Research Solutions (NASDAQ:RSSS) executives described fiscal second-quarter 2026 results as “a bit of a mixed bag,” pointing to year-over-year pressure in transaction revenue and softer trends in the company’s B2C subscription business, while highlighting continued strength in B2B platform growth, improving profitability, and increasing emphasis on API-based integrations tied to AI workflows.
Quarterly performance: stable revenue mix shifts toward platforms
Chief Financial Officer Dave Kutil said total revenue for the second quarter of fiscal 2026 was $11.8 million, compared with $11.9 million in the year-ago period. Platform subscription revenue rose about 14% year-over-year to $5.2 million, driven by a net increase of 47 platform deployments versus the prior year and expansion within the existing customer base through upsells and cross-sells.
ARR growth and B2C headwinds
Kutil said the company ended the quarter with $21.8 million in annual recurring revenue (ARR), up 14% year-over-year, including roughly $15.3 million in B2B ARR and approximately $6.4 million in normalized ARR tied to Scite’s B2C subscribers. Total incremental ARR for the quarter was $560,000, which management called the highest organic second quarter in company history.
However, Kutil and Olivier pointed to “softness” in B2C ARR. Kutil said this was primarily due to a deliberate pullback in certain marketing channels where trial-to-subscriber conversion was lagging, with the company prioritizing cohort quality and retention over short-term B2C growth. Olivier added that competition in B2C has increased, raising the cost and intensity of digital marketing for trial users and contributing to lower conversion rates from trial to paid subscribers compared with a year ago.
During Q&A, management said trial volume was roughly consistent year-over-year, but fewer trial users are converting to subscribers. Kutil also noted that B2C churn was down year-over-year in the quarter and that trend had continued into fiscal Q3, but reiterated that conversion remains the primary issue.
Margins, earnings, and cash flow improve
Kutil reported gross profit of $6.2 million, up 6% year-over-year, with gross margin improving 350 basis points to 52.4%. He attributed the margin expansion to the ongoing mix shift toward higher-margin platform revenue and improving platform margins. Platform revenue represented 44% of quarterly revenue, up from 39% in the prior-year quarter. On a trailing twelve-month basis, blended gross margin was 50.8%.
The platform business posted gross margin of 88.1%, up 160 basis points year-over-year, with Kutil saying labor and hosting costs have been increasing more slowly than platform revenue. Transaction gross margin was 24%, down from 25.2%, which he attributed to lower fixed-cost leverage due to the reduced transaction revenue base and some pressure on copyright-related margins.
Operating expenses were $5.4 million, down from $5.7 million, as lower general and administrative expense and lower stock-based compensation more than offset higher sales and marketing investment. Net income was $547,000, or $0.02 per diluted share, compared with a net loss of $2.0 million, or $0.07 per share, in the prior-year quarter. Kutil noted the year-ago results included a roughly $2.4 million charge tied to the projected contingent earn-out liability for Scite.
Adjusted EBITDA increased 36% year-over-year to $1.3 million from $963,000. Kutil said the company’s trailing twelve-month adjusted EBITDA margin was 11.8%, up 230 basis points from the end of calendar 2024, and added that Q3 and Q4 are historically the strongest quarters for adjusted EBITDA.
On the balance sheet, cash and cash equivalents were $12.3 million at December 31, 2025, compared with $12.2 million at June 30, 2025. Kutil said that figure includes two payments related to the Scite earn-out totaling $2.6 million in cash, along with the issuance of about 487,000 shares. Operating cash flow was $1.4 million, up 35% from $1.0 million in the year-ago quarter, which he said reflected higher profitability and disciplined working capital management. The company ended the quarter with no outstanding borrowings on its revolving line of credit.
Strategy focus: B2B growth, API “infrastructure” sales, and AI integration
Olivier reiterated the company’s emphasis on annual and multi-year B2B agreements as its primary growth driver, contrasting that with B2C’s month-to-month subscriber model. He said the company is making ongoing product and sales-process improvements, including shipping “improvements, both software and new data, like adding patent data,” and that it is working to raise B2C conversion rates.
Chief Strategy Officer Josh Nicholson framed two shifts in the business: increasing API and AI integration (which he described as moving from seat-based subscriptions to “infrastructure” sales), and evolving from document delivery to an “answers and access platform.” Nicholson said customers are increasingly embedding Research Solutions’ capabilities directly into their own systems and AI tools, rather than having researchers switch among multiple products. He said API-driven deals are typically 2x to 5x larger than traditional seat-based sales and are “stickier” because they become embedded in customers’ workflows.
Nicholson also described the company’s position as providing infrastructure that supports accurate citations, copyright compliance, and access to scientific content, including specialized datasets spanning disciplines and regions. He said the company has recently deployed a new API for Article Galaxy and is seeing traction with enterprises using the technology to power internal AI research assistants.
Olivier discussed the company’s approach to AI, including a Scite connector that can generate fully cited answers using peer-reviewed articles and then link to obtaining those articles with entitlement and rights checks. He emphasized rights management capabilities—such as managing entitlements, reprint rights, and AI rights—as well as the ability to search behind paywalls. He said the company aims to deliver its capabilities within the workflows customers use, including those that standardize on an LLM.
Outlook themes: seasonality, transactions decline tied to churn, and evolving pricing
Management said it typically performs better in the second half of the fiscal year due to seasonality in B2B and transactions, and expects that pattern to continue. Olivier said the company expects year-over-year transaction declines to persist in the back half of the year primarily because of the churned large customer, even as transaction activity is expected to be stronger in the second half than the first half on an absolute basis.
In Q&A, executives said the pipeline has grown consistently quarter-over-quarter and year-over-year, with an increasing portion tied to “API deals” that integrate into customer workflows. They also acknowledged that pricing models may need to evolve as usage shifts from seat-based licensing toward API call volumes. Olivier said some customers are making hundreds of thousands of calls per month, which he described as a different framework for pricing and publisher revenue-sharing, an area the company expects to develop over the next 12 months.
On internal operations, Nicholson and Olivier said the company is using AI tools in development and other functions to improve productivity, while Olivier noted that much of the document delivery operation involves work that is harder to replace with AI. Kutil said a focus area includes operating expense rigor, a vendor review and cost savings program, proactive work on churn drivers, and continued working capital management to support funding remaining Scite earn-out obligations from operating cash flow.
To close, management said the company plans to attend the ROTH Capital Partners Conference in Dana Point, California, on March 23.
About Research Solutions (NASDAQ:RSSS)
Research Solutions, Inc (NASDAQ:RSSS) is a provider of software and managed services that streamline access to and management of scientific, technical and medical research. The company’s flagship platform automates the acquisition, licensing and delivery of journal articles, conference proceedings and other pay-walled content, enabling institutions to reduce administrative overhead and control subscription costs.
Key offerings include self-service workflows for document requests, enterprise-grade managed services for high-volume users, and analytics tools that deliver detailed reporting on spend, usage patterns and supplier performance.
