Research Solutions(RSSS) - 2025 Q4 - Earnings Call Transcript

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]