Research Solutions, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• FY '25 was a record year with $21 million in ARR, 20% ARR growth, and a target of $30 million platform ARR by FY '27.
• Strong acquisition pipeline with opportunities to accelerate reaching the ARR target.
• Product perspective: Focus on developing existing products and integrating AI for copyright-compliant research acceleration.
• Marketing and sales: New Chief Revenue Officer hired in Nov 2024 driving B2B sales, with strong leads from marketing activities.
• Site earn-out: Final earn-out determined to be $15.4 million, with increased cash mix portion and payments ongoing through May 2027.
• Cash flow: Generated over $7 million in cash flow from operations in FY '25, ending with $12.2 million cash balance with no outstanding borrowings.
• AI initiatives: Launched AI TDM rights offering and exploring MCP for AI model interaction with research articles.

Segment Performance

• Platform Subscription Revenue: Fourth quarter 2025 totaled approximately $5.2 million, a 21% increase from the prior year quarter. For the full fiscal year 2025, it was approximately $19 million, a 36% increase from fiscal 2024. Platform revenue accounted for 42% of Q4 2025 revenue, up from 35% in the prior year quarter.
• Transaction Revenue: Fourth quarter 2025 was approximately $7.3 million, down from $7.9 million in the prior year quarter. For the full fiscal year 2025, it was $30.1 million, a 2% decrease from the prior year.

Guidance

• Aim to hit $30 million platform ARR by end of FY '27.
• Expect B2B ARR growth to continue, but competitive pressures in B2C may affect near-term growth.
• Transaction revenue expected to be challenging in first half of FY '26 but optimistic for flattening decline or return to low growth in back half.
• Adjusted EBITDA margin expected to follow seasonality with Q2 likely weakest and back half strongest.

Risks

• Competitive pressures in the B2C space may impact near-term growth.
• Transaction revenue growth was challenging in the back half of FY '25 and expected to remain challenging in the first half of FY '26.
• Various factors could impact future operating results and financial condition, as detailed in SEC filings.

Q: Partnership with LibKey and opportunity?

A: Partnership with LibKey to expand academic business, leveraging their Link Resolver product to access scientific articles.

Q: Cross-sell between Site and Article Galaxy?

A: Vast majority of Site sales in FY '25 are to new customers, with low to mid-single-digit penetration on Article Galaxy customer base.

Q: Strategy to stem decline and resume growth in transactions business?

A: Focus on improving conversion rates, suggesting additional purchases, and making the transaction process more seamless, with internal efforts to enhance the customer experience.