Q4 2026 Research Solutions Inc Earnings Call

September 9, 2026

Speaker #1: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero, and a member of our team will be happy to help you.

Speaker #1: Please stand by. Your meeting is about to begin. Good afternoon, everyone, and thank you for participating in today's conference call to discuss research solutions, financial and operating results for fiscal fourth quarter and full year.

Operator: Please stand by. Your meeting is about to begin. Good afternoon, everyone, and thank you for participating in today's conference call to discuss Research Solutions' financial and operating results for its fiscal Q4 and full year ended 30 June 2026. As a reminder, this conference is being recorded. I would like to now turn the conference over to your host, John Beisler, Investor Relations.

Speaker #1: Ended June 30th, 2026. As a reminder, this conference is being recorded. I would like to now turn the conference over to your host, John Beisler, Investor Relations.

Speaker #2: Thank you, operator. Good afternoon, everyone, and welcome to the Research Solutions fourth quarter and full fiscal year 2026 earnings call.

John Beisler: Thank you, operator. Good afternoon, everyone, and welcome to the Research Solutions Q4 and full fiscal year 2026 earnings call. On the call today are Roy W. Olivier, Chairman and Chief Executive Officer, Dave Kutil, 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 Q4 of full year fiscal 2026. The release is available on the company's website at researchsolutions.com. Before management begins their prepared remarks, I would like to remind you that some of the statements made today 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.

Speaker #3: call.

Speaker #4: On the call today are Roy W. Olivier, Chairman and Chief Executive Officer, Dave Kutchell, 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 4th quarter of full year fiscal 2026.

Speaker #4: The release is available on the company's website at researchsolutions.com. Before management begins their prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of

Speaker #3: 1995.

Speaker #4: 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 condition.

John Beisler: 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 condition. 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 will be made available for replay via a link on the company's website. I would now like to turn the call over to Roy W. Olivier. Roy?

Speaker #4: 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.

Speaker #4: Finally, I would like to remind everyone that this call will be recorded and it will be made available for replay via a link on the company's website.

Speaker #4: I would now like to turn the call over to Roy Johnson.

Speaker #3: W. Olivier. One. Thank you, John.

Roy W. Olivier: Thank you, John. It was a busy year at Research Solutions in all respects. The corporate and academic sales teams did a nice job growing year-over-year while upgrading our sales process and sales team. We turned over almost 50% of our sales team during the year and have expanded sales headcount going into FY27. We continued to transition to a more structured sales process that has resulted in closing larger deals than we have in the past, raised our average sales price, or ASP, on both products, and resulted in 105 net new deployments for the year. While the new sales teams are doing well, and we feel very good about that continuing in FY27, the upsell and renewal teams continue to need focus. We appointed a new leader to run that team, strengthened and expanded the team, and realigned the structure around customer size and location.

Roy W. Olivier: Thank you, John. It was a busy year at Research Solutions in all respects. The corporate and academic sales teams did a nice job growing year-over-year while upgrading our sales process and sales team. We turned over almost 50% of our sales team during the year and have expanded sales headcount going into FY2027. We continued to transition to a more structured sales process that has resulted in closing larger deals than we have in the past, raised our average sales price, or ASP, on both products, and resulted in 105 net new deployments for the year. While the new sales teams are doing well, and we feel very good about that continuing in FY2027, the upsell and renewal teams continue to need focus. We appointed a new leader to run that team, strengthened and expanded the team, and realigned the structure around customer size and location.

Speaker #5: It was a busy year at Research Solutions in all respects. The corporate and academic sales teams did a nice job growing year over year while upgrading our sales process and sales team.

Speaker #5: We turned over almost 50% of our sales force and sales team during the year, and have expanded sales headcount going into FY27. We continued to transition to a more structured sales process, which has resulted in closing larger deals than we have in the past and raised our average sales price, or ASP.

Speaker #5: on both products and resulted in 105 net new deployments for the year. While the new sales teams are doing well, and we feel very good about that continuing in FY27, the upsell and renewal teams continue to need focus.

Speaker #5: We appointed a new leader to run that team, strengthened and expanded the team, and realigned the structure around customer size and location. We also implemented a tool to do a better job measuring customer health and kicking off automated and manual workflows based on those results.

