Research Solutions(RSSS) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $11.9 million, a 15.5$4.6 million, driven by net increase in Platform deployments and contributions from Scite [13] - Annual recurring revenue (ARR) reached $19.1 million, up 23$1.5 million [14] - Gross margin for Q2 was 48.9%, a 540-basis-point improvement over the prior year [17] - Net loss for the quarter was $2 million or$0.07 per share, compared to a net loss of $54,000 in the prior year [21] Business Line Data and Key Metrics Changes - B2B ARR was$12.7 million, while normalized ARR associated with Scite's B2C subscribers was approximately $6.4 million [14] - Transaction revenue for Q2 was$7.3 million, a 1.7% increase from the prior year [16] - The Platforms business recorded a gross margin of 86.5%, a 210-basis-point increase compared to the prior year [18] Market Data and Key Metrics Changes - The total active customer count for the quarter was 1,384, compared to 1,398 in the same period a year ago [16] - B2C experienced a slowdown at the end of the quarter due to the holiday break, impacting new signups [10] Company Strategy and Development Direction - The company reorganized its sales team into corporate-focused and academic-focused teams, resulting in strong performance in both segments [8] - Continued focus on improving customer acquisition costs (CAC) and CAC-to-LTV ratios while investing in sales and marketing [35][27] - Emphasis on enhancing product offerings, particularly in integrating AI into existing platforms [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the organic growth in the Platforms business and expects acceleration in bookings in Q4 and FY 2026's Q1 [35][26] - The company anticipates that the upcoming quarters will show improved cash flow results as they enter their strongest seasonal period [25] Other Important Information - Adjusted EBITDA for the quarter was $963,000, compared to$318,000 in the year-ago quarter [23] - The company experienced a strong quarter of cash generation, with cash and cash equivalents at 7.7 million as of December 31, 2024 [25] Q&A Session Summary Question: Can you help us understand new logo wins versus cross-sells in the 1.5 million of incremental ARR? - Management indicated that the quarter was driven primarily by new logo sales, with some success in cross-selling Scite into existing Article Galaxy customers [50][52] Question: What is the expected impact of seasonal trends on B2C performance? - Management noted that B2C typically performs well in fiscal Q2 and Q3, with a slowdown expected in mid-December to mid-January [54][56] Question: How have AI costs trended over time? - AI costs have halved since joining Research Solutions, with ongoing evaluations of new models for ROI [58][60] Question: What is the competitive advantage regarding exclusive content access? - Management emphasized that exclusive access to content, combined with a focus on specialized workflows, is a key differentiator in the AI space [64][68] Question: Can you elaborate on the 75% growth for Scite? - The 75% growth was attributed to a mix of new sales and cross-sells, with a significant emphasis on new sales following the integration of Scite into the company [78][80]