Research Solutions Inc (RSSS) (Q4 2026) Earnings Call Highlights: Record Gross Margins and ...

Negative Points

• Total revenue for fiscal 2026 declined 1.6% to $48.3 million, as transaction revenue fell 8.7%.

• Transaction revenue decreased 6.7% year-over-year in Q4, reflecting ongoing pressure on document delivery.

• B2C ARR declined by approximately $380,000 for the full year, and the segment is expected to remain flat amid competition.

• Net income for Q4 dropped to $666,000 from $2.4 million, and adjusted EBITDA decreased to $1.4 million from $1.6 million.

• Cash flow from operations for fiscal 2026 fell to $5.3 million from $7 million, due to timing of working capital payments.

• Total active customer count decreased to 1,323 from 1,338 a year ago, indicating challenges in customer acquisition or retention.

• The company expects continued low single-digit decline in transactions revenue for FY27, with no top-line growth guidance.

• Stock price is significantly undervalued, and management is evaluating options like buybacks but has no immediate acquisition plans.

Q & A Highlights

Q: The AI-related ARR number is the first time you've broken that out. How much of that is genuinely incremental customer spend versus repricing and rebundling of existing subscriptions at renewal? And can you comment on attach rate with FY26 renewals? A: Roy W. Olivier, Interim CEO: That's a net ARR growth number for AI-related products, which could be an upsell or a new sale. We haven't done the math on the split and haven't disclosed it. We will disclose an AI-related revenue number going forward, but I don't think we'll split it between upsell and new. That $800,000 compares to near zero a year ago, so the MCP and AI products are starting to generate traction, especially against net ARR growth for the year of about $1.8 million to $1.9 million.

Q: How are you pricing the AI products? Is it per seat, or is there a usage component? A: Roy W. Olivier, Interim CEO: We run some pricing models around usage, but typically the price put in front of the customer is either seats or an enterprise arrangement with usage caps, above which they have to buy additional usage.

Q: For Site MCP and Article Galaxy MCP, what keeps a researcher from paying for either Site or Article Galaxy? Is MCP a pull-through channel driving transaction orders? A: Roy W. Olivier, Interim CEO: Today, to run MCP you have to have the corresponding product an Article Galaxy license to run MCP for AG, and a Site license to run MCP for Site. However, we are experimenting with new models where that won't necessarily be required. On the AG side it's hard to separate the two; on the Site side it would be easier, and we're looking at that.

Q: For the MCP product, which has primarily been an upsell from current customers, how is usage tracking versus traditional products? Do you see a drop-off in traditional usage? A: Josh Nicholson, Chief Strategy Officer: On Site MCP, users are moving over to MCP assistant usage is declining while MCP is skyrocketing. We have over 18 million AI reads and the growth continues, ticking up about a million reads in the last week alone. We're seeing better retention and more usage through MCP. For Article Galaxy, we've been more conservative on rollout and it's still pretty early, but we're tracking article purchases and usage across platform versus MCP. Everything is plain language, which facilitates use of both core differentiators where users are starting to live.

Q: Can you talk more about the gateway products, the economics on both the supply and demand side, and how traction looks? A: Josh Nicholson, Chief Strategy Officer: It's pretty early, but there's very large demand. Publishers are trying to figure out how their content exists in the world of AI, and we're trying to help bring content into AI just as hosting platforms brought content online. We provide subscription-based access to their subscribers, so we get value to our product which we charge for, and they get value to their subscribers plus usage data. This will evolve over time and ultimately serve a variety of mechanisms and paths for AI licensing. There hasn't been much traction across anyone in the space yet, but there is demand and good interest from publishers exploring this with us.

Q: On the pipeline for AI products, last quarter you provided over $1 million. Is there any more detail you can provide on what that pipeline looks like today? A: Roy W. Olivier, Interim CEO: It's well over that today, but I don't have an exact number.

Q: What drove the fourth-quarter revenue decline, and how are the platform and transaction businesses trending? A: Dave Kutil, CFO: Total Q4 revenue was $12.1 million versus $12.4 million a year ago, as increased platform revenue was more than offset by lower transaction revenue. Platform subscription revenue was $5.3 million versus $5.2 million, driven by B2B platform ARR growth from new logos and upsells/cross-sells, partially offset by a decline in B2C ARR. Transaction revenue was approximately $6.8 million, down 6.7% year over year a meaningful improvement from the 11% decline in Q3 and consistent with the stabilization trend we discussed last quarter.

Q: Can you walk through ARR, deployments, and gross margin for the quarter? A: Dave Kutil, CFO: We ended the quarter with $22.5 million in annual recurring revenue, up 7.8% year over year, comprising approximately $16.2 million in B2B ARR and approximately $6.3 million in normalized ARR from Site B2C subscribers. B2B ARR grew $2 million, or 14.1%, and included $800,000 of AI-related ARR, which grew 125% sequentially from Q3. We added 29 net new platform deployments in the quarter, bringing total deployments to 1,276 at year-end. Gross margin was 53%, a 200 basis point improvement and a new quarterly record, driven by the mix shift toward platforms, which now represent 43% of total revenue.

Q: What were the full-year fiscal 2026 results and the cash position? A: Dave Kutil, CFO: Total revenue was approximately $48.3 million versus $49.1 million in fiscal 2025. Platform subscription revenue rose roughly 10% to $20.8 million, with 105 net new deployments and a 4.7% increase in average sales price. We added approximately $2 million of net B2B ARR, while normalized B2C ARR declined about $380,000. Transactions revenue was $27.5 million, down 8.7%. Gross margin was 51.9%, up 260 basis points, driving a 3.6% increase in gross profit dollars to $25.1 million. Net income was $2.8 million, or $0.08 per diluted share, versus $1.3 million, or $0.04, last year. Adjusted EBITDA was $5.8 million versus $5.3 million. Cash flow from operations was approximately $5.3 million versus $7 million, reflecting working capital timing rather than a change in earnings power. Cash and equivalents were $12.6 million at June 30, 2026, with no outstanding borrowings under our revolver.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .