Hey, good afternoon. Our next presenting company is Research Solutions, trades under the symbol RSSS on the Nasdaq. Company's had some really great progress here over the past year. Made a couple acquisitions that have really enhanced their product strategy and lineup. We'll be talking about a couple of those in particular here in a minute. Presenting today for the company is Roy Olivier, the company's CEO, and with him here is Bill Nurthen, the company CFO. We're gonna start today with a little video reel for you.
Great. Thanks, John. This will give you a quick overview of kinda what we do. Oh, space bar.
Previously science fiction are now reality. The signs are everywhere, big and small, but research is still costly, fragmented, and slow. More knowledge is being created than ever before, but it's impossible to evaluate it all with existing tools. AI is unlocking insights at unbelievable speed. But can we trust it? At Research Solutions, we solve those challenges to help researchers get to breakthroughs faster. Discover using powerful search and advanced AI built for credibility. Access any content from any journal instantly. Manage your research library and collaborate seamlessly. Analyze data and evaluate research all in one platform. Together, we're not just keeping pace with progress, we're driving it. Research Solutions, advancing the world's knowledge.
Great. Thank you very much. Appreciate everybody coming today to learn a little bit more about Research Solutions. I will tell you, this is an entirely new deck, so this deck was uploaded to our website this afternoon, so if you have the old deck, apologize, you won't be able to follow along. Deck's not perfect. I last night at 10:00 P.M. was still making changes to it, but I think it's a big improvement over the old deck, so appreciate your time. First off, you know, I'm gonna just walk you through kinda what we do, the market opportunity, what our model is, what our outlook is, certainly in the next two to three years, as well as our financials. Forward-looking statements, you guys can read that at your leisure.
You know, basically, what we do is, you've heard of vertical SaaS. The emerging segment is also vertical AI, and we'll talk a lot about why we think we're really well positioned to capitalize on AI that will transform the way research is done. You know, first off, what drives our business is the global scientific output continues to double every few years. Researchers simply cannot keep up. 66% report they're overwhelmed by the amount of research, and it's also very difficult to build and trust the research in that most of it is, it cannot be reproduced, and that costs the industry, estimated to be about $28 billion a year. So doing a better job with being able to evaluate, analyze research that's out there and reproduce it is kinda what we're about.
To give you a little bit of a high-level overview into our solutions, we sell primarily to corporate and academic customers. 85% of our business is corporate, about 10% is academic. Fastest growing segment for us is academic, however, because with one of the acquisitions we made, we have a very powerful academic offering now that's really driving some growth in that segment for us. The first solution is where the acquisitions took place, and that is discovery tools. How do I discover and search for information related to pediatric cancer, obesity, whatever the objective is? And we have discovery tools that help you efficiently find the information. Those are married to the latest AI models to provide you with insight that is unique today.
In other words, what we produce as output on the search side, nobody else in the world today produces, and I'll show you some examples of that a little bit later. The business that we've always been in is access. In other words, once I identify a bunch of scientific articles to support my new initiative, whether it's EV battery technology or pediatric cancer, where do I acquire that research? You acquire it through our platform, and today we have around a thousand customers using the platform to do that work, and some of those customers are the biggest pharmaceutical, medical device, biotech companies in the world. We also have tools to help them manage articles once they acquire them. So how do I store them so that we're not repurchasing the same article over and over again?
How do I create a research team, so I can share my research amongst that team? How do I mark up articles, and how do I do all of that in a copyright-compliant way? And how do I make sure that I've got a tool that manages what I should be subscribing to versus what I want to buy on a pay-per-view basis, what I want to rent, or what I want a pre-bundled, discounted package for? And our tools have helped customers do access and manage for more than a decade. We also have tools, part of the discovery tools and part of the back end, which help you analyze search results or analyze data to make better decisions about how to move forward. So our sources of revenue today are really across these four buckets.
We have a SaaS software offering, which is annual contracts that typically auto-renew. We also sell the scientific articles, which is the transaction line in our publicly reported financials. So you'll see a line that's recurring revenue. You'll see a line that is the articles themselves. I will say, in this tool set, I mentioned that we have academic solutions, we have corporate solutions. We also have B2B solutions, which is the corporate or academic products, and we have a growing B2C business, which is where individual researchers, whether they're going to college or whether they work for a large multinational, they subscribe to one of the products, they use it, and then in several cases, they bring it into the library, they bring it into the corporate decision maker, and they try to launch an initiative to bring that product in for the entire research organization.
