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Research Solutions, Inc. (RSSS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid top-line and margin expansion: revenue $12.66M (+4.5% YoY) and gross margin 49.5% (+430 bps YoY); adjusted EBITDA hit a record $1.42M with positive net income of $0.22M .
  • Platform momentum continued: platform revenue $4.84M (+22% YoY) at 87.4% gross margin, with ARR crossing $20.35M (+23% YoY); net B2B ARR added $0.736M, a company record, and 43 net new deployments .
  • Versus S&P Global consensus, revenue modestly missed ($12.66M actual vs $13.02M estimate*) and EPS missed ($0.01 GAAP diluted vs $0.03 estimate*), with management emphasizing cash flow strength ($9.85M cash; no revolver borrowings) and sustained ARR-driven margin mix . Values retrieved from S&P Global.
  • Management highlighted AI product differentiation and rights framework (Scite, AI rights add-on) and reaffirmed focus on sales/marketing investments; CFO indicated potential for Q4 adjusted EBITDA similar to Q3, despite seasonal transaction softness .

What Went Well and What Went Wrong

What Went Well

  • ARR crossed $20.35M (+23% YoY), driven by broad-based growth across Scite B2B/B2C and the core Article Galaxy; net B2B ARR growth of $0.736M set a company record .
  • Margin expansion: blended gross margin rose to 49.5% (+430 bps YoY), with platform margin at 87.4% and transactions margin improving to 26.0% .
  • Cash generation and profitability: adjusted EBITDA reached a record $1.42M and net income was $0.22M; cash and equivalents increased to $9.85M, positioning the company for earn-out payments and strategic flexibility .
  • Management quote: “Revenue from our AI-based B2B offerings has grown over 180% in the last year… we continue to outperform when it comes to generating operating cash flow and Adjusted EBITDA” — Roy W. Olivier, CEO .

What Went Wrong

  • Revenue and EPS missed S&P Global consensus (revenue $12.66M vs $13.02M estimate*; EPS $0.01 vs $0.03 estimate*), reflecting lower paid order volume and transaction customer count decline YoY . Values retrieved from S&P Global.
  • Transactions revenue decreased YoY to $7.82M (from $8.16M), with total transaction customers down to 1,380 (from 1,426), signaling potential demand variability and macro sensitivity .
  • Sales/marketing spend rose (+43% YoY), consistent with deliberate investment; while necessary for growth, it pressurized OpEx sequentially and requires continued execution to convert pipeline into ARR .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Total Revenue ($USD)$12,044,482 $11,914,219 $12,661,363
Gross Profit ($USD)$5,765,876 $5,821,093 $6,267,080
Gross Margin %47.9% 48.9% 49.5%
Total Operating Expenses ($USD)$5,119,185 $5,728,246 $5,710,158
Operating Income ($USD)$646,691 $92,847 $556,922
Net Income ($USD)$669,004 $(1,980,234) $216,470
Diluted EPS ($USD)$0.02 $(0.07) $0.01
Adjusted EBITDA ($USD)$1,272,535 $962,956 $1,419,055

Segment Breakdown (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Platform Revenue ($USD)$4,329,645 $4,601,257 $4,839,929
Platform Gross Margin %87.4% 86.5% 87.4%
Transactions Revenue ($USD)$7,714,837 $7,312,962 $7,821,434
Transactions Gross Margin %25.7% 25.2% 26.0%

KPIs (oldest → newest)

KPIQ1 2025Q2 2025Q3 2025
Total ARR ($USD)$17,618,629 $19,109,637 $20,352,000
B2B ARR End-of-Period ($USD)$12,187,834 $12,738,256 $13,474,074
B2C ARR End-of-Period ($USD)$5,430,795 $6,371,381 $6,877,926
Net B2B Deployments (Incremental)8 61 43
ASP End-of-Period ($USD)$11,844 $11,686 $11,892
Transaction Customers (Total)1,390 1,384 1,380
Cash & Equivalents ($USD)$6,924,773 $7,701,155 $9,852,007

Versus Estimates (Q3 2025)

MetricConsensus EstimateActualSurprise
Revenue ($USD)$13,021,170*$12,661,363 $(359,807) / (−2.8%)*
Primary EPS ($USD)$0.03*$0.01 (GAAP diluted) −$0.02*