Roy W. Olivier: We also implemented a tool to do a better job measuring customer health and kicking off automated and manual workflows based on those results. For example, we can kick off an engagement workflow to a specific cohort of users who have not used the software or used what we know are high-value features. We started all this in early FY2026 and saw a nice improvement in renewal rates in Q4 of FY2026. We expect this work to positively impact net ARR growth as we go into and through FY2027. We did report a 14% B2B ARR growth during the year, raising our high gross margin platform revenue from 39% of total revenue last year to over 43% this year, which translated into another year of positive results in terms of operating income, net income, EBITDA, and cash flow.

Speaker #5: For example, we can kick off an engagement workflow to a specific cohort of users who have not used the software or have not used what we know are high-value features.

Speaker #5: We started all this in early FY26 and saw a nice improvement in renewal rates in Q4 of FY26. We expect this work to positively impact net ARR growth as we go into and through FY27.

Speaker #5: We did report 14% B2B ARR growth during the year, raising our high gross margin platform revenue from 39% of total revenue last year to over 43% this year, which translated into another year of positive results in terms of operating income, net income, EBITDA, and cash flow.

Speaker #5: In addition to increased spend in sales, we made some additional investments in product development and software engineering, which helped us release two new key AI products, in addition to increasing development velocity on our core Cite and Article Galaxy products.

Roy W. Olivier: In addition to increased spend in sales, we made some additional investments in product development and software engineering, which helped us release two new key AI products, in addition to increasing development velocity on our core Scite and Article Galaxy products. In addition, we made several internal changes to improve productivity and output, including using AI to help us write and test code. All these improvements drove a large increase in development productivity. In fact, in the third quarter of FY2025, we were doing about 50 software updates a month. In June of 2026, we did 200, a 4x improvement. Most importantly, we released two AI products that extend the unique capability of Scite and Article Galaxy to be accessible in ChatGPT, Claude, or Copilot. This is part of our intent to, quote, "be where the researchers are working," end quote, and those products have been well-received by our customers.

Roy W. Olivier: In addition to increased spend in sales, we made some additional investments in product development and software engineering, which helped us release two new key AI products, in addition to increasing development velocity on our core Scite and Article Galaxy products. In addition, we made several internal changes to improve productivity and output, including using AI to help us write and test code. All these improvements drove a large increase in development productivity. In fact, in the Q3 of FY2025, we were doing about 50 software updates a month. In June of 2026, we did 200, a 4x improvement. Most importantly, we released two AI products that extend the unique capability of Scite and Article Galaxy to be accessible in ChatGPT, Claude, or Copilot. This is part of our intent to, quote, be where the researchers are working, end quote, and those products have been well-received by our customers.

Speaker #5: In addition, we made several internal changes to improve productivity and output, including using AI to help us write and test code. All these improvements drove a significant increase in development productivity.

Speaker #5: In fact, in the third quarter of FY25, we were doing about 50 software updates a month. In June of '26, we did 200 a month.

Speaker #5: That's a 4x improvement. Most importantly, we released two AI products that extend the unique capability of Cite and Article Galaxy to be accessible in chatbots.

Speaker #5: ChatGPT, Claude, or Copilot. This is part of our intent to, quote, "be where the researchers are working," end quote. And those products have been well received by our customers.

Speaker #5: As noted in our press release, we did about $800,000 in AI-related bookings in Q4, and we have built a strong pipeline of interest in those products that we expect will close in FY27.

Roy W. Olivier: As noted in our press release, we did about $800,000 in AI-related bookings in Q4, and we have built a strong pipeline of interest in those products that we expect will close in FY2027. I think much of what we did in FY2027 will set us up nicely to grow the business profitably in FY2027. I'd like to pass the call over to Dave to walk you through the fiscal fourth quarter and full year FY2026 financial results in detail, and then I'll discuss our goals in FY2027 and wrap up with some comments and the outlook for the year ahead. Dave?