We have actually successful sales results on both those sides, where we're able to go into a library because fifty or a hundred people subscribe to our product that go to that university. One of the biggest deals we've ever signed was an individual researcher, signed up for the product, used the product, made the company aware of the product, and the company approached us and ended up buying it for their research teams globally. As I mentioned, we do target both B2C and B2B. This is a busy slide, but I think it's important in that, you know, our platform makes research easier, faster, and more cost-effective. I think there's some very unique capability here in that once you do a search. If you use a free search engine, the two most commonly used are one called PubMed, one called Google Scholar.
You get a bunch of results, doesn't really tell you much about the results. We, on the other hand, will tell you, and I put red boxes around the stuff I'm gonna talk about, that this particular article, if I'm starting in the upper left, was cited by four publications and has references in sixty-three other publications. That's pretty commonly available out there in search results. The next box provides you with some very specific information. It's. We call it a contrasting statement. In other words, if you're looking at an article, this small box right here gives you the equivalent of a FICO score or a Rotten Tomatoes score for this article. It tells you how many times other articles have supported the conclusions in this article, how many times they've contrasted it, how many mentions, and how many citations have happened in that article.
We're the only people in the world today that do that because we have full text data mining rights for about 60% of the world's content, and this is the unique capability that's really fueled the growth of Scite and Research Solutions on the discovery side. In fact, Scite did a really nice job growing that B2C business. After we acquired them in December, we were able to pretty rapidly expand their B2B business because we have an on-the-ground B2B sales force in Europe and the United States, and we're able to pick up the phone and get meetings with some of the largest companies in the world to see this technology. So anyway, the Smart Citation allows you to search full text of articles and see previews.
You know, you can see easily how the article, researcher, and organization or topic's been discussed in the literature, and as I mentioned, FICO score or Rotten Tomatoes score for the article itself. We also have, I think, the broadest or certainly one of the top two or three broadest access to content in the world. You basically can access about 250 million journal articles through our platform today. Now, let's talk about AI for a minute. Scite was one of the early adopters of AI, as was Research Solutions.
But basically, AI allows you to build your own proprietary data sets, and I think we're well-positioned, having a fifteen-year relationship with the copyright holders of the content, along with decade-plus relationships with some of the biggest organizations in the world, and understanding the concerns of the publishers about letting these open AI models learn from their content, which is paywalled, and they want to sell it, versus the way we do it, which is we can allow you to ask a prompt question. You can see prompt there in the middle on the top. We'll give you the assistance response. We'll track your follow-up information, including the trail of where you've been, but we don't let the AI engine learn from the full copyrighted content, nor does this answer go to anybody other than the customer that asked the question.
So we've done it in a way that provide rich, real, AI-based analysis and allows you to ask the AI engine or the assistant to read three articles, summarize them for you in just sixty seconds, but we've done it in a copyright-compliant way, and we've done it in a way that preserves the revenue stream associated with the document delivery that publishers are very concerned about. Scite Assistant, you know, is backed by what we call the Smart Citations. That is the statement that says, "Here's a statement from another article that supports the article you're looking at or contrasts the article you're looking at." We have over two billion of those in our database from our use of those articles with our AI engine. The assistant is really a fantastic research partner.
I don't know how many of you have used AI, but for summarizing things, it's absolutely fantastic. You know, when I go in, most of you probably have annual physicals, you get the results before the doctor calls you. I'm always sitting there with AI, saying, "What does this mean? What caused this? How can I fix this?" It's a fantastic tool. We've gotten a lot of recognition for both products. The top is a quote from one of our key customers about Article Galaxy, where it helps them save a ton of time in their current workflow. The bottom is a quote from one of the thought leaders in terms of AI utilization as it relates to scientific material, who also is a user of the product. Today, we're trusted by about fourteen hundred organizations around the world.
