we will continue to monitor over time. On a final note, there were no outstanding borrowings under our $2.5 million revolving line of credit and we have no long-term debt or liabilities. Our line of credit is scheduled to expire this month. However, we are in the process of renewing the line for another two-year period on similar terms. I'll now turn the call back over to Roy.

Roy Olivier, CEO

Thanks, Bill. The two main drivers related to increasing shareholder value come down to accelerating growth and acquisitions. I will now provide a brief update on the status of each. Regarding accelerating growth, we've been working hard to fully understand our TAM by country, by segment and by vertical, and to build out a prospect database of decision-makers and researchers' contact information. We are making great progress on this project, which will continue for some time. This is giving us the confidence that the TAM is there and that we have the contact information to generate our growth targets. We also have been adding additional salespeople which are helping with our new customer growth. We have historically had around 6 sales people and we plan to grow that number by more than 2x by the end of FY, fiscal year ’22, to set us up for even more organic growth in fiscal ’23. We feel good about our plans to accelerate our market share penetration in the countries, segments and verticals we choose to serve. We've also strategically increased our spend on product management and software engineers to accelerate our pivot from primarily a document delivery to a platform that supports researchers during each step of the research journey. Article Galaxy 3.0, or AG3 as we call it, released in the first half of FY22 and was the foundation for this pivot. And we're making great progress adding value to that platform. Over the next two quarters, we will release full reference management tools, enhanced search capabilities, and new analytics reporting to establish us as the innovative leader in the space. We are now releasing new significant features monthly and have received positive feedback from both prospects and existing customers. As I have discussed previously, we're investing in two new products: Article Galaxy Scholar was formally released last month, and we continue to make progress with this academic platform. We've also started full development on an additional new product that solves a different problem in our customer base that utilizes some of AG3's capability. We are encouraged by our progress with both products and we'll monitor and report on their progress in future quarters. Regarding acquisitions, we continue to actively review and engage with several opportunities. While we've had a lot of interesting conversations and other activity, valuations continue to be a challenge in today's market, primarily due to unrealistic valuations. That said, we have found some interesting opportunities that we believe represent a strong cross-sell and product differentiation opportunity for us. I hope to have more to report in this area soon. In conclusion, we are pleased with our strong performance for the first half of the year. And with the progress we're making on investments to drive future growth. We're excited about the future and believe that we are on the right track. With that, I'd like to turn the call back over the operator for Q&A.

Operator, Operator

Thank you. We will now begin the question-and-answer session. The first question comes from Alan Klee of Maxim Group. Please go ahead.

Alan Klee, Analyst

Hi, good job on the quarter. Question: I heard you say that you increased your range for the platform gross margin to 80% to 85% and I believe this quarter you did a little better than the high of that range. Could you talk about what drove that this quarter? And why would that not kind of maybe stay at that level?

Roy Olivier, CEO

Sure. Yeah. So this quarter again, we have continued to see that as we onboard more and more customers, it's taking proportionately less labor cost to support those customers and proportionately less system cost as well. I think the move is that, in looking at this, we've looked at that gross margin and seem to have consistently beaten that and we're now feeling more comfortable that we can raise the range. The reason I'm not comfortable raising it beyond the 80 to 85 that we talked about, it's just that I want a little more time to pass. We onboarded, as we noted, a record amount of customers in this quarter and so I want to see how that plays out over time. And if we're comfortable with our present staffing or if we need to make some changes there, but it is something where we feel good about where the metric is trending, and hopefully, maybe able to raise it a little more in the future. Should we see how this plays out as we onboard? This amount of customers?

Alan Klee, Analyst

Thank you. I have two other questions. One is maybe talk a little about what the drivers are for this year's fiscal second half seasonality. And then second, you said that you've historically had around 6 salespeople; you plan to double that by the end of the fiscal year? Have you added any yet? Or you know, where does that stand? Thank you very much.

