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Research Solutions, Inc. (RSSS)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue grew 15.5% year over year to $11.9M, with Platform revenue up 47% to $4.6M and total gross margin expanding 540 bps to 48.9% .
  • ARR increased 23% to $19.1M ($12.7M B2B; $6.4M B2C), supported by a record 61 net new B2B platform deployments; Adjusted EBITDA rose to $0.963M; cash from operations exceeded $1.0M .
  • Reported net loss was $2.0M (-$0.07 per share), driven by a ~$2.4M provision to increase the contingent earnout liability for Scite; operating income turned positive ($0.093M) despite higher OpEx .
  • Management highlighted a sales reorganization, B2C seasonality normalization, and ongoing margin mix shift; noted an overhang removal as the former Chairman largely exited his position—potential stock reaction catalyst .

What Went Well and What Went Wrong

What Went Well

  • Record deployments and ARR momentum: “The 61 net new B2B platform deployments represent our best organic performance ever recorded in a quarter… nearly $1 million sequential increase in B2C recurring revenue,” said the CEO .
  • Margin expansion and mix shift: Gross margin reached 48.9% (+540 bps YoY) as Platforms contributed more of the mix; Platforms gross margin was 86.5% (+210 bps YoY), edging toward blended >50% .
  • Cash generation and EBITDA: Adjusted EBITDA increased to $0.963M and cash flow from operations topped $1.0M in the quarter; TTM Adjusted EBITDA reached ~$4.6M (~9.5% margin) .

What Went Wrong

  • Non-GAAP/equity-related charge drove GAAP loss: Net loss of $2.0M (-$0.07 EPS) was primarily due to a ~$2.4M increase in the Scite earnout liability following strong growth, overshadowing operating improvement .
  • OpEx step-up: Total operating expenses rose to $5.7M (from $4.9M), reflecting full-quarter Scite costs, increased sales and marketing, technology/product development, and higher D&A .
  • Execution areas to improve: Management cited underperformance in upsells and churn management; mix of new logos vs. upsells skewed new, with churn partly tied to non-controllable factors (M&A, closures) .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$12.13 $12.04 $11.91
Platform Revenue ($USD Millions)$4.28 $4.33 $4.60
Transactions Revenue ($USD Millions)$7.86 $7.71 $7.31
Gross Profit ($USD Millions)$5.64 $5.77 $5.82
Total Gross Margin %46.5% 47.9% 48.9%
Operating Income ($USD Millions)$0.66 $0.65 $0.093
Net Income ($USD Millions)-$2.82 $0.669 -$1.98
Diluted EPS ($USD)-$0.09 $0.02 -$0.07
Adjusted EBITDA ($USD Millions)$1.41 $1.27 $0.963
Cash from Operations ($USD Millions)$2.00 $0.84 $1.87 (six months)
Segment and Margin DetailQ4 2024Q1 2025Q2 2025
Platforms Gross Margin %85.3% 87.4% 86.5%
Transactions Gross Margin %25.4% 25.7% 25.2%
Platform % of Total Revenue35% 36% 39%
Transaction Customers (Total)1,398 1,390 1,384
KPIsQ4 2024Q1 2025Q2 2025
ARR (Total, $USD Millions)$17.42 $17.62 $19.11
B2B ARR End of Period ($USD)$12.06M $12.19M $12.74M
B2C ARR End of Period ($USD)$5.36M $5.43M $6.37M
Net B2B Deployments (End of Period)1,021 1,029 1,090
Net B2B Deployments (Incremental in Period)38 8 61
ASP End of Period ($USD)$11,812 $11,844 $11,686