We talked about SaaS versus documents. About a thousand of those organizations buy a software platform from us, four hundred or a few hundred just buy documents from us. But from a pharmaceutical company perspective, you can see some of the names here. We also have a number of installs and a growing, a very, very rapidly growing base in universities. And finally, we do business with a lot of the large multinationals out there. Our mission is to advance the world's knowledge by simplifying research. So everything we do in terms of discovery tools, the type of content we serve, the type of content we would like to add to our product, like patent data, conference data, clinical trial data, other types of data, is all underneath this mission of helping to speed up and simplify the research process out there. Let's talk about market opportunity.
These are updated TAM numbers. We think our TAM today is about $15 billion. You heard me mention we have a B2C business, we have a B2B business. B2B is blue. This represents universities, corporations, and research institutes. We think that the TAM for that business is about $4 billion. I'll have a ton of footnotes on this slide. You can actually go click on links in the footnotes to see where we source this data. I think a key takeaway is that we're pretty conservative with our interpretation of the number of customers per vertical that are a buyer, because we apply research intensity to the number.
So we can go look at a vertical, and the vertical can have 25,000 OEMs in it, or manufacturers in it, or whatever, research organizations in it, but if those research organizations have not published a certain amount of scientific articles, we don't count them because they're not. We don't consider them to be research intensive. We do the same thing on the B2C side. The B2C TAM is actually quite a bit bigger than $11 billion, but we shave it back for research-intensive universities, and we shave it back to basically match the number of subscriber sign-ups or sign-ups there are to ResearchGate, which is the largest kind of social media LinkedIn for researchers in the world today. So fast-growing market, under-penetrated. It's got a lot of great characteristics.
There's some independent research that suggests that, SaaS software in research-focused organizations will grow by about 19% CAGR between now and 2030, growing from a little under $300 million to $900... I'm sorry, $300 billion to $900 billion. We also believe the market is under-penetrated in that about 80% of the new logos we bring in, closed one new business, is coming from what we call DIY. They're doing research the way they did it when they were in college. In fact, many of them are still using their college login to go find research papers, which is not copyright compliant. But as those organizations get bigger, they move into copyright compliant tool sets like ours. We also have, very, very high renewal rates.
Our renewal rates are typically between 90% and 100%, mid- to high 90s. Our net renewal rates after upsells have run in the last two or three years between 100% and 110%. So once we do sign a customer, they're typically very sticky, and they stay with us for a long time on the B2B side. There's a little footnotes, so if you download the app, most of those are live. You can just click on them and go straight to the source for any of these numbers. Basically, people ask us, "Who's the user of your platform?" Any organization that is research intensive is a user for our platform.
We have customers in all these segments today, although I can tell you on a trailing twelve-month basis, about half of our revenue comes from pharmaceutical, medical device, biotech. The other half of the revenue comes out of around 60 other verticals, and it includes automotive, aerospace, medical device, food and beverage, cosmetics. We just signed up one of the luxury women's brands that's using our product for cosmetics. My wife immediately wanted to know if we got a discount on their bags, which we don't. But anyway, anybody that's doing research is a good candidate for our product. We can basically service organizations from small to very, very big. In fact, you saw the logos of our customer list today.
We deal with a lot of organizations that have thousands of researchers, but we also have a whole lot of organizations that have five, ten, twenty-five, fifty researchers. In fact, our average revenue per sale on the research solution side is about a fifty-seat deal. We also have a lot of diversity across a lot of verticals because of the just broad nature of our product and the amount of research that goes on out there. One other question you may ask is, what happens in an economic downturn? We basically did a little bit of research on the dot-com bubble and the subprime crisis. Basically, research never stops. At its peak, it dropped about 6.6% in the first quarter of 2009, and then started to bounce back each quarter thereafter.
But, the business itself is relatively stable, even during an economic downturn. And that page also has, in the lower left-hand corner, the sources for this data. You can click and go read it. Talk about business model. Today, we have two sources of revenue. Platform revenue, which is typically SaaS, either B2B or B2C, annual contracts on the B2B side. We do allow some monthly contracts on the consumer side, the B2C side. The transaction business, which is the sale of the article, represents about 69% of our revenue. However, the gross margin is way different, and we'll talk about that in a minute. The transaction business is the sale of individual articles. And just to be clear, people buy articles from us. If they subscribe to a platform, they still buy articles from us. There is-- we do have one...
