Q4 2025 Research Solutions Inc Earnings Call
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Good afternoon, everyone, and thank you for participating. In today's conference call, we will discuss Research Solutions' financial and operating results for its fiscal fourth quarter and full year ended June 30, 2025. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stephen Hooser, Investor Relations.
Thank you, David, and good afternoon, everyone. Thank you for joining us today for the Research Solutions fourth quarter and full fiscal year 2025 earnings call.
On the call with me today are Roy, West Virginia, President and Chief Executive Officer; Bill, Northern, Chief Financial Officer; and Josh Nicholson, Chief Strategy Officer.
After the market closed this afternoon, the company issued a press release announcing its results for the fourth quarter and full year 2025. The release is available on the company's website at researchsolutions.com.
Before Roy and Bill began their prepared remarks, I would just like to remind you that some of the statements made during today's call will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to Research Solutions' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial conditions.
Also, on today's call, management will reference certain non-GAAP financial measures, which we believe.
Provide useful information for investors. A reconciliation of those measures to GAAP measures is included in the earnings press release issued this afternoon.
Finally, I would like to remind everyone that this call will be recorded and made available for replay via the company's Investor Relations website.
I would now like to turn the call over to Roy West Virginia. Roy.
Thank you, Stephen.
Good afternoon and welcome. Thanks for joining us.
Overall, we're pleased with the progress of the business in FY25. We set many new records for the company's performance, including $21 million in our revenue. We grew our revenue by 20% in FY25 and remain focused on hitting our $30 million platform ARR target by the end of FY27. This is not guidance, but a BHAG, or Big Hairy Audacious Goal.
Um, our acquisition pipeline is strong, and we have several opportunities that we believe would allow us to hit that goal faster.
To do that, we need to execute well on several fronts.
First, we need to execute from a product perspective in terms of providing unique value delivered at the right time in the customer journey.
Much of this involves the development of our existing products and expanding how AI can help researchers accelerate research in a copyright-compliant way.
Well, we can always improve. We continue to make good progress in this area.
Second, we need to continue to execute in our marketing and sales teams. Marketing has done a great job in building top-of-funnel leads through marketing activities, including digital spend, webinars, white papers, and more.
We see strong results in this area.
As you know, we brought in a new Chief Revenue Officer in November of 2024 and have seen strong B2B sales.
In the second half of the year, we expect that to continue in FY26.
Third, we seek organically and through acquisitions unique value. That can be software tools, content, or a combination of content that we believe are not only unique today, but will remain unique in the AI world. We'll discuss this a bit more later in the call in terms of how we think about our strategy going forward.
SAS company for many years.
We are now in what may turn out to be a period that will drive massive change in the segments we serve due to the impact AI will have on research workflows.
Over the past several years, we have built a great set of software and other research tools to support research.
As we look forward, large LLMs have the potential to drive massive change to research workflows. So, we must pivot our strategy to be where the customer is and deliver unique value at the right time and in the right place in the research workflow.
In short, we will continue to improve software tools for our customers to simplify and accelerate the research process. But we will also need to improve our software APIs and create new AI-based solutions to support larger customers who will standardize on one, LM, but need some unique value and data that we can provide. Our AI-based products are organically growing at almost 4x the pace of our legacy products today.
We expect to see strong tailwinds from AI in the next few quarters. We believe we are uniquely positioned to take advantage of that as we update and expand our products.
Josh Nicholson will provide some context about that updated strategy later in the call.
For now, I'd like to pass the call over to Bill to walk you through our fiscal fourth quarter and full year 2025 financial results in detail.
And then I'll come back with some additional comments, Bill.
Thank you. Roy says, "Good afternoon, everyone."
I will start by first summarizing the fourth quarter results, and then we'll discuss the full fiscal year results.
Please note for comparisons between the fourth quarter of 2025 and the fourth quarter of 2024.
Those comparisons are fully organic.
For fiscal year 2025, the results include 12 months of contribution from the site acquisition, compared to approximately 7 months in fiscal year 2024.
The fourth quarter was another really strong quarter for our business and served as further validation of how our ongoing shift to SAS revenue is translating into expanding margins, profitability, and cash flow.
Total revenue for the fourth quarter of fiscal 2025 was $12.4 million, compared to $12.1 million in the fourth quarter of fiscal 2024.
