"Net incremental ARR growth in the quarter was approximately $1.5 million and we had 61 net B2B Platform deployments." - Bill Nurthen
Research Solutions Inc (RSSS) QQ2 2025 Results — Organic ARR Momentum, AI-Vertical Platform Focus, and Path to Profitability
Executive Summary
Research Solutions (RSSS) reported QQ2 2025 results featuring meaningful ARR expansion and a strong rate of Platform deployments, underscoring the company’s progress in monetizing its AI-enabled research workflow platforms. Total revenue rose 15.5% year over year to $11.9 million, with Platform revenue up 47% to $4.6 million and a 39% platform contribution to total revenue. ARR reached $19.1 million, up 23% year over year, driven by a mix shift toward higher-margin Platform deployments and continued Scite/Article Galaxy cross-sell activity. Despite topline progress, GAAP net income declined to a net loss of $1.98 million, and EBITDA was negative at $(1.66) million on a reported basis. Adjusted EBITDA was $0.96 million for the quarter, with trailing-twelve-month EBITDA of approximately $4.6 million, signaling improving cash-generation characteristics even as profitability remains a near-term challenge due to ongoing growth investments and a $2.4 million earn-out provision associated with Scite. Management attributed the ARR strength to a combination of new logo acquisition, a restructured sales organization (corporate vs. academic), and a rebound in academic/B2B activity post-election season. The company signaled continued investments in growth (Sales & Marketing, technology, and product development), with the expectation that Q3-Q4 will be stronger on profitability as growth investments normalize. Management also emphasized a strategic AI focus: vertical, workflow-integrated AI leveraging proprietary content access and rights, capable of plugging into multiple LLMs to improve research outcomes. Near-term guidance remains qualitative, with expectations for sequentially stronger bookings in Q4 and into FY2026 Q1, a normalization of CAC/CAC-to-LTV over time, and continued expansion of both B2B and B2C platforms. Investors should monitor ARR progression, churn and upsell dynamics, platform mix impact on margins, and the evolution of AI-enabled product updates and analytics capabilities.
Key Performance Indicators
Revenue
11.91M
QoQ: -1.08% | YoY:15.52%
Gross Profit
5.51M
46.29% margin
QoQ: -4.35% | YoY:23.00%
Operating Income
92.85K
QoQ: -85.64% | YoY:122.11%
Net Income
-1.98M
QoQ: -396.00% | YoY:-3 592.54%
EPS
-0.07
QoQ: -418.18% | YoY:-3 584.21%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $11.914 million, up 15.5% YoY; QoQ change: -1.08% (Q1 2025 revenue was $12.044 million).
Operating income: $0.0929 million (0.78% operating margin). Prior year: operating loss of $0.4 million.
Net income: -$1.980 million (net margin -16.6%).
EPS: -$0.07 per share; diluted EPS: -$0.07.
Financial Highlights
Revenue and profitability metrics (USD, Q2 2025 vs Q2 2024, QoQ):
- Revenue: $11.914 million, up 15.5% YoY; QoQ change: -1.08% (Q1 2025 revenue was $12.044 million).
- Gross profit: $5.514 million; gross margin 46.3% (GAAP). Platform gross margin: 86.5% (vs prior year quarter +210 bps).
- Operating income: $0.0929 million (0.78% operating margin). Prior year: operating loss of $0.4 million.
- Net income: -$1.980 million (net margin -16.6%).
- EPS: -$0.07 per share; diluted EPS: -$0.07.
- EBITDA: -$1.658 million; EBITDA margin: -14.0%. Adjusted EBITDA: $0.963 million; trailing twelve months EBITDA: $4.6 million (~9.9% margin).
- ARR: $19.1 million at 12/31/2024, up 23% YoY; B2B ARR ~$12.7 million; Scite B2C ARR ~$6.4 million (normalized).
- Net incremental ARR growth: ~$1.5 million in the quarter; 61 net B2B platform deployments (highest organic quarterly deployments to date).
- Active customers: 1,384 (vs 1,398 year-ago).
- Cash flow and liquidity: cash and cash equivalents $7.701 million; CFO $1.028 million; year-to-date CFO $1.9 million; free cash flow $1.023 million; no revolver borrowings outstanding; net cash position of $(7.701) million (net cash).
