RSSS — Research Solutions, Inc.

Summary of Research Solutions (RSSS) Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $12.3 million, up from $12 million in Q1 2025.
• Platform Subscription Revenue: Increased 18% to $5.1 million, driven by new deployments and upsells.
• Annual Recurring Revenue (ARR): Reached $21.3 million, a 21% year-over-year increase, with B2B ARR at approximately $14.8 million and B2C ARR at $6.5 million.
• Incremental ARR: $375,000 for the quarter, a 92% increase from $195,000 in the prior year.
• Transaction Revenue: Declined to $7.2 million from $7.7 million in the prior year, in line with expectations.
• Gross Profit: $6.2 million, up 8% year-over-year, with a gross margin of 50.6%.
• Net Income: $749,000 ($0.02 per diluted share), compared to $669,000 ($0.02 per diluted share) in Q1 2025.
• Adjusted EBITDA: $1.5 million, a 16% increase from $1.3 million in the prior year, marking the second-best performance in company history.
• Cash Flow from Operations: Increased 31% to $1.1 million.

2. Strategic Updates and Business Highlights

• The company is focusing on enhancing its B2B sales teams and transitioning to a comprehensive SaaS and AI solution for scientific research.
• Significant deals were closed, including contracts with Real Chemistry, a top 10 pharma company.
• The introduction of AI rights offerings in Article Galaxy aims to monetize AI usage of content, which is expected to boost platform seat revenues and reduce churn.
• The company is seeing an increase in B2C leads transitioning into B2B business, with a notable rise in the sales pipeline from B2C to B2B.

3. Forward Guidance and Outlook

• Management anticipates a dip in adjusted EBITDA between Q1 and Q2, but expects the decline to be less pronounced than in the previous year.
• The goal is to outperform fiscal 2025 in each remaining quarter, aiming for another record year.
• Continued investment in B2B sales resources is expected to yield over $1 in new ARR for every dollar invested.

4. Bad News, Challenges, or Points of Concern

• Transaction revenue is declining, primarily due to churn from three major customers, with two reducing their spending due to economic factors.
• The total active customer count decreased to 1,326 from 1,390 year-over-year.
• B2C ARR growth was lower than expected, although churn has improved.
• Increased competition is impacting conversion rates for new subscribers, particularly in the B2C segment.

5. Notable Q&A Insights

• Management noted that the attach rate for the new AI rights product is still being evaluated, with initial sales primarily to existing customers.
• There is optimism about the sustainability of ARR growth, attributed to a revamped sales process and larger deals, but caution was advised regarding potential pull-forwards.
• G&A expenses are at a low level, with expectations of modest increases moving forward.
• The company is actively pursuing M&A opportunities, with a healthy pipeline but no imminent closures expected by year-end.

Overall, while RSSS reported strong B2B growth and improved profitability metrics, challenges in transaction revenue and competitive pressures in the B2C segment remain areas of concern. The strategic focus on AI and enhanced sales processes is expected to drive future growth.