Our platform subscription revenue increased 21% from the prior year quarter to approximately $5.2 million.
The growth was primarily driven by growth in both B2C and B2B platform revenue.
Including for the latter.
And net increase of platform, deployments, and upsells and cross-sells into existing customers.
As a mix of total revenue, platform revenue accounted for over 40% of the revenue in the quarter, reaching 42% for the first time.
Compared to 35% in the prior year's quarter.
We ended the quarter with $20.9 million in annual recurring revenue (ARR), up 20% year-over-year.
That result included another impressive quarter of B2B ARR growth.
You may recall that in our last quarter's call, I commented that net ARR growth in Q3 was a company-organic record of 736,000.
This quarter was very close to that result as net B2B a r r, a r, r growth was 724,000.
which compares to 407,000 in the prior year quarter.
We also added 38 net new platform deployments.
Over the last quarter, the growth was well balanced between new sales and upsells, and occurred across both Cite and Article Galaxy products.
The total company ARR at quarter-end breaks down as $14.2 million in B2B ARR and approximately $6.7 million in normalized ARR associated with sites and B2C subscribers.
We did experience a modest sequential decline in B-to-C ARR.
At the late spring into summer, it is seasonally a difficult time for that product.
As a result, the net total incremental ARR growth for the quarter was approximately $567,000.
What we see today is a press release for how we define and use annual, recurring revenue, and other non-GAAP items.
Compared to 7.9 million in the prior year quarter.
We started seeing some year-over-year declines in paid transaction order volumes in February of 2025.
And that trend continued through our fourth quarter.
Our total active customer count for the quarter was 1,338 compared to 1,398 in the same period a year ago.
Gross margin for the fourth quarter was 51%, a 450 basis point improvement over the fourth quarter of 2024.
This was the first time in the company's history that blend and gross margin has been in excess of 50% for a quarter.
And platform gross profit contributed over 70% of the total gross profit in the quarter.
The platform business recorded a gross margin of 88.5% compared to 85.3% in the prior year quarter.
This was an unusually high result, and I suspect it could come down some in future quarters, but not materially.
Gross margin in our transaction business was 24.1% compared to 25.4% in the prior year quarter.
The decrease was primarily attributable to lower fixed cost coverage due to the lower revenue base.
I expect transaction gross margins to look more like this quarter's result in future quarters.
And we continue to experience similar year-over-year declines in transaction revenue.
Total operating expenses in the quarter were $5.1 million compared to $5 million in the prior year quarter, as increased sales and marketing expenses and general and administrative expenses were partially offset by lower stock compensation costs.
I will comment that while sales and marketing expenses were up year-over-year, they were down sequentially.
This is due to some seasonality; we have in our approvals that typically produce a sign sequential reduction in sales and marketing expense between Q3 and Q4.
As a result, I expect sales and marketing expense to look more like what we saw in the third quarter of 2025, as we look ahead to future quarters.
Lastly, the Q4 result for General and Administrative expenses did include over $100,000 in severance-related charges that were accrued at year-end.
Other income for the quarter was $1.2 million and was primarily attributable to a favorable adjustment to the final earnout determination for Sight.
Other expenses for the prior year, quarter total $3.5 million, which included a $4.3 million, $3 million charge related to an earnout adjustment in that period for Sight.
Net income for the quarter was $2.4 million, or 7 cents per diluted share, compared to a net loss of $2.8 million, or 9 cents per diluted share, in the prior year quarter.
Adjusted EBITDA for the quarter was $1.6 million, which represented a 13% margin and set a new company quarterly record, compared to $1.4 million in the fourth quarter of last year.
Now, let me turn to our results for the full fiscal year 2025, which was also another record year for the company in many respects.
Total revenue for fiscal 2025 was approximately $49.1 million, a 10% increase from fiscal 2024.
Platform subscription revenue increased 36% to roughly $19 million.
From our perspective, we added over $2.1 million in net B2B ARR for the fiscal year.
And total deployments at the end of the year were 1,171, up 150 for the year.
Net B to C ARR increased just under $1.4 million for the year.
Transaction revenue for fiscal 2025 was $30.1 million, a 2% decrease from the prior year.
The decrease, as previously mentioned, is attributable to the decline in order volumes we experienced in the second half of the fiscal year.