Almost nobody buys it, but we do have one version where you can pay one fee and have access to everything. But for the most part, people are buying the platform, they're still paying per view for the article. We do help them decide where should they subscribe, where should they pay per view, and where should they try to seek a package at a discount, where I want to buy 500 articles over the next year, I'll prepay and get a 20% discount. This business is typically generated on a per transaction basis, but it is relatively stable. In other words, it doesn't move around a lot. There's a little bit of seasonality to it, but you'll see it's been very stable over a number of years, except where we've done an acquisition.
I will say, however, the growth rate of this business, the transaction business, is low single digit. I can go into a lot of details as to why, but there's two headwinds to growth in that business, and then the growth in that business is as we add customers, we're adding revenue on the top, but there's things that cause that to drip out the bottom, including the fact that the platform helps them make better decisions about where to spend their money. The margin characteristics of this business, Bill will cover in a few minutes, but it's in the twenties. So it's a, it's a relatively low margin business, but it's also a great cash generator for us. Platform side of the business is the cloud-based software that's sold in the B2B side on an annual, auto-renewing contract.
And it's monetized through subscriptions, primarily based on the number of seats you have and the features that you turn on. This business has 85% gross margins, so as this business grows as part of our overall revenue, it really transforms our cash flow and EBITDA generation. On that note, so if we just talk about the platform business standalone, it's fast-growing and recurring. Our renewal rates right now are about 100%, and our trailing twelve-month gross margins are about 85.7%. The graph here... Can you guys see that at all, or do I need to make that bigger? You kinda see it? The graph here shows us growing from about $5.6 million to about $17.4 million in ARR over this period of time, and the top number is customer count.
We're slightly under 1,000 platform customers as of Q3, the last reported quarter. We'll be reporting Q4 in September. Some key highlights of the business: fast-growing, 46% CAGR over the past eight years. However, we have seen it slow down in this economic environment in the last year and a half, two years. Highly stable, predictable cash flow, strong net retention, 80+% gross margins, very scalable. The incremental cost to add a customer is very, very low, and last, there's a lot of room for market expansion in here in terms of the product's applicability to all these other verticals. The transaction business is a business that's not recurring, but it's pretty predictable because people are continually doing scientific research, generates revenue on the sale of the individual articles.
Cash is generated in that business is reinvested into growing the platform or SaaS side of the business. The investments funded by the transaction business cash flow really help improve our offerings in order to attract more and more ARR, and, you know, the need for specialized STM content is pretty in demand full year. There's a little bit of seasonality through the year on that business. A lot of the growth you'll see in this graph, where it grew from a low of $26 million to $30 million, was an acquisition. We expect this business to be, as I mentioned, a low single-digit growth business going forward. Let's talk about the moat for a second.
You know, first off, we think that Scite's smart citation software, the badge that says, this is how many times it's been supported, contrasted, et cetera, it is unique in the marketplace today, and in order to duplicate what Scite did today, would be much more difficult because there's so much fervor around AI. Publishers are so concerned about the AI models learning the full text of the content and that negatively impacting their ability to sell that content, that we would not be able to secure the rights that we have today if we started today. So we have a five to six-year head start on anybody else in this space, and the output of what we produce is unique. Nobody else has this type of output. Secondarily, we, we have about 85% of all published STM content accessible in one click.
You might say, "Why not 100%?" Because scientific publishing has been around for more than a century, and believe it or not, we still have people that go to libraries, photocopy stuff, clean it up, and send it to a customer. So there's some percentage of our orders that require manual processing, and we do that. We're one of the very few people who do that. We have people all over the world that will go to University of Wisconsin's one until they had a major hack. London was one, but we'll go find articles that are still in print form. You know, we have longstanding relationships with thousands of publishers. Most of our agreements are 10-plus years old. Many we've secured full article rights with.
And lastly, you know, we have net renewal rates of about 100%, which I think speaks to the quality and the value of what we're offering. This is kind of a little bit of a duplicate. I might kill this slide, but this is really just to indicate that today we are partnered with the largest publishers around the world. That includes our ability to access most of the journals or publications that are owned by those publishers. They are typically long-term agreements. We've never had an agreement go away. We continue to add agreements over time, and at the end of the day, we've won a bunch of awards based on the product quality and the improvement of the workflow that we're delivering to the researchers.