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Profitability seasonalityFY25 H2 (Q3–Q4)Q2 seasonally lower EBITDA Expect Q3 and Q4 to be strongest quarters for profitability and cash flow Maintained (seasonal ramp)
SG&A/OpEx run-rateFY25 Q3 onwardNormalized run rate ~Q3 FY24 levels SG&A “not expected to shift materially up or down from Q2” (with growth investments) Maintained (steady with selective investment)
Cash flowFY25 H2Positive OCF trend Expect improvement entering strongest seasonal period (Q3–Q4) Raised qualitatively
Scite earnout payoutStarting ~Jul 2025N/AHalf cash/half stock over 8 quarters; payout timing begins ~July New detail
Formal revenue/EPS guidanceFY25NoneNone provided N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesVertical SaaS/AI positioning; major ARR growth; earnout increase due to Scite Deeper AI integration; lowering hosting costs; blended margin ambition >50% AI rights and paywalled access as moats; AI costs halved; model flexibility (OpenAI/Anthropic); Scite usage +250% YoY in Jan Strengthening
Sales execution/reorgARR up strongly; record EBITDA CRO hire; standardized sales process planned; longer B2B cycles Split into corporate vs academic teams; record deployments; continued focus on churn/upsell Improving mix; execution focus
Macro/seasonalityNoted seasonal dynamics in platform/transactions Q2 expected softer; Q3–Q4 stronger; B2C seasonality B2C slowed mid-Dec–Jan; expect ramp later in quarter; transactions weakest in Q2 In-line seasonality
Margin mix shiftGross margin up 710 bps YoY Platforms drove margin; target blended >50% in 12–15 months Platforms at 86.5% GM; blended 48.9%; edging higher Continuing improvement
M&A/BD2 acquisitions closed FY24; pipeline for opportunities Valuations down; inbound opportunities; focus on cross-sell synergy “Looking at many options” but nothing imminent Opportunistic, disciplined
Regulatory/legalN/AN/ANone highlightedStable

Management Commentary

  • CEO: “The 61 net new B2B platform deployments represent our best organic performance ever recorded in a quarter… nearly $1 million sequential increase in B2C recurring revenue.” Also noted former Chairman’s exit removed an overhang .
  • CFO: “Gross margin… a 540 basis point improvement… edging closer to producing 50% plus blended gross margins” and TTM Adjusted EBITDA ~$4.6M (~10% margin) .
  • Chief Strategy Officer (Scite): Emphasized exclusive publisher rights enabling paywalled full-text search and vertical AI applied to research workflows as a durable advantage; AI costs falling while usage surges .

Q&A Highlights

  • ARR composition: ~$1.5M net incremental ARR driven predominantly by new logos; upsells underperforming expectations except cross-selling Scite into Article Galaxy .
  • B2C seasonality and ramp: Temporary slowdown due to academic calendar (mid-Dec to Jan); expected recovery later in quarter .
  • AI costs and models: AI costs roughly halved since joining Research Solutions; model choice optimized for ROI; cost trends expected to keep improving as models advance .
  • Competitive positioning: Differentiation via exclusive full-text rights and workflow depth; vertical AI vs generalized LLMs .
  • Earnout logistics: Scite earnout to be paid half cash/half stock over 8 quarters, starting around July 2025; share count roughly 32.6M .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2025 revenue and EPS was not available due to access limitations at time of request. No estimate-based beat/miss analysis can be provided; results should be interpreted vs prior periods and management commentary [GetEstimates error].

Key Takeaways for Investors

  • Platform-led mix shift is structurally improving margins; blended gross margin at 48.9% with Platforms ~86.5% suggests continued margin expansion potential into 2H .
  • Growth vector clarity: New logos are the primary ARR driver now, with B2C recovering seasonally and academic/corporate team split supporting pipeline conversion .
  • Near-term GAAP optics: Earnout remeasurement can mask operating improvement; watch Adjusted EBITDA and cash from operations (strong at $1.87M YTD) for underlying performance .
  • Strategic moat in AI: Exclusive publisher rights enabling paywalled full-text search plus vertical workflow focus differentiates Scite/AG from generalized AI tools; cost curve favorable .
  • H2 setup: Management expects Q3–Q4 to be strongest for profitability and cash flow, with SG&A stable around Q2 run-rate despite targeted growth investments .
  • Execution watchpoints: Upsell productivity and churn control remain priorities; standardized sales process and CRO leadership are designed to address these .
  • Potential stock catalyst: Former Chairman’s exit reduced perceived overhang; combined with record deployments/ARR growth, this may shift investor sentiment positively .