Gross margin for fiscal 2025 was 49.3%, a 530 basis point improvement over fiscal 2024.
The result represents a 23% year-over-year increase in the company's gross profit.
Total operating expenses in fiscal 2025 were $21.7 million compared to $20.4 million in the prior year.
The increase is attributable to higher sales and marketing expenses.
We intentionally invested in sales and marketing expenses in fiscal 2025.
And I believe we are seeing some of that payoff with the recent quarterly performance in that B2B ARR growth.
Other expenses for the year were $1.2 million compared to other expenses of $2.9 million in fiscal 2024.
Both years reflect net adjustments, with net expense adjustments of $1.7 million and $5.1 million, respectively, made related to the site earnout.
Net income for fiscal 2025 is $1.3 million, or 4 cents per diluted share, compared to a net loss of $3.8 million, or 13 cents per diluted share, in the prior year.
Adjusted ibida.
For the year, $5.3 million was a company record compared to $2.2 million in fiscal 2024.
It also represents the first time in the company's history.
That full fiscal year's adjusted, even a margin crossed the 10% threshold.
Before I discuss cash flow in our balance sheet, I would like to take a minute to discuss the final determination of the site earnout.
The final earnout was determined to be $15.4 million.
This was to be paid 50% in cash and 50% in stock over 8 quarters.
However, through an offer to cite shareholders, we increased the cash mixed portion of the earnout payment to approximately 62%.
We made this offer given the confidence we have in our cash flow and the desire to issue fewer shares as part of the overall transaction purchase price.
We made the first payment on the earnout in August, which consisted of approximately $1.3 million in cash and approximately 265,000 shares.
Future cash payments will be approximately $1.2 million each quarter.
And the shares to be issued will change quarterly based on a market calculation of their value prior to the distribution of the shares.
The payments will be made every 3 months and will be completed in May 2027.
Turning to cash flow. It has been very satisfying to see the transformation in cash flow in the business over the past few years.
Our cash flow has continued to outperform our adjusted EA, which I think is a testament to the quality of our earnings and the validity of our SAS Revenue. Mix shift model.
In fiscal 2025, we generated over $7 million in cash flow from operations, which is almost double the result from the last year of approximately $3.6 million.
This cash flow has translated into a nice cache build on our balance sheet.
We remind everyone that we will update when we complete the site acquisition in December 2023.
Our cash balance dropped to $2.7 million.
Now, only 18 months later.
We were able to end fiscal year 2025 with a cash balance of $12.2 million, and there are no outstanding borrowings under our $500,000 revolving line of credit.
As a result of barring any strategic M&A type activities, we expect that we can make the site earnout payments in fiscal year 2026 and still end the year with a higher cash balance than we have today.
As we look ahead, we are enthusiastic about the momentum in our B2B ARR growth and believe that it can continue.
There are some competitive pressures we are experiencing in the B2C space that may affect near-term growth, but we remain positive regarding the long-term prospects for that business, as well as our ability to convert certain groups of B2C users to larger B2B platform sales.
Lastly, transaction revenue growth was challenging in the back half of fiscal 2025.
We expect the first half of fiscal year 2026 to continue to be challenging. However, we are optimistic about a flattening of the declines or even the possibility of a return to low levels of growth as we get into the back half of fiscal 2026.
From an expense standpoint, we will continue to invest in sales and marketing, as well as in technology and product development, while aiming to reduce our overall general and administrative spend.
From an adjusted E, a bit of perspective. I expect to follow the same seasonality as last year, with the first quarter being potentially a slight dip sequentially from this quarter, but a beat to last year's Q1 result.
T2 will likely be our weakest quarter, and then our strongest quarters will be in the back half of the year.
All things considered, we remain on track to have another record year of performance.
Mentioned than ever to execute on M&A opportunities.
I'll now turn the call back over to Roy.
Roy: Thanks, Ben. Yeah, thanks, Bill.
A few additional comments about our FY25 results.
As a reminder, we made several investments during the year.
Some of which are
We invested in a new Chief Revenue Officer who joined in November of 2024 and has overhauled the way we go to market.
These changes have driven positive results in the second half of the year, and we expect to continue to see that in FY 26.
As a result of his efforts, we have signed more large contracts in recent months, including several over $100,000 in ARR. Then we've closed in the company's history.