On the outlook side, I'm just gonna go through these real quickly and turn it over to Bill, but we expect to continue to see nice double-digit platform growth. We expect to continue to see expanding market opportunity, and growth there. We think AI and advanced analytics is a big part of our growth going forward, up to and including providing full text and data mining rights for the long tail of smaller publishers. In other words, we have great relationships with these smaller publishers, where a big pharmaceutical company is not gonna wanna negotiate fifty or seventy-five agreements for full text search capability. So we think we can bring a block of those to those publishers as part of our offering.
Very high recurring revenue, and part of our growth historically and going forward will be building on that organic growth by acquisitions that make sense. I'm gonna just flip this over to Bill, 'cause I've talked too much. So Bill, you wanna walk through the financials?
Okay, so yeah, just real quick on this slide. This illustrates really the transformation that Roy talked about and the revenue mix shift that's going on here. So again, you look at, like, two years ago, ARR was $7.9 million, now it's $17.4 million. So it was about 22% of the revenue two years ago, it's now about a third of the revenue. And then our corporate gross margin, the blended gross margin between those two business lines now has gone from 38% to over 45% on the corporate blended gross margin. So that transition is happening, it's underway, and it's really where we see value in the business. And then this just shows how it's going into the bottom line, right?
This is a adjusted EBITDA and cash flow graph, and you can see again, two years ago, adjusted EBITDA and cash flow are both negative. Most recent year now, over $2 million of adjusted EBITDA and about $3.5 million of cash flow from operations. The transformation's real, it is falling to the bottom line, and as long as that mix shift continues, as we continue to grow the platform revenue, there's more opportunity for expansion of EBITDA and increased cash flow in the business. That's translated into stronger balance sheet. I'll really quickly say we did the Scite acquisition in December. Our cash balance dropped to about $2.8 million, and then six months later, we're back up at $6 million in cash. That's what we pre-announced last week, that we have about $6 million of cash at the end of June.
So again, cash flow is there, and that cash flow is not needed to fund the business organically. It can be used for acquisitions, it can be used for buybacks, you know, any kind of strategic things. And this is just some metrics on our valuation and our ownership. I think, you know, if you take a close look at this, there's, to the extent this mix shift can continue, there's definitely a lot of upside in the valuation, and then we think that's why it's a, it's an investment worth looking at. So with that, I think we'll go to any questions you have.
Yeah, I think, you know, experienced management team. Bill and I ran a public company before this one for a number of years, that we ultimately sold to private equity. And, you know, our playbook here is similar in that we wanna grow the business organically, we wanna layer in acquisitions that add to the product strategy, but also are accretive to our EBITDA and growth goals, and ultimately position the company to exit, should we start getting a lot of interest. Most of the management team, some of the management team have been here for a number of years. Josh , the Chief Strategy Officer, came from Scite, very smart guy. Rick came from a private equity background, as our CTO.
Corey joined us this year as a marketing chief. He's done a phenomenal job in terms of investment and return on investment from a marketing dollar perspective. So, you know, I think we've got a bright future. But at this point, I'll just pull this up and then ask: Is there any questions? Yes, sir.
So, the 40% is outside of what you guys have access to or agreement with, and that's mainly, I understand, there's two companies. So if I'm a subscriber to the platform, and I'm doing search on some kind of cancer or something like that, do articles from that journal show up in an abbreviated form? And I guess, if I'm a subscriber, do I get the AI benefit of that, and then I guess if you're not a subscriber, do you get it as well?
Yeah.
Or provide it for them.
Yeah, that's a great question. Just to be clear, we have access to basically 100% of the world's content in terms of you can click to buy the article. So if you do a search on our database, you're gonna search all 250 million articles. However, about 60% of those, we're doing a full text search on, the other 40%, we're just doing a search on the abstract. You know, the abstract that you can find on PubMed or Google Scholar, or lots of different places. So the quality of the search result on the abstract side is lower than if we did full text search.