Roy W. Olivier: As noted in our press release, we did about $800,000 in AI-related bookings in Q4, and we have built a strong pipeline of interest in those products that we expect will close in FY2027. I think much of what we did in FY2027 will set us up nicely to grow the business profitably in FY2027. I'd like to pass the call over to Dave to walk you through the fiscal Q4 and full year FY2026 financial results in detail, and then I'll discuss our goals in FY2027 and wrap up with some comments and the outlook for the year ahead. Dave?

Speaker #5: I think much of what we did in FY26 will set us up nicely to grow the business profitably in FY27. I'd like to pass the call over to Dave to walk you through the fiscal fourth quarter and full year FY26 financial results in detail, and then I'll discuss our goals in FY27 and wrap up with some comments and the outlook for the year ahead.

Speaker #5: Dave?

Speaker #6: Thank you, Roy, and good afternoon, everyone. I'll start my comments with a recap of our fourth quarter, followed by a summary of fiscal 2026.

Dave Kutil: Thank you, Roy, and good afternoon, everyone. I'll start my comments with a recap of our fourth quarter, followed by a summary of fiscal 2026 results. Total revenue for the fourth quarter of fiscal 2026 was $12.1 million, compared to $12.4 million in the fourth quarter of fiscal 2025, as increased platform revenue was more than offset by a decrease in transaction revenue. Our platform subscription revenue was $5.3 million, compared to $5.2 million in the prior year quarter. The growth was driven by an increase in B2B platform ARR due to a mix of new logo generation and upsells and cross-sales into our existing customer base. Partially offset by decline in B2C ARR. We added 29 net new platform deployments in the quarter, bringing total deployments to 1,276 at year-end.

Speaker #6: Total revenue for the fourth quarter of fiscal 2026 was $12.1 million, compared to $12.4 million in the fourth quarter of fiscal 2025, as increased platform revenue was more than offset by a decrease in transaction revenue.

Speaker #6: Our platform subscription revenue was $5.3 million, compared to $5.2 million in the prior year quarter. The growth was driven by an increase in B2B platform ARR due to a mix of new logo generation and upsells and cross-sells into our existing customers.

Speaker #6: customer base, partially offset by a decline in B2C ARR. We added 29 net new platform deployments in the quarter, bringing total deployments to 1,276 at year end.

Dave Kutil: We ended the quarter with $22.5 million in annual recurring revenue, up 7.8% year-over-year, which breaks down as approximately $16.2 million in B2B ARR and approximately $6.3 million in normalized ARR associated with Scite's B2C subscribers. B2B ARR grew $2 million or 14.1% versus the year ago period, and included AI-related ARR of $800,000, which grew 125% sequentially from Q3 of fiscal 2026. Please see today's press release for how we define and use annual recurring revenue and other non-GAAP terms. Transaction revenue for Q4 was approximately $6.8 million, compared to $7.3 million in the prior year quarter, a decline of approximately 6.7%. That result represents a meaningful improvement from the 11% year-over-year decline we reported in Q3 and is consistent with the stabilization trend we discussed on last quarter's call.

Speaker #6: We ended the quarter with $22.5 million in annual recurring revenue, up 7.8% year over year. This breaks down as approximately $6.2 million in B2B ARR and approximately $6.3 million in normalized ARR associated with sites' B2C subscribers.

Speaker #6: B2B ARR grew $2 million, or 14.1%, versus the year-ago period and included AI-related ARR of $800,000, which grew 125% sequentially from the third quarter of fiscal '26.

Speaker #6: Please see today's press release for how we define and use annual recurring revenue and other non-GAAP terms. Transaction revenue for the fourth quarter was approximately $6.8 million compared to $7.3 million in the prior quarter, a decline of approximately 6.7%.

Speaker #6: That result represents a meaningful improvement from the 11% year-over-year decline we reported in the third quarter and is consistent with the stabilization trend we discussed on last quarter's call.

Speaker #6: Our total active customer count for the quarter was 1,323, compared to 1,338 in the same period a year ago. Gross margin for the fourth quarter was 53%, a 200 basis point improvement over the fourth quarter of 2025 and a new quarterly record for the company.

