Research Solutions' Q4 2025 Earnings Call: Contradictions Emerge in AI Integration, Sales & Marketing Investments, and Revenue Growth Strategies

The above is the analysis of the conflicting points in this earnings call

Date of Call: Unknown

Financials Results

• Revenue: $49.1M, up 10% YOY
• EPS: $0.04 per diluted share, versus ($0.13) prior year
• Gross Margin: 49.3%, up 530 basis points YOY

Guidance:

• Expect B2B ARR momentum to continue; B2C growth pressured near term by competition but positive long term.
• Transaction revenue likely down in 1H FY26; potential flattening or low growth return in 2H.
• Continue investing in Sales & Marketing and Product/Tech; aim to reduce G&A.
• FY26 adjusted EBITDA margin targeted >10%, likely in the 10–15% range.
• Gross margin expected to be 50%+ for FY26.
• Seasonality: Q1 slight sequential dip vs Q4 but above prior-year Q1; Q2 weakest; strongest in back half.
• Strong cash flow expected to cover SITE earn-out; capacity for M&A using cash/senior debt.
• Management targets another record year.

Business Commentary:

• Revenue and ARR Growth:
• Research Solutions reported total revenue of $12.4 billion for Q4 2025, up 40% year-over-year, with platform subscription revenue increasing by 21% to approximately $5.2 billion.

• The growth was driven by strong performance in both B2C and B2B platform revenue, including new deployments and upsells.

• AI Product Growth:

• The company's AI-based products grew at almost 4x the pace of its legacy products, contributing significantly to overall growth.

• This was attributed to the increasing demand for AI solutions in research workflows and Research Solutions' strategy to expand its AI capabilities.

• Cost Optimization and Margin Expansion:

• The company achieved a gross margin of 51% in Q4 2025, with the platform business contributing over 70% of total gross profit.

• This was achieved through operational efficiencies, strategic sourcing, and increased scale, leading to improved profitability.

• Strategic Focus and Market Positioning:

• Research Solutions aims to become a significant player in the AI-native world by providing infrastructure for reliable, compliant access to research content.
• The company is focusing on its headless strategy, enabling integration with large language models and enhancing its competitive position in the industry.

Sentiment Analysis:

• ARR reached $20.9M, up 20% YOY; platform revenue +21% YOY. Q4 gross margin 51% (first time above 50%); platform GM 88.5%. Adjusted EBITDA record: $1.6M in Q4 (13% margin) and $5.3M for FY25. Net income turned positive: $1.3M FY25 vs loss prior year. Cash $12.2M, no borrowings. Management: 'on track to have another record year,' with AI products growing ~4x legacy and more >$100K ARR deals. Notes transaction headwinds but expects potential stabilization in 2H FY26.

Q&A:

• Question from Jacob Steffen (Lake Street): What drove the nice sequential uptick in ASP—cross-sell/upsells or larger new deals?
  Response: Larger deal sizes from CRO-led sales execution and training; ASP recovering post-Resolute churn; API-type deals also contributing.

• Question from Jacob Steffen (Lake Street): How does Resolute fit your API-first strategy for LLMs?
  Response: Resolute’s strong APIs and 13 curated databases plug into the headless approach, enabling sticky, high-value data integrations.

• Question from Jacob Steffen (Lake Street): Are others pursuing the same API/LLM strategy?
  Response: Some publishers (e.g., Wiley) license AI access, but the company is uniquely positioned as a pan-publisher rights/compliance bridge.

• Question from Richard Baldry (ROTH Capital): Platform COGS fell despite revenue growth—are further optimizations possible?
  Response: Savings from prepaid cloud commitments, stable labor, and cheaper AI usage support high margins; further gains likely but at a slower pace.

• Question from Richard Baldry (ROTH Capital): Can AI-related growth at ~4x non-AI persist over the next 1–2 years?
  Response: Similar B2B momentum expected with usage-based API pricing driving larger deals; B2C growth to moderate as base/competition rise.

• Question from Richard Baldry (ROTH Capital): What’s driving the strength in >$100K deals?
  Response: Value-based pricing and improved sales process under the new CRO, plus revamped academic pricing, are yielding larger contracts.

• Question from Derek Greenberg (Maxim Group): Discuss the LibKey partnership opportunity.
  Response: LibKey integration enhances link resolution/access in academia, expanding reach to thousands of libraries and accelerating academic growth.

• Question from Derek Greenberg (Maxim Group): Update on SITE–Article Galaxy cross-sell penetration?
  Response: Still low-to-mid single digits; most SITE wins were new logos, though cross-sell deals tend to be sizable.

• Question from Derek Greenberg (Maxim Group): Margin outlook for FY26 and opex vs revenue?
  Response: Maintain EBITDA margin >10% (target 10–15%) with gross margin >50%; invest in S&M/Product; model transactions down 1H; back half strongest.