Executive Summary

Q1 FY26 delivered modest top-line growth with expanding margins: total revenue $12.31M (+2% YoY), gross margin 50.6% (+270 bps YoY), net income $0.75M, diluted EPS $0.02, and Adjusted EBITDA $1.47M (second-best quarter in company history) .
Platform momentum continued: platform revenue rose 18% to $5.12M (42% of revenue), Total ARR climbed 21% to $21.29M, with B2B ARR up 21% to $14.76M and record organic Q1 B2B net ARR growth ($561K) on larger six-figure wins, including the company’s largest-ever Scite AI deal .
Transactions remained a headwind: revenue fell 6.8% to $7.19M on lower per-article fees and fewer active customers; management noted roughly 60% of the corporate decline stemmed from a single churned account and two large customers buying less due to macro/research prioritization .
No formal guidance; management expects typical Q1→Q2 seasonality but a less pronounced dip and even a “shot at some EBITDA growth” sequentially, and aims to outperform FY25 in each remaining quarter, supporting a positive full-year trajectory .
Catalysts: accelerating AI rights add-on (RightsDel), publisher AI gateway on Scite, rising ASPs from improved sales execution, and a growing B2C-to-B2B pipeline; management is also pursuing M&A with an active pipeline, albeit not expecting a close by year-end .

What Went Well and What Went Wrong

What Went Well

“Strongest organic Q1 growth on record within our B2B business,” driven by “multiple six-figure deals, including our largest ever Scite AI deal,” and ASPs “near all-time high levels” .
Margin expansion: total gross margin improved 270 bps to 50.6% on mix shift to higher-margin platforms and expanding platform margins (88.1% GM, +70 bps YoY) .
Cash generation: operating cash flow rose 31% to $1.11M; TTM CFO reached $7.3M and TTM Adjusted EBITDA $5.5M (11.1% margin), reinforcing reinvestment capacity .

What Went Wrong

Transaction segment softness: revenue down 6.8% YoY to $7.19M, customers fell to 1,326 (from 1,390), and transaction GM declined to 23.8% (from 25.7%) .
Corporate customer pressure: ~60% of corporate decline tied to one churned account; two other large customers reduced spend due to macro/research priorities, tempering near-term recovery expectations .
B2C ARR net decline (-$186K) amid competitive intensity and below-target trial-to-paid conversion; management is iterating product and messaging to improve conversion while noting lifetime value and churn trends are improving .

Financial Results

Headline Metrics vs Prior Periods and Estimates

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD)	$12.66M	$12.44M	$12.31M
Diluted EPS ($USD)	$0.01	$0.07	$0.02
Gross Margin %	49.5%	51.0%	50.6%
Adjusted EBITDA ($USD)	$1.42M	$1.61M	$1.47M

Metric	Q3 2025 Estimate*	Q3 2025 Actual	Q4 2025 Estimate*	Q4 2025 Actual	Q1 2026 Estimate*	Q1 2026 Actual
Revenue ($USD)	$13.02M*	$12.66M	$12.41M*	$12.44M	$12.29M*	$12.31M
Primary EPS ($USD)	$0.03*	$0.0242*	$0.055*	$0.086*	$0.0333*	$0.03*

Values marked with * retrieved from S&P Global.
Notes: Company reported diluted EPS of $0.02 in Q1 FY26 ; S&P Global “Primary EPS” may differ from diluted EPS methodology.

Q1 FY26 revenue was a slight beat vs consensus (actual $12.31M vs $12.29M*).
Q1 FY26 EPS was below consensus on both primary and diluted EPS measures (actual primary $0.03* vs $0.0333*; diluted EPS $0.02 vs consensus primary $0.0333*), while Q4 FY25 was a clear EPS beat and Q3 FY25 was a miss .

Segment Breakdown

Segment	Q3 2025 Revenue	Q4 2025 Revenue	Q1 2026 Revenue	Q3 2025 Gross Profit	Q4 2025 Gross Profit	Q1 2026 Gross Profit	Q3 2025 GM%	Q4 2025 GM%	Q1 2026 GM%
Platforms	$4.84M	$5.18M	$5.12M	$4.23M	$4.59M	$4.51M	87.4%	88.5%	88.1%
Transactions	$7.82M	$7.25M	$7.19M	$2.04M	$1.75M	$1.71M	26.0%	24.1%	23.8%

KPIs

KPI	Q3 2025	Q4 2025	Q1 2026
Total ARR (End of Period, $USD)	$20.35M	$20.92M	$21.29M
B2B ARR (End of Period, $USD)	$13.47M	$14.20M	$14.76M
B2C ARR (End of Period, $USD)	$6.88M	$6.72M	$6.54M
Incremental B2B ARR ($USD)	$735,818	$723,524	$560,874
Platform Deployments (End of Period)	1,133	1,171	1,185
ASP (End of Period, $USD)	$11,892	$12,124	$12,454
Transaction Customers (Total)	1,380	1,338	1,326
Transaction Customers (Corporate / Academic)	1,060 / 320	1,028 / 310	1,002 / 324

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA trajectory	FY26	Not provided	Management expects typical Q1→Q2 seasonality, “less pronounced dip” and a “shot at some EBITDA growth” sequentially; aims to outperform FY25 each remaining quarter	Qualitative improvement
Transactions	H1 FY26	Not provided	Expect continued challenge through at least H1 FY26; seeing stabilization vs Q4 FY25 and hope for reduced decline in H2 (more hunch than certainty)	Qualitative caution
Formal revenue/EPS/margins guidance	FY26	None	None provided in Q1 materials	N/A