Dave Kutil: Our total active customer count for the quarter was 1,323, compared to 1,338 in the same period a year ago. Gross margin for Q4 was 53%, a 200 basis point improvement over Q4 of 2025 and a new quarterly record for the company. The increase was due to the ongoing revenue mix shift towards our higher margin platforms business, which now represents 43% of our total revenue. The platform business recorded gross margin of 87.3%, compared to an all-time high of 88.5% in the prior year quarter, but still well within our target range of mid 80% gross margin. Gross margin in our transactions business was 26%, compared to 24.1% in our prior year quarter. The increase was primarily attributable to improved margins on our copyright content, reflecting favorable publisher mix and pricing, partially offset by lower service fee margins.

Speaker #6: The increase was due to the ongoing revenue mix shift towards our higher margin platforms business, which now represents 43% of our total revenue. The platforms business recorded a gross margin of 87.3%, compared to an all-time high of 88.5% in the prior year quarter, but still well within our target range of mid-80% gross margin.

Speaker #6: Gross margin in our Transactions business was 26% compared to 24.1% in our prior-year quarter. The increase was primarily attributable to improved margins on our copyright content, reflecting favorable publisher mix and pricing, partially offset by lower service fee margins.

Speaker #6: Total operating expenses in the quarter were $5.6 million compared to $5.1 million in the prior year quarter, as increased sales and marketing expenses and upfront investments in AI were partially offset by lower general and administrative costs compared to the fourth quarter of fiscal 2025.

Dave Kutil: Total operating expenses in the quarter were $5.6 million, compared to $5.1 million in the prior year quarter, as increased sales and marketing expenses and upfront investments in AI were partially offset by lower general and administrative costs compared to Q4 of fiscal 2025. Other expense for the quarter was $135,000, compared to income of $1.2 million in the prior year quarter. The prior year result was primarily attributable to a favorable adjustment to the final earn-out determination for Scite in Q4 of fiscal 2025. As a reminder, as of 2 August, we have completed five quarters of earn-out payments, with three additional payments remaining in fiscal 2027. Net income for the quarter was $666,000, or $0.02 per diluted share, compared to $2.4 million or $0.09 per diluted share in the prior year quarter.

Speaker #6: Other expense for the quarter was $135,000, compared to income of $1.2 million in the prior year quarter. The prior year result was primarily attributable to a favorable adjustment to the final earnout determination for Cite in the fourth quarter of fiscal 2025.

Speaker #6: As a reminder, as of August 2nd, we have completed five quarters of earnout payments, with three additional payments remaining in fiscal 2027. Net income for the quarter was $666,000, or $0.02 per diluted share, compared to $2.4 million, or $0.09 per diluted share, in the prior-year quarter.

Speaker #6: Adjusted EBITDA for the quarter was $1.4 million, compared to $1.6 million for the fourth quarter of last year. Now, let me turn to the full year fiscal 2026 results.

Dave Kutil: Adjusted EBITDA for the quarter was $1.4 million, compared to $1.6 million for Q4 of last year. Now let me turn to the full year fiscal 2026 results. Total revenue for fiscal 2026 was approximately $48.3 million, compared to $49.1 million in fiscal 2025. Platform subscription revenue increased roughly 10% to $20.8 million. Total deployments at year-end were 1,276, a net increase of 105 deployments from the end of fiscal 2025, and our average sales price increased 4.7% due to the upselling efforts mentioned earlier. From an ARR perspective, we added approximately $2 million of net B2B ARR during the fiscal year, while normalized B2C ARR declined by approximately $380,000 for the full year.

Speaker #6: Total revenue for fiscal 2026 was approximately $48.3 million, compared to $49.1 million in fiscal 2025. Platform subscription revenue increased roughly 10% to $20.8 million.

Speaker #6: Total deployments at year-end were 1,276, a net increase of 105 deployments from the end of fiscal 2025. Our average sales price increased 4.7% due to the upselling efforts mentioned earlier.

Speaker #6: From an ARR perspective, we added approximately $2 million of net B2B ARR during the fiscal year, while normalized B2C ARR declined by approximately $380,000 for the full year.

