Summary of Research Solutions (NasdaqCM:RSSS) FY Conference Call Company Overview - **Company**: Research Solutions, Inc. (RSSS) - **Industry**: Scientific research and document delivery - **Business Model**: Transitioning from a transactional model to a SaaS platform model focused on research and development (R&D) [2][9][20] Key Points and Arguments Business Transformation - The company is undergoing a significant transformation from providing peer-reviewed scientific research articles to offering a sophisticated SaaS product called Article Galaxy, which streamlines the research process for corporate clients [2][3][4] - Article Galaxy allows researchers to access scientific papers through a single search, enhancing efficiency and reducing costs [3][4] Product Offerings - **Article Galaxy**: A platform for accessing scientific research papers, now includes rental capabilities and rights management features [4][5] - **Scite**: An AI-powered discovery product acquired by the company, which enhances the research process by providing insights beyond paywalls [8][20] - **DocDel (Document Delivery)**: The transactional business segment, which is currently facing challenges due to customer churn [6][9][15] Financial Performance - The company reported a 20% organic growth in Annual Recurring Revenue (ARR), which is now over $21 million [16][19] - The platform business has a gross margin of approximately 85%, while the transactional business has a gross margin of 24-25% [13][16] - The overall corporate blended gross margin has improved from 40% to over 50% in the past two years [17] Market Opportunity - The Total Addressable Market (TAM) for the B2B segment is estimated at $4 billion, with significant growth potential in the B2C segment as well [12][21] - The company serves a diverse range of verticals, including pharmaceuticals, biotech, and academic institutions, with about half of its revenue coming from the healthcare sector [11][12][21] Customer Dynamics - The company has approximately 1,500 customers, with a typical customer lifetime value of 6-8 years [11][21][42] - Renewal rates are around 90%, with top-tier customers achieving renewal rates of 97-98% [41][42] - Challenges in the transactional business are attributed to customer churn and the increasing availability of open-access content [33][36] Strategic Focus - The company aims to be the "Bloomberg terminal" for research, providing comprehensive solutions across the research workflow [20] - There is an ongoing discussion about share buybacks as a strategy to enhance shareholder value, especially given the current trading multiples [23][24] AI Integration - AI is viewed as both a threat and an opportunity; the company is focused on integrating AI into its workflow to enhance its offerings while ensuring compliance with copyright regulations [27][28][29] Future Outlook - The company expects continued growth in its platform business, while the transactional business may remain flat due to market dynamics [10][15] - The management is optimistic about the long-term growth potential and is focused on executing its strategic plan [19][21] Additional Important Insights - The company has made two acquisitions in the past five years to enhance its discovery capabilities [7][20] - The management is implementing a new software tool to proactively manage customer relationships and reduce churn [43] - The competitive landscape is evolving, with many new entrants in the research AI space, but the company believes it has a unique position due to its access to comprehensive content [29][30]

Core Insights - Research Solutions, Inc. reported a 21% year-over-year increase in Annual Recurring Revenue (ARR) to $21.3 million, driven by strong growth in both B2B and B2C segments [5][8] - The company achieved total revenue of $12.3 million for the fiscal first quarter, a 2% increase compared to the prior-year quarter, with platform subscription revenue rising 18% to $5.1 million [4][8] - Net income for the quarter was $749,000, reflecting a 12% increase from $669,000 in the previous year, while Adjusted EBITDA rose 16% to $1.5 million [9][8] Financial Performance - Total revenue reached $12.3 million, up from $12.0 million in the same quarter last year, primarily due to increased platform revenue [4] - Platform subscription revenue was $5.1 million, an 18% increase year-over-year, attributed to organic growth in both B2C and B2B platforms [5] - Transaction revenue decreased to $7.2 million from $7.7 million, due to lower per article fees on paid orders [6] Profitability Metrics - Gross profit increased by 8% to $6.2 million, with total gross margin improving by 270 basis points to 50.6% [7][8] - Operating expenses rose to $5.3 million from $5.1 million, mainly due to higher sales and marketing expenses [7] - Adjusted EBITDA for the quarter was $1.5 million, compared