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q3 FY25; Q-1: Q4 FY25)	Current Period (Q1 FY26)	Trend
AI rights add-on and publisher AI gateway	AI product growth; platform mix driving margins; record B2B ARR adds	RightsDel launched; AI gateway with publishers via Scite; introducing AI usage metrics analogous to COUNTER	Rising strategic importance
Platform mix and margins	Q3: GM 49.5%, platform GM 87.4%; Q4: GM 51.0%, platform GM 88.5%	GM 50.6%; platform GM 88.1%; platform 42% of revenue	Sustained expansion
Transactions headwinds	Q3/Q4 declines; lower paid order volume	Decline due to lower per-article fees and concentration in 3 customers; academic growing, corporate down	Stabilizing but pressured
Sales execution and ASP	Revamped sales process; larger deals in pipeline	Larger new logos; ASP near all-time highs; disciplined value-based pricing	Improving
B2C conversion and competition	Q3 growth in B2C; no explicit conversion detail	Competitive intensity; 7-day trials; conversion below last year; LTV/churn improving; pipeline from B2C→B2B up to >$1M	Mixed: conversion challenge, pipeline positive
Cost discipline (G&A)	Q3/4: contained G&A; some legal variability	G&A sustainably lower post executive departure; modest increase possible	Stable to modest up

Management Commentary

CEO on B2B momentum: “We posted the strongest organic Q1 growth on record within our B2B business, aided by winning multiple six-figure deals, including our largest ever Scite AI deal… With these deals our Average Sales Price (ASP) is now near all-time high levels.”
CFO on seasonality and outlook: “We think… the dip [in adjusted EBITDA] will be less pronounced in Q2… and there's also a shot at some EBITDA growth sequentially… our goal remains to experience outperformance to fiscal 2025 in each of the remaining quarters.”
CSO on AI strategy: RightsDel to monetize AI usage on articles; Scite-based AI gateway with publishers; aim to introduce AI usage metrics akin to COUNTER to enable pricing and upsell .
CEO on transactions mix: “Our academic segment is growing, and the corporate segment is declining, with about 60% of that decline coming from one churned account… [other] two customers… are buying less year-over-year… based primarily on the current economic environment or changes in their research priorities.”

Q&A Highlights

AI rights add-on attach rates: Too early for a definitive attach rate; initial sales to existing customers; potential ARR uplift discussed anecdotally (~50% opportunity cited in industry chatter), but not a major contributor to ASP this quarter; larger new logo deals drove ASP .
B2C conversion strategy: 7-day trials; improved outputs (up to 15-page referenced reports) may reduce time-to-solve; conversion below last year amid higher competition; rigorous testing of UI/UX and messaging; churn and LTV improving; growing B2C→B2B pipeline (> $1M vs ~$50K a year ago) .
ARR durability: Larger deals are becoming more common; pipeline contains similarly sized opportunities; sales process and marketing funnel improvements support sustainability (no pull-forward) .
Cost structure: G&A lower after executive departure; viewed as a reasonable run-rate barring legal/recruiting spikes; modest increases possible .
Transactions outlook and macro: Limited visibility; stabilization vs Q4; hope for reduced decline in H2 after lapping sharper drops; no material impact from government shutdown; headless integrations remain in pipeline for large corporates building internal LLMs .

Estimates Context

Q1 FY26 revenue slightly beat consensus ($12.31M actual vs $12.29M*), while EPS missed (Primary EPS $0.03* vs $0.0333*; diluted EPS $0.02 reported) .
Prior quarters: Q4 FY25 was an EPS beat (actual primary $0.086* vs $0.055*), while Q3 FY25 was a miss (actual primary $0.0242* vs $0.03*) .
Implication: Sell-side models likely to raise platform margin assumptions and ARR growth trajectory, but maintain caution on transactions recovery and B2C conversion until clearer sequential improvements emerge.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Platform-led model is working: mix shifting to high-margin platforms with sustained margin gains and disciplined sales execution; ASPs rising on larger deals and value-based pricing .
Near-term EPS variability: Q1 EPS miss vs consensus was modest and primarily reflects dilution from measure definitions and transactions softness; Q4 beat demonstrates operating leverage potential .
Watch ARR and deployments: B2B ARR and deployments continue to climb; sustained incremental ARR and ASP progression should underpin medium-term revenue visibility .
Transactions remain the swing factor: corporate concentration risks and lower per-article fees are headwinds; stabilization signs appear, but recovery timing uncertain—monitor customer churn/buying patterns and pricing .
AI rights and publisher gateway are strategic: RightsDel and Scite AI gateway can unlock new monetization (AI usage metrics), drive upsell, and deepen publisher partnerships—key to the AI narrative and potential ARR uplift .
Cash generation supports reinvestment: Strong TTM CFO and Adjusted EBITDA provide dry powder for sales/marketing and selective M&A; active pipeline exists though not expected to close by year-end .
Setup into FY26: Management targets outperformance vs FY25 each remaining quarter and sees a less-pronounced Q2 dip; sequential EBITDA growth is possible, providing potential positive estimate revisions if delivered .

Research Solutions, Inc. (RSSS)·Q1 2026 Earnings Summary