Dave Kutil: Transactions revenue for fiscal 2026 was $27.5 million, compared to $30.1 million in the prior year, a decline of approximately 8.7%. Transaction purchases from new customers were more than offset by lower volumes from a small number of large customers and the transactions-related benefits offered within our platform subscriptions. As I noted earlier, the year-over-year trend improved as we exited the fiscal year. Gross margin for fiscal 2026 was 51.9%, a 260 basis point improvement over fiscal 2025. The increase is primarily related to our continued revenue shift towards our higher margin platform business, and it drove a 3.6% increase in gross profit dollars to $25.1 million, despite the lower revenue base. Total operating expenses in fiscal 2026 were $21.5 million, compared to $21.7 million in the prior year.

Speaker #6: Transaction revenue for fiscal 2026 was $27.5 million compared to $30.1 million in the prior year, a decline of approximately 8.5%. Transaction purchases from new customers were more than offset by lower volumes from a small number of large customers.

Speaker #6: ...and the transactions-related benefits offered within our platform subscriptions. As I noted earlier, the year-over-year trend improved as we exited the fiscal year. Gross margin for fiscal 2026 was 51.9%, a 260-basis-point improvement over fiscal '25.

Speaker #6: This increase is primarily related to our continued revenue shift towards our higher-margin platform business, and it drove a 3.6% increase in gross profit dollars to $25.1 million, despite the lower revenue base.

Speaker #6: Total operating expenses in fiscal 2026 were $21.5 million, compared to $21.7 million in the prior year. Lower general and administrative costs and stock compensation expense were partially offset by higher sales and marketing expenses and product development costs.

Dave Kutil: Lower general and administrative and stock compensation expense were partially offset by higher sales and marketing expenses and product development costs. Other expense for the year was $724,000 and $1.2 million in fiscal 2025. Last year included $1.7 million to reflect the adjustments made to Scite earn-out finalization. Net income for fiscal 2026 was $2.8 million, or $0.08 per diluted share, compared to $1.3 million or $0.04 per diluted share in the prior year. Adjusted EBITDA for the year was $5.8 million, compared to $5.3 million in fiscal 2025. Turning to cash flow. Cash flow from operations for Q4 was approximately $1.8 million, compared to $2.3 million in the prior year quarter. For the full year, we generated approximately $5.3 million in cash flow from operations, compared to approximately $7 million in fiscal 2025.

Speaker #6: Other expense for the year was $724,000 and $1.2 million in fiscal 2025. Last year included $1.7 million to reflect the adjustments made to the site earnout finalization.

Speaker #6: Net income for fiscal 2026 was $2.8 million, or $0.08 per diluted share, compared to $1.3 million, or $0.04 per diluted share, in the prior year.

Speaker #6: Adjusted EBITDA for the year was $5.8 million, compared to $5.3 million in fiscal 2025. Turning to cash flow, cash flow from operations for the fourth quarter was approximately $1.8 million, compared to $2.3 million in the prior year quarter.

Speaker #6: For the full year, we generated approximately $5.3 million in cash flow from operations, compared to approximately $7.0 million in fiscal 2025. As we discussed on last quarter's call, the year-over-year decline primarily reflects the timing of working capital payments, rather than a change in the underlying earnings power of the business or the collectability of our receivables.

Dave Kutil: As we discussed on last quarter's call, the year-over-year decline primarily reflects the timing of working capital payments rather than a change in the underlying earnings power of the business or the collectibility of our receivables. Turning to our balance sheet, cash and cash equivalents as of 30 June 2026, were $12.6 million, compared to $12.2 million on 30 June 2025. The end of the fiscal year was a higher cash balance than a year ago, even after funding four quarters of Scite earn-out payments, consistent with the expectation that we laid out on last year's Q4 call. There were no outstanding borrowings under our revolving line of credit. With a growing cash position and no debts, our current balance sheet provides the flexibility to complete the remaining Scite earn-out payments in fiscal 2027, while remaining opportunistic in regard to strategic alternatives.

Speaker #6: Turning to our balance sheet, cash and cash equivalents as of June 30, 2026, were $12.6 million, compared to $12.2 million on June 30, 2025.

Speaker #6: We ended the fiscal year with a higher cash balance than a year ago, even after funding four quarters of site earnout payments, consistent with the expectation that we laid out on last year's fourth quarter call.

Speaker #6: There were no outstanding borrowings under our revolving line of credit. With a growing cash position and no debt, our current balance sheet provides the flexibility to complete the remaining site earnout payments in fiscal 2027, while remaining opportunistic with regard to strategic alternatives.