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ4 2025None“Possibility to attain a Q4 adjusted EBITDA result similar to Q3” Qualitative indication (maintained profitability)
Transactions RevenueQ4 2025NoneExpect seasonal sequential decline vs Q3 Seasonal caution
Rule of 40 (Platform growth + EBITDA margin)TTM/Q3 2025FY23: 25%; FY24: 16% Q3: 34.1%; TTM: 33.1% Improving trajectory
Formal Revenue/EPS GuidanceFY/Q4 2025Not providedNot providedMaintained “no formal guidance” stance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI/technology initiatives (Scite, full‑text search, hallucination mitigation)Emphasis on integrating Scite/AI; adding publishers; TDM/AI rights vision Costs halved for AI models; vertical AI in research workflows; strong pro forma Scite growth New LLMs and Tables mode; model‑agnostic approach; AI rights product adds 8 publishers; differentiation via smart citations Strengthening
Sales & marketing investments / CROBuilding disciplined sales org; new CRO onboarding; standardized training planned SG&A step up; CRO hired; record pipelines; focus on upsell/cross‑sell Investments driving higher ASP/close ratios; 43 net new deployments; record B2B ARR add Improving
Transactions business & seasonalityQ1 growth +3.4%; noted seasonality Q2 +1.7% YoY; seasonally weakest quarter Q3 down 4% YoY; paid order volume lower; expect sequential decline in Q4 Mixed/soft
Macro/budgets (academic/government, tariffs)Longer sales cycles; budget diligence Demand rebound post‑election; record pipelines Academic/government budget cuts seen as opportunity; limited impact to date; corporate tariff pressure unclear Watchlist
M&A and Scite earn‑outIncreased inbound; disciplined criteria; stronger balance sheet Earn‑out to be calculated in May; half cash/half stock over 8 quarters No new deals; evaluating options (including capital uses); P&L expense from PV unwind ($406k) Neutral
Cash flow & balance sheetQ1 cash flow +$0.84M; no debt Q2 cash flow +$1.0M; cash $7.7M Q3 OCF ~$2.9M; cash $9.85M; no revolver borrowings Strengthening

Management Commentary

  • Strategy and milestones: “We are pleased to report ARR above $20 million for the first time… Revenue from our AI-based B2B offerings has grown over 180% in the last year” — Roy W. Olivier, CEO .
  • Profitability path: “On a trailing 12-month basis, our adjusted EBITDA is now $5.1 million, which represents a 10.4% margin… crossing through the 10% adjusted EBITDA margin to be an important milestone” — Bill Nurthen, CFO .
  • AI differentiation: “Smart citations… enable smarter, verifiable knowledge synthesis… eliminating hallucination… It is a core differentiator of Scite and very often how and why we win deals” — Josh Nicholson, CSO .
  • Sales execution focus: “All sales teams are starting to show better results… higher average sales price, improving close ratios… dedicated Academic and Corporate team” — Roy W. Olivier .
  • Rule of 40 ambition: “For the quarter, we’re at 34.1%. And on a trailing 12‑month basis, we’re at 33.1%… look forward to making more progress” — Roy W. Olivier .

Q&A Highlights

  • Growth investments vs profitability: Management willing to increase sales/marketing spend as the sales model becomes more predictable and ROI is demonstrable; aiming to improve Rule of 40 via accelerated ARR growth .
  • Internal AI utilization: Exploring AI to enhance productivity, particularly in R&D/software engineering; goal to materially increase AI‑written code over time .
  • Mix of new logos vs cross‑sell: Q3 skewed to new logos; upsell/cross‑sell improving, with best quarter of the year for Scite cross‑sell into AG customers .
  • B2C seasonality: Early signs of summer softness; conversion rate improvements implemented but unlikely to fully offset seasonal decline .
  • Earn‑out mechanics and P&L impact: No adjustments in Q3; P&L “other income” negative due to PV unwind ($406k) despite positive net income .

Estimates Context

  • Revenue and EPS missed consensus: revenue $12.66M vs $13.02M estimate*; EPS $0.01 (GAAP diluted) vs $0.03 estimate*, with the miss driven by lower paid order volume and fewer transaction customers YoY . Values retrieved from S&P Global.
  • SPGI Primary EPS actual was 0.0242*, reflecting normalization differences vs GAAP diluted EPS $0.01 reported; regardless, below the $0.03 consensus*.
  • Implications: Consensus may reduce near‑term revenue/EPS forecasts for FY Q4 given transaction seasonality commentary, but margin trajectory and ARR trends could support upward revisions to gross margin and adjusted EBITDA forecasts . Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin mix shift intact: Platform revenue growth and >85% platform margins continue to lift blended margins toward/above 50% over time .
  • ARR momentum: Crossing $20.35M ARR with record B2B net adds signals durable subscription growth; watch deployment and churn management to sustain net adds .
  • Cash generation: Q3 OCF ~$2.9M and $9.85M cash provide flexibility for Scite earn‑out and potential capital allocation or M&A, with no revolver borrowings .
  • Near‑term trading: Expect cautious reaction to the revenue/EPS miss vs consensus*, offset by record EBITDA/cash and strong ARR KPIs; Q4 seasonal transaction decline flagged by CFO could temper expectations . Values retrieved from S&P Global.
  • Medium‑term thesis: Vertical AI differentiation (full‑text search, smart citations, AI rights framework) plus a more disciplined sales org under a CRO supports sustained ARR growth and improving Rule of 40 metrics .
  • Watch items: Transaction demand trends (macro/academic budgets, tariffs) and execution on upsell/cross‑sell; earn‑out P&L unwind continues near term .
  • Catalysts: Additional publisher agreements for AI rights, continued Scite B2B wins, and potential capital allocation updates if cash build persists .

Values retrieved from S&P Global.