Roy Olivier, CEO

Yeah, in terms of the seasonality, the only answer I have is the historic seasonality of the business; I'm not sure that I can tie it to anything particular. In the academic segment, which is a very small portion of our business today, there are pretty strict budgetary approval cycles, and then funds release cycles that suggest that our Q4 and Q1 are better than the middle part of the year. On the corporate side, we typically don't have that type of dynamic. So I can simply say that the seasonality of the business is something we see looking at this historic data over the last several years in terms of new bookings. And because of new bookings, of course, that's where a chunk of the renewals come up, which impacts the upsell part of the business. So just looking at the last three to four years, the second half of the year is always stronger than the first. In regards to your second question, no, well, we hired one, but our plan is to get kind of people in seats in our fiscal Q4, for training and ramping to start them off in FY23. So we're on plan to do that.

Richard Baldry, Analyst

Thanks. Can we talk about where do you see the opportunities to deploy those new sales heads? Would it be vertical, geographic, US international? So we get an idea of where they'll be added in the opportunities they're looking at?

Roy Olivier, CEO

Yeah, great question. There's kind of a couple of answers. First off, we're going to segment our sales reps by user – by the number of users in an account. So when you think about selling to AstraZeneca, which has thousands of users, or even a mid-tier company that might have 200 users, that's a different sales cycle than sub-20 users as an example. So we will continue to have our executive level salespeople that are used to dealing with large accounts focused on things that are a little larger from a user account perspective. The new team will be brought in to work on the smaller accounts, which will be kind of a lower OTE role, mostly a telemarketing job, and will pursue the 100,000 to 150,000 accounts that we've identified that fall into that segment from a user – from a number of users perspective. Does that help?

Richard Baldry, Analyst

Yep. Then it kind of looking backwards at the gross margin on the platform side, the dollars actually have been down now two quarters in a row, even while the revenues are going up. So can you talk about the components of that cost? Are they fixed versus variable? And you've talked about the labor costing down, but how do we think about when that total spend should turn and start climbing with the revenues?

Roy Olivier, CEO

Yeah, good question. By the way, let me add one thing to your sales rep question. When we're doing the analysis today, we think that the number of larger user seat sales reps we have in the United States is the right number. We think we need to add people in Europe. Now this is not the kind of below 10 or below 20 seat group. This is the executive group that deals with larger accounts. So we will add some larger account people primarily in Europe. As I mentioned on previous calls, we have one person in Japan today that's running our Japanese business. And we are looking for partners in China, which is the number two research and patent market in the world today, so no real progress report there, but some of our marketing spins are going to be trying to expand what's going on in Japan and China. So what's going on in Japan and China specifically?

Bill Nurthen, CFO

Yeah, so a couple I guess a couple things. One, just to clarify, I mean the total dollar gross profit that we're seeing from the platform has been going up over the last few quarters. Really there's two components: one is labor, which is the largest component that will go into the cost to be delivering on the platform. And then there is the sort of hosting component to it as well. The labor is the largest portion, and that has been going up relatively lightly compared to what you're seeing in the platform of growth year-over-year. The hosting component is a smaller component. But that does increase more dramatically with the growth, but not proportionately at the same rate.

Richard Baldry, Analyst

Okay. Given every headline I hear lately is talking about inflation, can you talk about your ability to pass along to our pricing to match any internal costs that would be rising? How do you feel about sort of a price taker versus a price setter positioning in your space?

Roy Olivier, CEO

Yeah, that's a hot topic. And we have kind of three levers in that area. One is the platform itself. The second is the cost of the article. The third is the service fee, we charge for delivery of the article. Our service fees are typically set as part of an annual agreement. Most of those agreements do not necessarily have a limit on our ability to renegotiate the service fee. But a fee will have caps tied to consumer Index or PPE or something. But for the most part, we leave service fees alone and make very, very few adjustments to them. And they do require a contract renegotiation, which most of our contracts renew annually. On the article costs, which is the bulk of our cost structure associated with the transaction business, those we can change whenever we need to change them, we typically change them once a year. And that's actually in January. However, we had an incident mid-year last year where a publisher raised prices mid-year, and we simply passed that price increase. So we're pretty proactive about moving transaction costs. On the platform side, you know, as I mentioned earlier, we've got kind of double-digit net churn to the positive and that is a result of us increasing seat count features and in some cases just raising prices. Although for the most part, what we end up doing, we kind of have a land and expand mentality from a sales point of view, the new sales team, which is selling new customers that have not bought transactions from us before we give them flexibility to land that account. Once we land that account, the renewal team does a fantastic job each year and uplifting the number of users and uplifting features and moving them more toward what we refer to as our standard calculator price. Does that help?