Speaker #6: As we look forward to fiscal 2027, we expect continued platform subscription growth, improving retention, and further stabilization in our transaction business. Paired with disciplined expense management, we believe that we are also positioned to deliver another year of adjusted EBITDA growth and strong cash generation.

Dave Kutil: As we look forward to fiscal 2027, we expect continued platform subscription growth, improving retention, and further stabilization in our transactions business. Paired with disciplined expense management, we believe that we are also positioned to deliver another year of adjusted EBITDA growth and strong cash generation. I will now turn the call over to Josh to talk about our products. Josh?

Speaker #6: I'll now turn the call over to Josh to talk about our products. Josh?

Speaker #7: Yeah, thanks, Dave, and hello, everyone. I missed the last call as my wife and I welcomed our daughter to the world—really one of the best things ever—but I'm happy to be back with you guys today.

Josh Nicholson: Yeah. Thanks, Dave, and hello, everyone. I missed the last call, as my wife and I welcomed our daughter to the world. Really one of the best things ever, but I am happy to be back with you guys today. Today, I want to cover three things: what is AI actually doing to our business, what we shipped in response, and why we think we are on the right side of this shift. First, the impact of AI on the business, because I know it continues to be the question on everyone's mind and the question we get a lot. Our answer is that AI is already reshaping how research gets read, and we can see it directly in our own data. Since we launched the Article Galaxy and Scite MCP connectors in February, AI agents have performed more than 16 million scholarly reads through Scite.

Speaker #7: So today, I want to cover three things: what AI is actually doing to our business, what we shipped in response, and why we think we are on the right side of the shift.

Speaker #7: First, the impact of AI on the business, because I know it continues to be the question on everyone's mind, and the question we get a lot.

Speaker #7: Our answer is that AI is already reshaping how research gets done, and we can see it directly in our own data. Since we launched the Article Galaxy and Cite MCP connectors in February, AI agents have performed more than 16 million searches.

Speaker #7: Scholarly reads through Cite — two details in that data matter for how you think about research solutions. One, in June, four months after launch, school calls from AI agents overtook the number of queries in our own Cite Assistant interface.

Josh Nicholson: Two details in that data matter for how you think about Research Solutions. One, in June, 4 months after launch, tool calls from AI agents overtook the number of queries in our own Scite Assistant interface. Usage didn't shrink, it moved. Researchers are still asking the same questions. They are increasingly asking them inside Claude, ChatGPT, and Copilot instead of inside a browser tab, and more corporate and academic customers are taking licenses with these tools. Our job is to recognize our differentiators, leverage them, and be where the users are and where we are. Scite and Article Galaxy connectors are in the official connector directories of all three of these platforms: Copilot, ChatGPT, and Claude. Article Galaxy is the only Document Delivery tool with a connector that integrates directly into LLM.

Speaker #7: Usage didn’t shrink, it moved. Researchers are still asking the same questions; they’re increasingly asking them inside Claude, ChatGPT, and Copilot instead of inside a browser tab.

Speaker #7: And more corporate and academic customers are taking licenses with these tools. Our job is to recognize our differentiators, leverage them, and be where the users are and where we are.

Speaker #7: Cite and Article Galaxy connectors are in the official connector directories of all three of these platforms: Copilot, ChatGPT, and Claude. Article Galaxy is the only DocDel tool with a connector that integrates directly into LLMs.

Speaker #7: Cite is one of the very few scientific article search connectors, and it adds capability that platforms themselves do not have and other search tools do not have either.

Josh Nicholson: Scite is one of the very few scientific article search connectors, and it adds capability that platforms themselves do not have and other search tools do not have either. It can tell you whether a claim has been supported or contradicted by later research because we have classified over 1.6 billion citation statements from the full text of the literature. It can also search inside paywalled full-text through our publisher agreement. The second point, roughly 43% of what AI agents reach for sits behind a paywall. That is the unique value that AI and Research Solutions can deliver together. An agent finds a paper in Scite, and about 4 times in 10 it cannot read the full text. Article Galaxy is a compliant, rights-cleared way to get it. 20 years of publisher relationships and rights settlement do not get disrupted by a language model.

