RSSS — Research Solutions, Inc.

Summary of Research Solutions' Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $11.8 million, a slight decrease from $11.9 million in Q2 2025.
• Platform Subscription Revenue: Increased by 14% to $5.2 million, driven by 47 net new deployments.
• Annual Recurring Revenue (ARR): Reached $21.8 million, up 14% year-over-year, with B2B ARR at approximately $15.3 million and B2C ARR at about $6.4 million.
• Transaction Revenue: Decreased to $6.6 million from $7.3 million year-over-year, primarily due to churn from a large account.
• Net Income: $547,000 ($0.02 per diluted share), compared to a net loss of $2 million ($0.07 per share) in the prior year.
• Adjusted EBITDA: Increased by 36% to $1.3 million, with an adjusted EBITDA margin of 11.8%.
• Cash Flow from Operations: Improved to $1.4 million, a 35% increase from the previous year.

2. Strategic Updates and Business Highlights

• B2B Segment Growth: Strong performance in B2B with significant growth in ARR bookings and net new deployments, indicating positive customer engagement with product developments.
• Product Improvements: Ongoing enhancements in software and data offerings, including faster patent data integration and improved sales processes.
• API and AI Integration: Transitioning from a document delivery model to an "Answers and Access" platform, focusing on API sales and embedding services into customer workflows.
• Market Positioning: Emphasis on building infrastructure for AI tools, with a focus on providing compliant citation and access to scientific articles.

3. Forward Guidance and Outlook

• Second Half Expectations: Anticipation of stronger B2B performance in the second half of the fiscal year, although a year-over-year decline in transaction revenue is expected due to previous churn.
• Profitability Goals: Aim to exceed fiscal 2025 EBITDA levels in each of the remaining quarters, supported by ongoing platform subscription growth and disciplined expense management.
• Long-term Strategy: Focus on evolving pricing models and enhancing API offerings to capture larger contracts and improve customer retention.

4. Bad News, Challenges, or Points of Concern

• Transaction Revenue Decline: Expected continued decline in transaction revenue due to churn from a significant customer and reduced volumes from other larger clients.
• B2C Segment Pressures: Increased competition in the B2C market, leading to lower conversion rates from trials to subscriptions and challenges in digital marketing effectiveness.
• Customer Churn: Notable churn from key accounts, with potential for further declines if customer research intensity does not stabilize.
• Competitive Landscape: Heightened competition in the B2C segment and potential threats from LLM providers entering the market with similar content offerings.

5. Notable Q&A Insights

• B2B Pipeline Growth: The pipeline for larger API deals is expanding, indicating strong demand for integrated solutions.
• B2C Recovery Uncertainty: Management remains cautious about the B2C segment's recovery, citing competitive pressures and conversion challenges.
• Internal AI Utilization: The company is leveraging AI internally to improve productivity and efficiency, particularly in software development and operational processes.
• Publisher Relationships: Ongoing discussions with a variety of publishers about AI rights and infrastructure, with a focus on enhancing collaboration and driving new revenue opportunities.

Overall, Research Solutions is navigating a mixed financial landscape with strong B2B growth and strategic shifts towards API and AI integration, while facing challenges in the B2C segment and transaction revenue declines. The company's focus on infrastructure and customer integration positions it well for future growth, despite current headwinds.