- Capex and investments: capital expenditures $5.404 million; free cash flow to date ~$1.023 million; stock-based compensation and one-time earn-out-related charges contributed to SG&A and D&A changes.
- Balance sheet indicators: total assets $42.7889 million; goodwill and intangible assets $26.576 million; total liabilities $31.663 million; total stockholders’ equity $11.126 million; retained earnings negative at $(27.620) million; cash-to-equity and cash-to-book-value metrics suggest a balance-sheet-light, cash-generative model with meaningful intangible assets supporting the AI-driven platform strategy.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
11.91M
15.52%
-1.08%
Gross Profit
5.51M
23.00%
-4.35%
Operating Income
92.85K
122.11%
-85.64%
Net Income
-1.98M
-3 592.54%
-396.00%
EPS
-0.07
-3 584.21%
-418.18%
Key Financial Ratios
currentRatio
0.77
grossProfitMargin
46.3%
operatingProfitMargin
0.78%
netProfitMargin
-16.6%
returnOnAssets
-4.63%
returnOnEquity
-17.8%
operatingCashFlowPerShare
$0.03
freeCashFlowPerShare
$0.03
priceToBookRatio
11.35
priceEarningsRatio
-15.94
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ2 2025 earnings call and Q&A:
- ARR and deployments momentum: Roy Olivier highlighted that net new ARR and deployments were strong, with a record level of organic net new deployments driven by a corporate-focused and an academic-focused sales structure. He stated that net ARR growth was $1.5 million for the quarter and that 61 net B2B platform deployments represented the highest organic quarterly performance to date.
- Platform mix and margin leverage: Bill Nurthen noted a 47% increase in Platform revenue to $4.6 million, representing ~39% of total revenue. He emphasized that platform gross margins were 86.5% (up 210 bps YoY) while Transaction margins declined to 25.2% due to lower paid transactions and flat service fees, underscoring a margin mix shift toward higher-margin Platform activities.
- AI strategy and vertical focus: Josh Nicholson articulated a clear AI-focused strategic posture, stressing vertical AI and workflow integration. He highlighted the company’s ability to plug in any large language model (LLM), relying on exclusive content access rights and a workflow-centric approach to achieve better results than generalized AI tools, reinforcing a defensible data-and-process moat.
- Near-term profitability and investments: Roy and Bill discussed ongoing investments in sales & marketing and technology/product development, including a new Chief Revenue Officer, with expectations of higher CAC and CAC-to-LTV in the near term, followed by a re-acceleration in bookings in Q4 and FY2026 Q1. They emphasized that SG&A could drift modestly but that Q3-Q4 are expected to be stronger on profitability as normalization occurs.
- Seasonal and product enhancements: The call noted B2C seasonality dynamics around academic cycles, with expectations of a rebound in Q3 and Q4, and ongoing product updates (UX/CX improvements, AI integrations, instrumentation/analytics) to strengthen ROI visibility for customers.
Net incremental ARR growth in the quarter was approximately $1.5 million and we had 61 net B2B Platform deployments.
— Bill Nurthen
The exclusive access really underpins this advantage. But I think, looking at AI across different industries, and really why I said vertical AI is, going into the workflows of researchers and applying AI in a specialized way that a more generalized tool like ChatGPT is not going to do.
— Josh Nicholson
Forward Guidance
Outlook and assessment: RSSS remains in an investment-led growth phase with a stated expectation of improved profitability in the back half of the year as growth investments normalize. Management signaled the following directional items:
- Booking momentum: Expect acceleration in bookings in Q4 2024 and FY2026 Q1, implying CAC-to-LTV normalization over time as the go-to-market structure matures (corporate vs academic teams) and Scite cross-sell ramps further within Article Galaxy customers.
- Margin trajectory: Near-term gross margins should continue to benefit from the platform mix shift toward higher-margin subscriptions. The company anticipates that SG&A normalization may lag during the growth phase but projects that Q3 and Q4 can be stronger on profitability relative to Q2.
- AI and product roadmap: Ongoing AI-enabled product updates, deeper instrumentation and analytics, and enhanced ROI reporting should improve retention and expansion opportunities, particularly in the Scite and Article Galaxy platforms.