We've also seen strong results from the new academic focus of the sales team. We formed an early FY2; it's our fastest growing segment.
And generated new bookings equal to the long-standing corporate-focused team.
That said, our business remains over 80 percent focused on our customers.
We made a change in leadership over our transactions business. As previously noted, that business has seen headwinds, but we have some levers we can pull to improve results.
The new theme is aggressively evaluating ways to do that and working with our product management and software engineering teams to implement those improvements.
We have seen some short-term successes in a report more in our Q1 call.
We also made several changes to the software engineering and software development teams over the year.
We believe those changes will accelerate development velocity and provide more high-value features to our customers as we go through FY 26.
We revamped how we identify and pursue acquisition targets.
As a result of the changes we made, we have a large pipeline in place today.
The targets we have are actionable, meaning valuation, expectations seem realistic, and add new workflows or content that we believe will fit well into our customer base.
In addition, we believe our products are a fit for their customer base.
I'm confident we'll be able to move forward with one or more deals in FY 2026. In addition, given our strong cash generation, I believe we can finance those deals primarily through senior debt and cash.
I have a strong bias towards sellers who want to stay with the company and grow the combined business and want stock to do so. However, I expect deal structures will be more weighted toward cash and closed.
We also invested resources and time to create a new source of revenue with the recently announced AI Writes product.
Every customer of ours is concerned about copyright compliance and wants to make sure they have the rights they need when they need them.
The best example of that recently is AI writes.
Our solution allows a customer to know what rights they have in a single click and acquire rights as needed. It enables the customer to use AI, providing a new revenue source to the publishers and adding real value to our product. It's been very well received by customers and our publishing partners, including some of our largest customers.
I've got a few more comments about the future, but right now, I'd like to pass it over to Josh, our Chief Strategy Officer, to walk you through some of the things we're doing to drive growth in this new AI-driven world. Josh.
Thanks, Ryan. Hello, everyone. Um, today I'd like to highlight some of the broader shifts we're seeing across the web with the rise of LLMs and chatbots, and how these changes are creating new challenges as well as opportunities for us. Increasingly more people are performing what the Wall Street Journal called zero-click searches. That is, people are turning to AI as answer engines and getting good enough answers without having to click through to the underlying data, whether that was a news article, a Reddit thread, or in our case, a scientific article.
As Roy and Bill have highlighted, this is manifesting on our side, with Doc Bail, transaction revenue flipping, and publishing partners reporting declines in traditional usage statistics, such as full-text reads and downloads.
Our internal surveys from users point specifically to AI being a reason. People are acquiring the articles in short; AI is shifting demand from article retrieval to structured reasoning. This means the future of research and our products must be task-oriented and database-driven.
Also, increasingly look to be where the customer is, or what we call a headless strategy. We see Cite and Article Galaxy increasingly being used as an API-first platform. Our customers are no longer just logging into a single interface; they are embedding sites directly into their own system's dashboards and even generative AI assistance. This headless strategy is intentional; by decoupling our services from a fixed UI, we enable developers and institutions to pull citation graphs, evidence summaries, and write clear, full-text content directly into the workflows. Already, we have deployed various API-first deals across both products, some of which have been our largest contracts ever for our respective products, Cite and Article Galaxy.
This approach allows us to go where the user is through integrations into internal built tools, third-party products, and to shift our focus from an arms race to an armed supplier.
We have launched an AI TDM rights offering that allows our customers to easily and securely acquire AI writes for articles they have acquired. While many publishers might negotiate these rights directly, it's important for us to display that information for our users and to make it possible to acquire the rights where necessary.
Supposedly tied to this, we are exploring working directly with publishers to enable AI models and agents to discover content and source. AI writes from a single pan publisher resource called an mCP or model context protocol.
We believe such infrastructure is the future of how large language models interact with research articles, presenting a path for AI models to securely query scientific articles, retrieve citations, verify claims, and integrate trustworthy literature directly into their reasoning process. In practice, this means that whether you're a pharmaceutical company building an in-house assistant, an academic using a generic AI your company has licensed, or a publisher enabling AI-driven services, Research Solutions becomes the compliance-safe bridge between proprietary content licensing and reliable AI output.
