Research Solutions: A Mixed Bag in Q2 2025, EPS Misses Expectations

Research Solutions (NASDAQ: RSSS) reported its fiscal second quarter 2025 earnings on February 13, 2025, with a mixed bag of results. While the company saw significant growth in key metrics, it missed earnings expectations, leaving investors with a bittersweet taste. Let's dive into the details and explore what these results mean for the company and its shareholders.



The Good: Strong Revenue Growth and Market Penetration

Research Solutions reported a 15.5% increase in total revenue to $11.9 million, driven by a 47% rise in platform revenue to $4.6 million. This growth is a testament to the company's successful pivot towards a high-margin, recurring revenue business model. The platform revenue now comprises 39% of total revenue, up from 30% in the prior year, highlighting strong market adoption of their AI-powered research workflow platform.

The company achieved its best organic performance with 61 net new B2B platform deployments and recorded a nearly $1 million sequential increase in B2C recurring revenue. This accelerating market penetration across both customer segments indicates that Research Solutions is well-positioned to capitalize on the growing demand for AI-powered research workflow solutions.



The Bad: EPS Miss and Net Loss

Despite the strong revenue growth, Research Solutions reported a net loss of $2.0 million ($0.07 per share) for the quarter, primarily due to a $2.4 million charge related to Scite's contingent earnout liability. This charge, combined with increased expenses related to Scite's full quarter of activity, contributed to the net loss. The company's earnings per share (EPS) of $-0.07 missed analysts' expectations of $0.02.

While the net loss appears concerning, it's primarily due to a non-cash earnout adjustment for Scite, actually signaling stronger-than-expected performance from this acquisition. The robust cash flow from operations of over $1 million and trailing twelve-month Adjusted EBITDA of $4.6 million (9.5% margin) demonstrate the underlying financial health and scalability of the business model.



The Ugly: Challenges Ahead

Research Solutions faces several challenges as it looks to sustain its growth and improve profitability. The company must continue to innovate and improve its platform to maintain its competitive edge and attract new customers. Additionally, Research Solutions should explore new markets and customer segments to diversify its revenue streams and drive further growth.

Maintaining a strong sales and marketing strategy will be crucial for sustaining the high growth rate in platform deployments. Ensuring high customer satisfaction and minimizing churn will help Research Solutions maintain its existing customer base and drive organic growth.



Conclusion

Research Solutions' fiscal second quarter 2025 earnings report was a mixed bag, with strong revenue growth and market penetration offset by a missed EPS and net loss. While the results may be disappointing for some investors, the underlying financial health and scalability of the business model remain intact. To sustain its growth and improve profitability, Research Solutions must focus on continuous innovation, market expansion, effective sales and marketing efforts, and customer satisfaction. As the company looks to the future, it is well-positioned to capitalize on the growing demand for AI-powered research workflow solutions and continue its transformation into a high-margin, recurring revenue business.