Richard Baldry, Analyst

Yep, that's helpful. Thank you.

Adam Wilk, Analyst

Hey, guys, thanks for taking my question. A couple of my questions were already asked or you touched on that in your prepared comments. I appreciate all the color that you give. Really impressive quarter from you guys. I guess my only question, a little bit on the unpredictable side, but are we able to expect continued increase in transactions moving forward? Or is this kind of a one-off quarter? How are you guys sort of thinking about that segment moving forward?

Roy Olivier, CEO

Yeah, that's a great question. And unfortunately, my crystal ball is not as good as I'd like it to be. I mentioned that we would expect positive news in the short term based on the data, and we do tremendous data analysis on this since I've gotten here and Bill's gotten here. Bill and I look at it every Monday, and it suggests that the decline is flattening, and that we may be near the trough. But as Bill mentioned, we're not ready to make that commitment externally. I'd like to get another couple of quarters under our belt to see what's going to happen there. But I am comfortable in the short term, because of some things we're doing frankly with pricing, that will limit the level of declines we've seen over the last year or two. Bill, anything you want to add to that?

Bill Nurthen, CFO

Yeah, I think that's pretty spot on, Roy. I think the one view that we have is that at some point here, as we add these customers to the platform, we do feel like it has to make a turn. We're just trying to, as Roy said, it's kind of hard to see right now when that turn is going to happen. We do feel it'll happen at some point, but I'm not ready to make a call just yet.

John Beisler, Analyst

Yeah, we're going to add color.

Roy Olivier, CEO

Yeah, please go ahead.

John Beisler, Analyst

If I can add just a touch of color, when you think about, we have 650 some odd platform customers now, a little less than 300 of those came on before 2017. And those were typically our largest transaction customers, the big guys jumped on board first. So they drive a tremendous amount of the transaction volume and dollars. And because they've been here since 2017, they've also seen the most savings in terms of reuse rights and tokens and subscriptions and all of that stuff. So when you look at the – their decline in year-over-year transaction dollars, it's driven by the fact that the platform works. One of the other pieces of analysis we did is we took all the customers that we brought on board over the last couple of years. And we looked at their trends, and we were pleased to find out that they spend around three times the platform cost on transactions. So when we bring on 10,000 customers, they're typically buying between $25,000 and $35,000 worth of transactions. And that number seems to be holding pretty steady. So what we have as older, huge customers that are declining because the platform is doing its job. And as we start to pivot to more of these new customers that are bringing in three times whatever we're charging them for the platform, that should be where we hit that trough and start growing. Does that help?

Adam Wilk, Analyst

It does, yeah, that's helpful. Thank you. And then you touched on M&A activity, obviously. Is it? I guess the absence of a deal at this stage? Is it really just a function of valuations? Or have you made it kind of further down the road with anything significant? It would have been nice to sort of see a deal completed by the end of last year, early this year. And clearly, public market valuations have come down pretty significantly in some areas, and I guess private markets typically lag behind a little bit. And I'm wondering if you've maybe seen any improvement on your end, or any maybe flinching from people in the private market world? Again, I know you touched on it, but any other commentary would be helpful if there's anything? Thanks.