Taken together, these initiatives mean Research Solutions is no longer just a distributor of articles or a platform for presenting ourselves as the building blocks of scientific AI, the infrastructure that ensures research content is accessible, reliable, and legally cleared for the age of generative AI. I'm excited by our progress as a team, and I think we're uniquely positioned to serve the needs of publishers and researchers in an AI-native world.
Thank you again, and I'll now turn it back to Roy to wrap up.
Hey, thanks for all.
I mentioned in my introductory comments the things we need to execute on in FY 2026.
A few of those things are.
Managing the customer's library of scientific research, including what rights came with those articles.
The ability to easily access rights. The customer needs when they need it.
The site badge, which is like a FICO score or Rotten Tomatoes score for an article, is being evaluated and is unique in the market today.
The site search, which includes searching beyond the paywall for most of the world's content.
This generates better results, is copyright compliant, and actually improves sales of articles for the publisher.
Generally, the large LLMs search abstracts and have near zero behind-the-paywall access.
Because of all of this, the site generates far fewer hallucinations in its results.
We also deliver articles from 2,000 plus publishers. The vast majority of those are delivered in a few seconds.
And we integrate.
Curated data from several sources to improve AI generated output. We have the ability to do that today given
the databases we acquired as part of the resolution.
That is a big part of our headless strategy because it will offer our customers.
Curated databases to include Insight assistant or other AI generated output.
In short, I think we're on the right track in terms of an updated strategy that will position us well in the new world.
We also think the operational improvements and investments mentioned above will enable us to execute that strategy, both organically and through acquisitions.
1 final comment. I did mention in the pre-release of our earnings back in August that we were focused—or that we continue to be focused—on the weighted rule of 40.
We, in FY 255, the calculation was a 34.
In the rule of 40, and as we think about our FY 26, we expect to make continued progress toward the 40 number.
To, as a reminder, the weighted rule of 40 is your ARR growth rate as a percentage times 1.33.
Plus, our adjusted EBA margin as a percentage times 67.
So, with a little more waiting on growth, we continue to lean toward investing in growth to make it to the weighted rule of 40.
After all that, we remain excited about where we are, our position, and where we're going. I'd like to turn the call back over to the operator for questions. Operator?
Absolutely. At this time, if you'd like to ask a question, please press the star and 1 keys on your telephone keypad. Keep in mind, you can remove yourself from the question queue at any time by pressing star and 2.
We'll take our first question from Jacob Steen with Lake Street. Please go ahead. Your line is open.
Hey guys, thanks for taking the questions. Um, maybe just first wondering if you could touch on the, uh, the nice sequential uptick in ASP. Uh, maybe help us kind of think through some of the drivers of this. Was it more cross-sell, upsells, or kind of a larger new deal activity?
Bill, do you want to take that 1?
Yeah, sure. No, we are. I mean, part of what we've seen with the on boarding of the new cro, and some of the, uh, sales trading, uh, that we've been doing is that we are actually getting larger deals. Um, and so I think Roy mentioned, uh, you know, we had um, we we've got a now just recently, a couple hundred thousand dollar deals in. Um, and and these are in the past few months, we've seen some of the larger deals in our in our company system. I'll also say, there was sort of a period where we had some churn from Resolute in the past, uh, which was traditionally more of a larger deal where that, that basically caused a decline in our ASP, and so that has kind of weaned off. And now we're in a, we're at a place where we can sort of build back ASP. And I think it will be a focus as we, um, you know, do additional sales training bring on some better, um, you know, sales people over time and um, you know again continue to see some larger deals. Um,
Also, just as it relates to some of the API type deals that Josh was talking about.
Okay, got it. And to kind of ask 1 question further on on Resolute. Um, obviously, noted some churn issues kind of starting off there, but, um, how are you using the product? How do how do you see the Resolute? Um, you know,
software adapting to your new strategy of being the API provider for LLMs.
Well, resolutions. All always had a strong API; it has not necessarily had a strong UI in their software. So, Resolute works much better in this headless strategy than it works as a product, unless we go in and rewrite big parts of the product, which we have not wanted to do. So, we haven't talked about Resolute in the number of quarters because it's a product we don't focus on. We focus on a heavy investment in Sight and heavy investment in Article Galaxy, which, of course, are driving all of our growth. However, as we develop the central strategy, we talked about being able to plug in the 13c to the workflow.