But yes, you get the full search results on the full set of data, but you get more data on the articles that we have full text search capability for. Not only in terms of better search results, because we can see the whole article as opposed to just the abstract, but the snippet, the supporting statements, the contrasting statements, that stuff does not show up on the articles that we're only searching the abstract for.
Is there any AI features that show up in that initial thing before I buy that article?
You can ask the assistant to summarize the article for you, but it's gonna summarize based on the abstract, not the full article. Any other questions? Okay. Yes, sir. Our average revenue per customer for the core Research Solutions product is about $11,000. That's the platform fee. They typically buy somewhere between two and a half and three times that amount in articles, so they're typically buying 25-35 thousand articles. For Scite, the advanced search engine, it's about the same. It's about $11,000 to subscribe to the Scite platform. So if you want both, you're subscribing to both. You know, it's $22,000 if you want both of them.
You're paying a fee based on number of seats and things you have turned on in the software, and that's an annual subscription that does adjust every year. We build a price increase into our contract. You might add more features or whatever, but then you're paying per article. Yes, sir.
What about the industry model then?
... Our B2C model is quite a bit different, lower, because it's an individual subscriber, and so, yeah, they're paying, you know, in the hundreds of dollars, not in the thousands of dollars. And that business today is dominated by monthly subscribers. One of the things we're working on is pivoting those monthly to annual. So there's a lot more seasonality to that business. In the summer, it's dead. In the fall, spring, we have a lot of, a lot of net new subscribers, and then there's a little bit of gap in December, early January, where it slows down.
Who do you think those users are, are they academics?
Yeah, two-thirds are academics. They're either students or faculty. A third is corporate researchers that sign up for it.
Are they self-onboarded or...?
All self-onboarded. That whole business is super interesting. There's one person that runs that $5 million plus business because it's digital marketing to trial to subscriber. Even the off-boarding is 100% automated. It's all run through a tool. Yes, sir?
How do you, you know, coexist with Wiley and Cambridge Press and that? I'm just trying to understand, like, is Wiley see you as a competitor or they see you as kind of-
We're just another distribution source for Wiley articles.
Right.
You know, our customers value us because we're number one, Switzerland. We have everything in one place. You're not, you're not doing a search and then going to Wiley to get the Wiley article and going to Springer Nature to get the Springer Nature article. One place, you click, you get it. We take care of billing and paying publishers in the background. The second reason a lot of our customers sign up with us, quite frankly, is they like the fact that what they do is anonymous with us. Nobody knows what they do with us except us, and we've agreed to never provide that information to anybody unless we're required to by a court. So they like that, that kind of independence aspect. But frankly, some publishers, we charge more for their content than you could buy it for directly from them.
But because our platform saves you so much money in other ways, some of the largest companies in the world use our platform. They pay more per article, but at the end of the day, we're saving them money because we save them a ton of time, which I don't really consider money, it's just time savings. But the way that our product works saves them a bunch of money in areas like reuse rights, better decisions about subscriptions versus tokens versus pay-per-view, those sorts of things.
Right.
Any other questions? Yes, sir.
Design science area, if I wanted to know about the best practices of American corporations or directly included, would this help me at all? And the second point is, I assume everything is in publications in English.
Great question. First off, the world's scientific research industry is English. Even in China, the Chinese researchers who may not speak English very well, they can read and write English pretty well, and so everything's published in English. There is a few obscure publishers in China that do Chinese publishing. There's a few in Japan that do Japanese publishing, but it's less than a single-digit % of the total content out there globally. So our UI globally is in English, except for the administrators. If you're the back-end admin who is setting up, who has the ability to log in, that we can change to the local language because those folks are typically not English speakers, but the front end of the platform is 100% English. And then I forgot your other question.
Other companies, including-
Oh, yeah. So the Scite Assistant, when we have it pointed at scientific research, it only talks to scientific research. It does not talk to the general web, because the web is where you get a lot of bad information. However, you can use our assistant to ask that type of question. We'll get you the answer from the general web, or if it's included in scientific material, which I guess there probably is some articles about that, it'll give you the results of the scientific material. But for the most part, people are using our AI for searching of STM content, and we only look at STM content. We do not search the general web for that, even though the platform can do that. You can decide when you do the search, whether you want a broad search or a narrow search. Other questions?
All right, well, thank you very much for your time.