- Financial targets: Management did not provide explicit revenue or EBITDA targets for the next quarters, but the commentary emphasizes a qualitative path to higher profitability driven by incremental Platform deployments, higher gross margins, and a stabilizing CAC dynamic. Investors should monitor quarterly ARR trajectory, churn/upsell dynamics, platform deployment pace, and the evolution of AI-driven product adoption and customer ROI metrics as indicators of progress toward profitability.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
RSSS Focus
46.29%
0.78%
-17.80%
-15.94%
RDVT
69.40%
16.10%
3.00%
33.20%
TRAK
81.70%
24.60%
3.24%
65.11%
CXDO
59.00%
4.15%
1.22%
35.26%
USIO
21.20%
-1.04%
0.48%
135.32%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
RSSS presents a compelling growth story anchored in a high-margin Platform business and a scalable AI-enabled research workflow. The QQ2 2025 results demonstrate solid ARR growth, a favorable platform mix, and meaningful deployment momentum, suggesting the company is progressing toward a more durable profitability profile as growth investments normalize. The near-term profitability outlook hinges on successful execution of the sales reorganization, continued cross-sell expansion, and disciplined investment in marketing and product capabilities. The AI strategy (vertical, workflow-centric, and rights-enabled) offers a defensible moat with potential for outsized returns if Scite and Article Galaxy monetize effectively across enterprise and academic segments. Key catalysts include sustained ARR acceleration, improved churn/upsell metrics, higher-value contract wins, and product enhancements that quantify ROI for customers. Investors should monitor quarterly ARR growth, gross margin progression (platform mix), SG&A normalization, and the evolution of CAC-to-LTV as RSSS scales its go-to-market engine.
Key Investment Factors
Growth Potential
Robust organic ARR growth (Q2 2025 net ARR +$1.5M; ARR reached $19.1M, up 23% YoY) with 61 net B2B platform deployments in the quarter and rising Platform contribution to revenue (39%). The Scite integration provides a defensible AI-enabled workflow moat; cross-sell into Article Galaxy and B2B/B2C expansion offer multi-channel growth potential. Enterprise-focused reorganization (corporate vs academic) should improve pipeline quality and deal flow over time.
Profitability Risk
Near-term profitability pressure from growth investments and a $2.4M earn-out liability related to Scite. Churn and upsell dynamics remain a work in progress, with management noting room for improvement in upsells. CAC and CAC-to-LTV are expected to be temporarily higher as the sales organization scales; reliance on content rights and external AI models introduces execution and competitive risk in the AI space. No debt is present, but the balance sheet contains significant intangible assets and goodwill, which could affect impairment risk in a slower growth environment.
Financial Position
Sound liquidity with $7.7M cash and equivalents and no revolver borrowings. Trailing 12-month CFO about $5.8M (operating cash flow positive in Q2 2025: $1.0M) and free cash flow of approximately $1.0M for the quarter. The company projects continued cash generation into the traditional peak cash-flow period (Q3-Q4). However, near-term profitability is pressured by investments and one-time earn-out-related accounting charges.
SWOT Analysis
Strengths
Strong organic ARR growth and high platform gross margins (Platform gross margin ≈ 86.5%).
Defensible AI-enabled data access and workflow integration with Scite and Article Galaxy.
Underscored by a cash-generative model with no debt and positive operating cash flow.
Growing enterprise and academic customer engagement driven by restructured sales teams.
Weaknesses
GAAP net income negative and near-term profitability pressured by growth investments and one-time earn-out charge.
Churn and upsell remain areas for improvement; near-term CAC pressures due to sales expansion.
Significant intangible assets and goodwill add impairment risk in slower-growth scenarios.
Opportunities
AI-vertical focus and workflow integration position RSSS to outperform generalized AI tools in research settings.
Cross-sell opportunities within Article Galaxy and expansion of Scite into additional enterprise customers.
Continued monetization of exclusive content access and paywalled content for AI-assisted research.
Threats
Intense competition in AI-powered research tools and potential pricing pressure from peers.
Macro uncertainties affecting research budgets and university/enterprise R&D spend.
Regulatory and licensing risks around content rights and data usage in AI workflows.