Roy Olivier, CEO

Yeah. No, I mean, you're spot on. Valuations continue to be kind of a challenge. And then, of course, our ability to fund a deal, you know, brings whatever the – if you think about a wide net to do deals, if you had unlimited cash, our ability to do them is a much narrower net. Because we simply can only raise a certain amount of capital to get something done. I would say I have not seen any foreign training from people that we've talked to over the last three or four months where we may have made an offer, and they turned us down over evaluation. We'll see if that changes. But like I said, I think we have found some interesting opportunities that are actionable, and I hope to have something to talk about in the near future. But like you, on this point, we didn't get something done in that first nine months. That would have been fantastic. But it's definitely proven to be a tougher road than last time Bill and I were doing this back in 2016 through 2020.

Adam Wilk, Analyst

Great, yeah. Thanks. That's helpful. And I appreciate you taking my questions. Great job. Thank you.

Roy Olivier, CEO

Thank you.

Operator, Operator

The next question comes from Peter Rabover of Artko Capital. Please go ahead.

Peter Rabover, Analyst

Hey, guys, thanks for taking my call. Hey, I know we were talking about inflation and passing off prices, but I noticed that the ASP or the average price has trended down this quarter, 2% or 3%. Any – could you give us some color on why that is?

Roy Olivier, CEO

Yeah, I mentioned a moment ago that our 2017 previous under 300 customers were our largest customers. So that's a pretty high ARPU, because these are guys that had a ton of seats. And then as we've continued to sell into the base, we focused on SMB where that ARPU is lower. So a lot of the new sales, the ARPU is not that $10,000 to $11,000 number. So I think we've kind of telegraphed this on previous calls. We would expect that ARPU to continue to come down, I think occasionally, we'll sign kind of one huge deal that will give us a bump for that quarter. But generally, we're selling into the SMB space, which is sales between 10 seats and maybe 50 seats; we do an occasional, like we did a 300 seat sale last couple days. But to get to those 500,000 seat deals, those don't come along very often. And those are the ones that pull up our ARPU. Bill, I don't know if you have any additional commentary on that one.

Bill Nurthen, CFO

No, that I think that's accurate as well, I would expect it to come down, the newer sales are coming in predominantly at smaller ASP, although we do feel like that there's a big market out there for those sales.

Peter Rabover, Analyst

Hello? Hey sorry, you guys cut off there for a second. Can you hear me?

Roy Olivier, CEO

Yeah, we can hear you.

Peter Rabover, Analyst

Okay, so I'm sorry, but during the call the operator kind of cut in to ask a question. I must have missed it. Did you say you signed a 300-seat deal?

Roy Olivier, CEO

Yeah, we signed a deal yesterday. It's an unusual deal for us in many regards. One is it's up to 300 seats, so we won't – they won't sign and pay for 300 seats tomorrow. But they'll grow into 300 seats over time.

Peter Rabover, Analyst

Okay. Wow. That's fantastic. That's great to hear. So, I had a question that doesn't really have a direct answer. But maybe you could share now that you're close to like 700 deployments, or I guess, maybe almost 1000. To talk about where you, like, just try to talk about your customer base and your growth base, like, where you came the most growth and just something to think about it, is it pharma, is it manufacturing, is it biotech? So something to kind of start thinking about granularity?

Roy Olivier, CEO

Yeah, that's a great question. We have some data on that, but we're doing a bunch of analysis so that we can have what I call effective territory sales plans as we go into FY23. In other words, instead of just giving a guide territory and say you got to generate 200,000, we want to give our rep territory and we want to tell them here's all your accounts in the territory. Your market share is 3% to 6%, and here's the accounts we are watching to pursue to do it. And so we're doing a lot of analysis now. However, to your question, the majority of our business is still pharma and biotech. We do have stalls in 62 other verticals. Some of those are growing as we add content or functionality that is appealing to that vertical or maybe as simple as the sales reps more aggressively calling in that vertical like food or cosmetics? But the lion's share of our business continues to be pharma and biotech. But by the next call, I can probably have a lot better info for you on a deep dive in terms of what I'm looking for is, what user group is growing the fastest? Is it the 10 to 20, is it 20 to 50, is it the 100 over? Where are we seeing most of those sales, where we seeing the most gross margin contribution total including transactions because that helps us identify the sweet spot of what we want our sales teams to be calling on as opposed to just generally looking to drag in 200 grand, no matter where it comes from.