to $1.3 million in the prior-year quarter, representing an 11.1% margin on a trailing twelve-month basis [9][8] Customer Metrics - The company ended the quarter with 1,326 active customers, a decrease from 1,390 in the prior-year quarter [6][12] - B2B ARR growth was $561,000, marking over 300% growth from the previous year, while B2C ARR decreased slightly [8][12] - The Average Sales Price (ASP) reached near all-time high levels, indicating strong demand for the company's offerings [3] Strategic Initiatives - The company is focused on enhancing its SaaS and AI solutions, with significant deals contributing to its growth, including the largest Scite AI deal to date [3] - Continued investment in sales and marketing is expected to drive further growth and improve execution [3]

Financial Data and Key Metrics Changes - Total revenue for Q4 FY 2025 was $12.4 million, up from $12.1 million in Q4 FY 2024, marking a strong quarter for the business [9] - Annual recurring revenue (ARR) reached $21 million, growing 20% year-over-year [4] - Gross margin for Q4 was 51%, a 450 basis point improvement over the previous year, marking the first time gross margin exceeded 50% [12] - Net income for Q4 was $2.4 million, compared to a net loss of $2.8 million in the prior year [15] - For the full fiscal year 2025, total revenue was approximately $49.1 million, a 10% increase from fiscal 2024 [16] Business Line Data and Key Metrics Changes - Platform subscription revenue increased 21% year-over-year to approximately $5.2 million in Q4 [10] - B2B ARR grew significantly, with net B2B ARR growth of $724,000 in Q4, compared to $407,000 in the prior year [10] - Transaction revenue for Q4 was approximately $7.3 million, down from $7.9 million in the prior year [11] - Total deployments ended the year at 1,171, up 150 for the year [16] Market Data and Key Metrics Changes - The company experienced a modest sequential decline in B2C ARR, attributed to seasonal challenges [11] - The total active customer count for Q4 was 1,338, down from 1,398 in the same period a year ago [12] - The company noted competitive pressures in the B2C space affecting near-term growth, but remains optimistic about long-term prospects [22] Company Strategy and Development Direction - The company aims to reach a $30 million platform ARR target by the end of FY 2027, focusing on product development and unique value delivery [4] - A shift from a transaction-based model to a vertical SaaS model is underway, with an emphasis on AI's impact on research workflows [7] - The company is pursuing a headless strategy, allowing customers to integrate services into their own systems and workflows [30] - New AI-based products are growing at nearly 4X the pace of legacy products, indicating a strong future focus on AI [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum of B2B ARR growth and the potential for a return to low levels of growth in transaction revenue [22] - The company plans to continue investing in sales and marketing while aiming to reduce general and administrative expenses [23] - Management expects to maintain adjusted EBITDA margins above 10% and gross margins above 50% in FY 2026 [66] Other Important Information - The final earnout for the Scite acquisition was determined to be $15.4 million, with a cash mix increased to approximately 62% [18] - Cash flow from operations in FY 2025 was over $7 million, nearly double the previous year's result [20] - The company ended FY 2025 with a cash balance of $12.2 million, with no outstanding borrowings [21] Q&A Session Summary Question: Sequential uptick in ASP drivers - Management noted larger deals and improved sales execution as key drivers for the increase in average selling price [38] Question: Resolute software adaptation to new strategy - The company is focusing on leveraging Resolute's strong API capabilities within the headless strategy, enhancing its value proposition [40] Question: Competitive environment for API strategy - Management highlighted that while some publishers are exploring similar strategies, the company is uniquely positioned due to its extensive partnerships with various publishers [43] Question: Trends in COGS and platform optimization - Management indicated that cost stabilization and prepayment strategies have contributed to lower COGS despite revenue growth [47] Question: AI-related deals growth sustainability - Management expects continued strong growth in B2B AI-related deals, while B2C growth may moderate due to increased competition [50] Question: Strength in deals above $100,000 - The new sales process and pricing strategy have enabled the company to secure larger deals, with a focus on understanding customer pain points [52]