Uh, we kind of resurrected that product in terms of selling that data to customers. And Josh, you may have a few other comments on that. Go ahead, if you do.
Yeah. I I'd really just emphasize that, you know, there are these 13 highly curated databases kind of coming to us or an API to get and access to the article, to get clinical trials, to get research articles to get, you know, news, articles, all these different things. Um, you know, is a, a big value, add for customers. Um, and so I'm personally excited because it's kind of been right there in front of us for a while. Um, and it's very easy to to execute on the 1 thing. I would also say about the API first deals is that by embedding ourselves, you know, into the infrastructure of some of these large companies. I think those contracts become very sticky. Um, and so, I'm, I'm personally quite excited by the the Resolute databases. Um, really, you know, coming back to life as a, a focus for us.
Okay, um, maybe just one last one, uh, more on the kind of competitive environment in this, in this headless strategy. Are you aware of anybody else that's kind of doing, running the same API strategy to kind of plug in with the larger LLMs?
You know, I think the third largest publisher they are directly, you know, opening up their articles or segments of their articles to llm Providers such as anthropic, um, on their recent earning calls. They talk about, you know, leaning more into Ai and specifically AI licensing deals. And so, I think we're going to start to see this across the ecosystem from Publishers themselves. I think Publishers will have somewhat of a challenge, you know, becoming a pan publisher source for this largely because you know, competitors don't want to give their content to other competitors. Um and so you know this is what we're talking about when we say we're pretty uniquely positioned, is that we work with. You know, virtually all Publishers, we're already driving them revenue. And this is really as Roy and I have said in the past, kind of a shift from dogell to rights Del. Um, and so I, I increasingly see, you know, these bits of Articles or chunks of Articles um and specifically the data from articles being, you know, something that that's valuable that integrates directly into tools. Whether that's a hyper
Scaler, or whether that's an internal, you know? Um,
Uh, licensed LLM at a large corporate or even an academic institution. And so, uh, I think it's an exciting time, and I think there are a lot of people kind of looking at this and trying to say how do we bridge this gap between research articles and AI?
Okay, got it. Very helpful. I appreciate it, guys.
We'll take our next question from Richard Baldry with Roth Capital. Please go ahead; your line is open.
Thanks. Um, ask same question. I asked last quarter for the, the cogs line was actually slightly down on the platform side while revenues, you know, were up pretty good. Can you talk again about sort of the trends there, whether you know, this is sort of getting to Peak optimization? I'm trying to think about it that way. Or is there, you know, further cost improvements that can come on the platform side, even as the Topline scaling,
Bill, do you want to take that?
Yeah, sure. Yeah, some of this is, um,
You know, effectively using our cache. I mean, really where this is coming from is we we we sort of stabilized the labor base there that grows kind of just with like, you know, uh not a lot of additional headcount but just Cost of Living increases things like that. But we really, you know, tried where we could to um, lower or or limit the increase in, um, the hosting cost. And some of what we we've been able to do is take, you know, the cash flow that we've had and apply that to some prepayments, where we prepay some of our space with Amazon web services, and other providers. And as a result, we're actually getting it cheaper over time by prepaying. So,
I'm not sure how much I'm not sure how much we can do that. Going forward to sort of see it decrease, but I think we can do that to the extent that um, you know, it will increase less than at the pace that we're growing to revenue which again is why I think you're seeing some very high numbers on the gross, margin side for a platforms. We also seeing in certain areas AI becoming a cheaper. Uh, so as we grow uh, some of the AI providers we use, get cheaper over time and so that's impacting the number as well.
Okay, then on the AI-related deals, being, you know, Forex to growth rate of non-AI.
You know, do you think that can continue at this pace? Is there sort of eventually the scale of that base gets big enough that it, you know, can't keep up at that sort of delta? How do we think about that headed into the next sort of year or two as a driver?
Yeah, I think we expect to see, uh, similar results in the B2B space as in the B2C space. We don't expect it to grow as much as it did in FY 2025, simply because the base is getting bigger and it is getting more competitive. But Joshua, Bill, I'd invite you to add any comments you might have.
Yeah, I mean, I would just again emphasize.
