Research Solutions, Inc. (NASDAQ: RSSS), a leading AI-powered research workflow platform, has released its financial results for the fiscal second quarter ended December 31, 2024. Despite reporting a net loss, the company demonstrated significant revenue growth, driven by its expanding platform offerings and robust annual recurring revenue (ARR).

1. Fiscal Second Quarter Highlights

Research Solutions reported total revenue of $11.9 million, marking a 15.5% increase from $10.3 million in the same quarter of the previous year. The company’s performance was bolstered by the following key metrics:

Platform Revenue: Increased by 47% to $4.6 million, representing 39% of total revenue, up from 30% in the prior-year quarter.

Annual Recurring Revenue (ARR): Rose 23% to $19.1 million, with approximately $12.7 million coming from B2B recurring revenue and $6.4 million from B2C recurring revenue.

Gross Profit: Increased by 30% year-over-year, with total gross margin improving by 540 basis points to 48.9%.

However, the company reported a net loss of $2.0 million, or $0.07 per share, compared to a net loss of $54,000 in the prior-year quarter. This loss was attributed in part to a $2.4 million charge related to increasing the projected contingent earnout liability for its acquisition of Scite.

Adjusted EBITDA Shows Improvement

The company’s Adjusted EBITDA for the quarter was $963,000, compared to $318,000 in the year-ago period, reflecting a 202.4% increase. On a trailing twelve-month basis, Research Solutions reported an Adjusted EBITDA of $4.6 million, equating to a 9.5% margin. This improvement indicates the company's ability to enhance operational efficiency despite the financial challenges.

2. Operational Performance

During the quarter, Research Solutions achieved several operational milestones:

The company recorded 61 net new B2B platform deployments, its best organic performance for a quarter to date.

B2C recurring revenue saw a nearly $1 million sequential increase, further underscoring the company's robust growth in both business-to-business and business-to-consumer segments.

Roy W. Olivier, President and CEO of Research Solutions, commented, "Our second quarter results benefited from the continued recognition of the advantages and savings our products offer within the research process. The conclusion of the election cycle removed some near-term economic uncertainty, allowing us to focus on growth."

3. Challenges and Strategic Focus

Despite the positive revenue growth, Research Solutions is not without challenges. The increase in operational expenses, which rose to $5.7 million from $4.9 million in the same period last year, was largely due to higher sales and marketing costs and technology development expenses. Olivier noted that the increased expenses included a full quarter of Scite costs, which had previously only accounted for one month in the prior year.

The company continues to navigate the complexities of integrating Scite and enhancing its product offerings to further capitalize on market opportunities.

4. Conference Call and Future Outlook

Research Solutions will host a conference call today at 5:00 p.m. ET to discuss these results in detail. Investors and analysts are encouraged to join as Olivier and CFO Bill Nurthen provide insights into the company’s strategic direction and answer questions.

For those interested, the conference call can be accessed by dialing 1-203-518-9848 with the Conference ID: RESEARCH. A replay will be available until March 13, 2025, by dialing 1-412-317-6671 and using the replay ID 11157678.

5. Conclusion

Research Solutions, Inc. has showcased impressive revenue growth in its fiscal second quarter, despite facing increased losses. With strong momentum in its platform revenue and ARR, the company is well-positioned to address its financial challenges and continue enhancing its offerings in the evolving research landscape. Investors will be keenly watching how the company manages its operational costs and integrates recent acquisitions in the coming quarters.

Original press release