Financial Data and Key Metrics Changes - Total revenue for Q4 FY 2025 was $12.4 million, up from $12.1 million in Q4 FY 2024, marking a strong quarter for the business [9] - Annual recurring revenue (ARR) reached $21 million, growing 20% year-over-year [4][10] - Gross margin for Q4 was 51%, a 450 basis point improvement year-over-year, marking the first time blended gross margin exceeded 50% [12] - Net income for Q4 was $2.4 million or $0.07 per diluted share, compared to a net loss of $2.8 million or $0.09 per diluted share in the prior year [15] - For the full fiscal year 2025, total revenue was approximately $49.1 million, a 10% increase from fiscal 2024 [16] Business Line Data and Key Metrics Changes - Platform subscription revenue increased 21% year-over-year to approximately $5.2 million in Q4 [10] - B2B ARR grew significantly, with net B2B ARR growth of $724,000 in Q4, compared to $407,000 in the prior year quarter [10] - Transaction revenue for Q4 was approximately $7.3 million, down from $7.9 million in the prior year quarter [11] - Total deployments ended the year at 1,171, up 150 for the year [16] Market Data and Key Metrics Changes - The total active customer count for Q4 was 1,338, down from 1,398 in the same period a year ago [12] - The company experienced a modest sequential decline in B2C ARR, attributed to seasonal challenges [11] Company Strategy and Development Direction - The company aims to reach a $30 million platform ARR target by the end of FY 2027, focusing on product development and AI integration [4] - A shift from a transaction-based model to a vertical SaaS model is underway, with an emphasis on AI's impact on research workflows [7] - The company is pursuing a headless strategy, allowing customers to integrate services into their own systems and workflows [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about B2B ARR growth momentum, despite competitive pressures in the B2C space [22] - Transaction revenue growth is expected to remain challenging in the first half of FY 2026, with hopes for stabilization or low growth in the latter half [22] - The company plans to continue investing in sales and marketing while reducing general and administrative expenses [23] Other Important Information - The final earnout for the Scite acquisition was determined to be $15.4 million, with a cash mix increased to approximately 62% [18] - Cash flow from operations for FY 2025 was over $7 million, nearly double the previous year's result [20] - The company ended FY 2025 with a cash balance of $12.2 million, with no outstanding borrowings [21] Q&A Session Summary Question: Can you discuss the sequential uptick in ASP? - Management noted that larger deals have been secured due to the onboarding of a new Chief Revenue Officer and improved sales training [38] Question: How is the Resolute software adapting to the new API strategy? - The company indicated that Resolute's strong API capabilities align well with the headless strategy, allowing for better integration into customer workflows [40] Question: What is the competitive landscape for the headless strategy? - Management highlighted that while some publishers are opening up their articles to LLM providers, the company is uniquely positioned to work with a wide range of publishers [43] Question: Can you elaborate on the strength in deals above $100,000? - The new sales process and pricing strategies have led to larger deals, with a focus on understanding customer pain points and delivering value [52] Question: What are the expectations for margin expansion in FY 2026? - Management anticipates EBITDA margins to remain above 10%, with potential for growth while continuing to invest in sales and marketing [66]

Financial Data and Key Metrics Changes - Total revenue for Q4 2025 was $12.4 million, up from $12.1 million in Q4 2024, marking a strong quarter for the business [8] - Annual recurring revenue (ARR) reached $21 million, growing 20% year-over-year [4][9] - Gross margin for Q4 was 51%, a 450 basis point improvement from Q4 2024, marking the first time blended gross margin exceeded 50% [11] - Net income for Q4 was $2.4 million or $0.07 per diluted share, compared to a net loss of $2.8 million or $0.09 per diluted share in the prior year [13] - Adjusted EBITDA for Q4 was $1.6 million, a new quarterly record with a 13% margin [13] Business Line Data and Key Metrics Changes - Platform subscription revenue increased 21% year-over-year to approximately $5.2 million, driven by growth in both B2C and B2B segments [9] - Transaction revenue for Q4 was approximately $7.3 million, down from $7.9 million in the prior year quarter, reflecting a decline in paid transaction order volumes [10] - The platform business recorded a gross margin of 88.5%, compared to 85.3% in the prior year quarter [11] Market Data and Key Metrics Changes - The total active customer count for Q4 was 1,338, down from 1,398 in the same period a year ago [11] - B2B ARR at quarter end was $14.2 million, while normalized ARR associated with B2C subscribers was approximately $6.7 million [10] Company Strategy and Development Direction - The company aims to reach a $30 million platform ARR target by the end of FY 2027, focusing on product development and unique value delivery [4] - The strategy includes transitioning from a transaction-based model to a vertical SaaS model, leveraging AI to enhance research workflows [6][30] - The company is exploring acquisitions to enhance its product offerings and has a strong acquisition pipeline [4][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about B2B ARR growth momentum, despite competitive pressures in the B2C space [19] - Transaction revenue growth is expected to remain challenging in the first half of FY 2026, with potential for stabilization or low growth in the latter half [20] - The company plans to continue investing in sales and marketing, technology, and product development while reducing general and administrative expenses [21] Other Important Information - The final earnout for the Scite acquisition was determined to be $15.4 million, with payments structured to be 62% in cash [16] - Cash flow from operations for FY 2025 was over $7 million, nearly double the previous year's result [18] - The company ended FY 2025 with a cash balance of $12.2 million, with no outstanding borrowings [18] Q&A Session Summary Question: What drove the sequential uptick in ASP? - The increase in ASP was attributed to larger deals and improved sales execution under the new Chief Revenue Officer [35] Question: How is the Resolute software adapting to the new API strategy? - Resolute's strong API capabilities align well with the headless strategy, allowing integration into customer workflows [36] Question: What is the competitive landscape for the headless strategy? - The company is uniquely positioned as it collaborates with various publishers, unlike competitors who may hesitate to share content [39] Question: Can you discuss the trends in the COGS line on the platform side? - COGS has stabilized with limited headcount growth and cost management strategies, contributing to improved gross margins [41] Question: How do you expect margins to expand in 2026? - The company anticipates EBITDA margins to remain above 10%, with potential for growth while continuing to invest in sales and marketing [57]

Core Insights - Research Solutions' Scite platform has signed an indexing agreement with the American Society for Microbiology (ASM), enhancing its position in the competitive AI research landscape [1][2] - The partnership adds ASM's extensive portfolio of peer-reviewed journals to Scite's network, which now includes over 30 major publishers and provides access to more than 1.3 billion indexed citations [2][5] - Scite's Smart Citations technology offers deeper insights into citation patterns, allowing researchers to understand how microbiology research is referenced and utilized [3][5] Company Overview - Research Solutions is a vertical SaaS and AI company that simplifies research workflows for academic institutions and life science companies globally, combining AI-powered tools with access to both open access and paywalled research [7] - The company emphasizes ethical sourcing of information through direct partnerships with publishers, distinguishing itself from competitors that scrape content [5] Industry Context - The indexing agreement with ASM reflects the growing importance of citation intelligence in modern research evaluation, providing a richer framework for understanding scholarly impact [4][5] - ASM, established in 1899, is a leading organization in microbiological research, advocating for open science and evidence-based public policies [8]

Core Insights - Research Solutions has integrated advanced search capabilities into its Article Galaxy platform, allowing researchers to search across citation statements from full-text articles, marking a significant improvement over traditional search methods [1][3][4] Company Developments - The upgraded search system reflects Research Solutions' commitment to innovation and feature enhancement based on customer feedback, enabling more relevant literature discovery through both basic and sophisticated search methods [3][5] - The new search functionality aims to improve research efficiency and strengthen Article Galaxy's position as a comprehensive platform for managing scientific literature [4][5] Industry Context - The enhanced literature discovery tools represent a growth area within scientific research technologies, addressing the challenges posed by the increasing volume of published research [5] - The integration of AI-powered tools and advanced search capabilities positions Research Solutions as a key player in simplifying research workflows for academic institutions and life science companies [7]