Uh I I think with this headless strategy, you know, this is internal tools or internal companies using internal Ai and you know, this allows us to price based on like the the usage of this, right? The calls that they're making to our API. So what we're we're seeing is you know as these tools ramp up its less looking at. Here's 100 persons you know seat license versus here's a companywide integration into a tool that they're heavily training on. And so I think that will, you know, command larger check sizes at B2B. Um, and you know, I think as we started to prove that out, those will continue to grow because we're going into, You Know, Places the companies are already investing a lot of money into
Um, that's it.
Great. And last for me, be can we dig a little deeper into the strength and the deals above 100K? Sort of are, are you going after a different type of customer or are you going after with a different value prop? Are they larger? You know, deals per customer and and how are you achieving that, you know, on sort of a similar customer base or
Is it different verticals? How are you getting sort of larger deals out of, you know, what presumably is a similar customer set?
Yeah, there's a few moving parts. Uh, one is the new sales process, and the new CRO has, uh, brought in a number of new people who are not kind of pre-programmed with an expectation of what we should sell a product at.
A big part of the new sales process is spending time qualifying the customer and understanding what their pain points are, what value we can use to address those pain points, and what the economic impact to them will be if we do. The products are being priced accordingly. So I think part of it is, and I think it's probably a big part of it, is sales execution and the way we're selling. Secondarily, we did a wholesale change to the pricing on the academic segment of the business. Not much of that is reflected in FY 255.
But what we did do in FY 25 is experiment with different pricing points. In other words, when we acquired the site, they had a fairly set pricing model for libraries. We sold at that price point, we sold at price points way above that price point, and we kind of played around with pricing in FY 25 until we figured out a new model that we recently implemented. So some of it is just our standard pricing that has changed.
Um, and I guess that would be the two main drivers that I can think of. Uh, Bill, is there anyone more that you can comment on?
Not too much. I do think it's a sales execution thing. Um, and really before we frame a proposal to a customer, we are really trying to understand their pain points and how much value the product is going to deliver for them, and then pricing that value accordingly.
Got it. Thanks, and congrats on a good year.
Thank you.
And as a reminder, if you'd like to ask a question, please press the star and 1 key on your telephone keypad. We'll take our next question from Derek Greenberg with Maxim Group. Please go ahead. Your line is open.
Hi, thanks for taking my questions. Um, the first question I have is just on a recent partnership you guys announced with LibKey and the integration there. I was wondering if you could just talk a little bit more about this partnership and the opportunity there.
Yeah. Is that address? I'll jump in and, Josh, you know some comments. But basically, the academic segment, LibKey, is a big player in the library, providing a product that's called a link resolver. A link resolver, what it basically does is, when you do a search.
And you get an answer to your search in terms of a scientific article. It kind of resolves where you go to, get to the link to obtain that article. And, um, they've been doing that for a number of years. A private company, successful, and we also work with, uh, frankly, three other link resolver companies that we work with for a number of years.
And so, putting together the, uh, third Iron deal. Third Iron is the company that, uh, that owns and created the Link Resolver—I'm sorry, the, um, Lipkey product.
You know, we've run a number of webinars in conjunction with them, which introduce their libraries. And keep in mind that we have academics who are new to us. You know, I don't think we have more than 200 academic customers.
There are, you know, over 10,000 libraries out there that we can sell into. So, we view partnering with Third Iron around LibKey as an opportunity to expand our academic business.
Um, as well as kind of revisiting the partnerships we have with some other providers that provide a product like LibKey to expand into their academic library business.
Josh, you want to add
And kind of efficient way possible. And I think, you know, leveraging our partnership with LibKey is one piece of that.
Okay, got it. Um,
turning to the Cross sell.
Um, between Cite and Article Galaxy, I was wondering if you had any statistics you were willing to provide in terms of, um, what percent of Article Galaxy customers are also customers of Cite. I recall, uh, previously you said this was single digits and you were looking to get to double digits. I was just wondering how, um, things are progressing on that side.
Yeah, we have not disclosed that number. You know, I can tell you that, and Bill Kirkman, if I'm wrong, a vast majority of the site sales in FY2 are to what we call a new, new customer. In other words, we're not doing business with them. On the Article Galaxy side, we do some cross-sells, and a lot of times, those cross-sells are pretty big from an ARR perspective. But I think if you look at it from a logo perspective, the vast majority of the logos are new, new customers. Bill, anything to correct that?