Peter Rabover, Analyst

Okay. Thanks. I appreciate that. That's all I have.

Roy Olivier, CEO

Thank you.

Operator, Operator

The next question comes from George Melas from MKH management. Please go ahead.

George Melas, Analyst

Thank you. Good afternoon, gentlemen. Good job on the continued sales growth. My question is about sort of the transactions. It is a very, very important part of the business. You have some direct competitors on the transaction side. Is the growth of the platform business and the investment that you are making on the platform side where AG3 has some of the new things that you are planning there, could that have an impact on the competitive dynamic for the transaction business?

Roy Olivier, CEO

Well, yes, I think it will. And AG3 and AGS as well as the new product we haven't really talked a lot about. They all have a transaction element. So each one of those are products that can drive up the transaction revenue or the number of transactions that we're processing through the various platforms. Some of the things we're doing is we identified a series of improvements to our software that we think will help with driving more transaction business. For example, we don't suggest upsell, I think that's how you and I would think about it. But in future versions of our software, we will literally proactively tell the researcher, one of two things, either hey, here's five other articles that are similar to this search you did and these articles that you acquired, or we actually want to get to the point where we can say over the last week, these new articles were released by these publishers that are related to the research project that you're working on. So we have a series of about a half a dozen product initiatives that we're not going to be able to implement all at once, but like one of them will be in this month's release, that are all intended to help improve transaction uptake in our existing customer base. And these are features that will be deployed to all 650 to 700 customers on the same day. So these are things that we will be able to immediately know if they're working or not.

George Melas, Analyst

Okay. Okay. And maybe just under AG Scholar, can you try to size up the TAM there and how you're going to let us know your new initial steps to try to reach that TAM?

Roy Olivier, CEO

Yeah, I apologize. I don't know the TAM numbers off the top of my head. But I can see if we can pull those together. But we do have the TAM. We do think it's a sizable business. It's certainly larger. Well, I would say it's a sizable business. I'll have to pull the exact numbers. I don't remember them off top my head.

George Melas, Analyst

Okay, and are you using one salesperson to do that at first or?

Roy Olivier, CEO

We have two people on it now. So two people are working it. We have a pretty active marketing campaign that includes webinars and a lot of conferences and a lot of presentations to library consortiums. In fact, we had two webinars in the last month and both of them were very well attended. I think the first webinar was around 100 people in attendance; second webinar was 53 in attendance, and the 53 attended because we did it morning East Coast time, which was probably a mistake. But anyway, those are generating nice leads into the group. And over the next few months, we will be attending a whole bunch of conferences, as well as additional webinars, and frankly, I think the biggest mover for us and EGS is presenting to consortiums of libraries, where we're presenting to a bunch of them at once. And that's a pretty active part of our marketing plan.

George Melas, Analyst

Okay, and is there a clear competitor in that space? Or is it kind of not very penetrated at all?

Roy Olivier, CEO

There's not a clear competitor, other than a librarian that works in the library that makes the decisions whether or not you as a student, or you as a professor can buy the article that you want to buy. In many cases, what our technology does is it allows that library to set limits and set rules around what people can buy and cannot buy and get out of the middle of that buying decision. And we've had – we have some libraries where they just set it up and let it run. We have other libraries that we have one library that made a pretty high-risk decision to cancel all their subscriptions and tokens and simply use the platform and buy the articles one at a time. And as it turns out, it actually saved them a significant amount of money, I mean, high six figures, low seven figures. So there's an interesting ROI developing from people that are using the platform. But not every customer is going to do what that one customer did.

George Melas, Analyst

Okay, great. Thank you very much for taking my question.

Roy Olivier, CEO

Thank you.

Operator, Operator

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

Roy Olivier, CEO

All right, well, thanks everyone for joining us today on our call. As a reminder, we will be participating in the Roth Capital Partners conference in March. For more information on this event, please contact your Roth Sales rep. We look forward to speaking to you again in May to discuss our third quarter results and we hope you have a great day.

Operator, Operator

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