The following segment was excerpted from this fund letter.
Research Solutions (OTCQB:RSSS) – Our investment in Research Solutions continued to fire on all cylinders in the fourth quarter and 2019 by appreciating 47% on the strength of growth in its Platforms segment and an announcement on its partnership with Evidence Partners. In November 2019, the company announced a strategic partnership with Evidence Partners, a Canadian provider of systematic peer review software via its Distiller SR product. A systematic peer review is essentially a review of most current academic research (that is conveniently distributed by the Research Solutions Transactions segment) on various scientific topics and is usually a regulatory requirement for various organizations. The two platforms are complementary, not competitive, and early on the partnership can take on many forms, from customer list swaps and increased Transaction segment revenue starting in 2020, to an eventual merger serving the corporate and academic scientific research community with an integrated suite of top notch software and published products.
On the financials side, Research Solutions continued to deliver with what appears to be a stabilized and finally growing Transactions segment, and a 45% y/y growth in Platforms revenues with 320 platform deployments and a $3.5mm Annualized Recurring Revenue at an 82.4% gross profit margin. The management team seems to have zeroed in on the most effective selling techniques, and with a blue-chip customer list, we would be surprised if we did not begin to see an acceleration in the top line growth rate. We expect 2020 to be an initial profitability year for the company with 2021 and beyond becoming significant Free Cash Flow generation years when we expect the company to rerate to its high double-digit operating profit multiples of its Information Services peers. While the company’s fundamentals are doing great and there is a decently positive sentiment in the stock, its liquidity is the real issue that, despite being a 260% return stock since our initial purchase, has kept the stock under the radar. We believe 2020 will be the year when the company gets uplisted to Nasdaq and with close to a $100mm market cap should get the notice of Wall Street. In short, we still expect significant return contributions to our partnership from this holding, which remains one of our largest positions.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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