Yeah, I would still I would still describe it. Excuse me as low to mid single digit penetration on the article. Galaxy customer base.
Okay, thank you. It's helpful. Um, my last question is just on, um,
margins. Uh, we saw some really good Improvement this year. Um, even on margins, growing 5%, uh doubling year-over-year, I was wondering looking towards 26. Um how we see expansion relative to this year in margins. Um and how you expect I guess operating expenses to grow um compared to revenue.
Yeah, I think, you know, part of the question for us is, how much do we? How much do we, uh, invest back into sales and marketing and Tech and product development? As I said, we're trying to
Uh, basically, uh, try to keep investing in the sort of those two top lines on our expense base: sales, marketing, tech, and product development. And while cutting sales—excuse me, cutting G&A—things like stock comp where we can. Um, but I will say, so in other words, I think we'll definitely cross the 10% margin threshold for the year. We want to stay above that. I think next year, um, we can be above where we are today, but we may temper that a bit. In other words, I think we could run, you know, 15% plus, but I don't think we're going to do that. I think we'll invest back into it and so, you know, we'll.
What kind of be somewhere in between that kind of 10% to 15% range? And, uh, that's where I expect we'll kind of end up, uh, from an even margin. I think, you know, I think gross margin will continue to expand. You know, that'll be 50% plus, um, you know, for the year next year, um, and you know, expense base.
tough to say, I I mean, I I you know again, I think it could we we'll kind of pull levers where we need to pull levers but um,
You know, again, it could be a 10% growth on the sort of SG&A type bucket.
Um,
But again, I think I'll have more updates on the Q1 call as we see our Q1 results come in and as we sort of further define and chart out how we're going to, you know, manage expenses and invest in growth for the rest of the year. I do think, um, you know, transactions are a key element of this and I am, you know, on our own internal models for it. As I said, we're modeling those down at least for the first half of the year.
Um, and so if you are sort of building models and such I would do similar from that standpoint, um until we start to see that turn the other way, but but given that I still think we'll be, you know, kind of at the levels. I talked about um as we look ahead to 26,
Okay, great. Thank you. It's very helpful.
I did get 1 question it did get 1. Question via email. Can we explain the strategy to stem the decline and resumed growth in the transactions business?
Uh, to address that, what I would say is, you know, the current thinking is product improvement to improve conversion percentages.
I think part B of that is understanding what's driving the change. In other words, we're seeing a significant year-over-year increase in monthly average users and weekly average users.
That suggested some of our customers, um, around 10% of our customers are buying fewer documents because they can get a good enough answer from AI. So our current thinking is to improve. We have a massive amount of traffic and insight, and we have a massive amount of traffic and article Galaxy. And so our current thinking is to work to improve.
The conversion rate to also take advantage of the opportunity. Oh, you just bought this article; here are 3 other articles like it. Oh, you just read this article; here are 5 articles that have a supporting statement in them related to the one you acquired or have a contrasting statement in them related to the one that you acquired. Do you want to buy these? So it's really, um, I use the thing. I use the comment internally: we want to be the Amazon of docs; we want to make it super easy. It's not as easy as it could be. Today, we want a suggestive sell. We don't really do that today at all and do some other things. And, as I mentioned, we already took action on one barrier and saw a pretty nice improvement, which, if it were to continue for all 52 weeks—because we look at weekly data.
You know, that would be a high six-figure improvement in revenue to that business. And as you know, that's a pretty significant bit of...
Uh, profitable business for us. So, uh, we've got a number of things in the works. But, um, you know, strategically we focus on SaaS revenue and AI. However, we do have a fairly large team of 60 people that work on the Dock Dell business. The leader in that business now is a guy who's very technologically savvy, and he's gone through every internal process and every customer process that we have with the intent of how do we make this more seamless and more suggestive to drive more sales in that business.
Back to you, operator.
Further questions on the phone line at this time. So I'll turn the program back to you, Roi, for any additional or closing remarks.
Okay, well, thanks everybody for your time, and I look forward to connecting in November to discuss our first quarter fiscal 2026 results. Have a great day!
This does conclude the Research Solutions fiscal and operating results for its fiscal fourth quarter and full year ended June 30, 2025. Thank you for your participation, and you may disconnect at this time.
Thank you.