Speaker #7: It can tell you whether a claim has been supported or contradicted by later research, because we have classified over 1.6 billion citation statements from the full text of the literature.

Speaker #7: It can also search inside paywalled full text through our publisher agreements. The second point: roughly 43% of what AI agents reach for sits behind a paywall.

Speaker #7: That is the unique value that AI and Research Solutions can deliver together. An agent finds a paper in Cite, and about four times in ten, it cannot read the full text.

Speaker #7: Article Galaxy is the compliant, rights-cleared way to get it. Twenty years of publisher relationships and rights settlement do not get disrupted by a language model.

Speaker #7: They become the thing that, like, the language model needs. So the honest answer on AI is this: legacy per-article volume is under pressure, and Dave walked you through the transaction numbers. But the same force that pressures document delivery is creating demand for verified search verification and rights-cleared access, and that demand is landing on our recurring platform business.

Josh Nicholson: It becomes a thing that the language model needs. The honest answer on AI is this: legacy per article volume is under pressure, and Dave walked you through the transaction numbers. But the same force that pressures Document Delivery is creating demand for verified search, verification, and rights-cleared access, and that demand is landing on our recurring platform business. Second, I want to talk about what we shipped. In fiscal 2026, we put three major things into production. The gateway, MCP access to Scite and Article Galaxy with admin controls, purchasing and ordering, and coverage that now extends beyond papers to patents, grants, clinical trials, and drug and device data. The meter, metered billing on agent usage, Pro and Teams plans on Scite, and pooled usage across an organization so that agentic access is something we price for rather than give away.

Speaker #7: Second, I want to talk about what we shipped in fiscal 2026. We put three major things into production: the Gateway, MCP access to Cite and Article Galaxy with admin controls.

Speaker #7: Purchasing and ordering, and coverage that now extends beyond papers to patents, grants, clinical trials, and drug and device data. The meter—metered billing on agent usage.

Speaker #7: Pro and Teams plans are on the site, and pooled usage across an organization means that agentic access is something we price for, rather than give away.

Speaker #7: Today, roughly three-quarters of MCP usage comes from paid plans, not free ones. And then self-serve and API Console launched in August. So a developer, or a pharma data science team, or an agent can get started ASAP.

Josh Nicholson: Today, roughly three-quarters of MCP usage comes from paid plans, not free ones. Self-serve and API console launched in August, so a developer or a pharma data science team or an agent can get started ASAP. Third, why is this working commercially? MCP is behaving as an expansion engine. The MCP deals that we closed this year were almost entirely upsells to existing Scite customers and on average, adding agentic access roughly doubled the contract. The first Article Galaxy MCP deals landed as new logos. The large pipeline ROI continues to grow, and the mix is shifting towards larger corporate deals. That shows up in deal size. The average value of new opportunities we create each quarter has nearly doubled over the past 2 years, with the sharpest step-up in the 2 quarters since the MCP launch.

Speaker #7: Third, why is this working commercially? MCP is behaving as an expansion engine. The MCP deals that we closed this year were almost entirely upsells to existing sites.

Speaker #7: Customers, and on average, adding agentic access roughly doubled the contract. The first article, Galaxy MCP deals, landed as new logos. A large pipeline, Roy, continues to grow, and the mix is shifting towards larger corporate deals.

Speaker #7: That shows up in deal size. The average value of new opportunities increased each quarter has nearly doubled over the past two years, with the sharpest step up in the two quarters since the MCP launched.

Speaker #7: It also shows up in retention. Customers who adopt MCP retain at far higher rates than those who do not. The part of the retention fix and the AI strategy are the same work.

Josh Nicholson: It also shows up in retention. Customers who adopt MCP retain at far higher rates than those who do not. The part of the retention fix and the AI strategy are the same work. Get customers using agentic access early, and they stay. The last piece is the supply side. We launched a Publisher MCP Gateway that makes a publisher's content discoverable to AI agents while keeping paywalled full-text protected, and that gives the publisher a clean read on what AI demand for their catalog looks like. Around 40 publishers are indexed, and the first 2 gateway agreements are signed. Every publisher that joins makes the corporate product more valuable, and every corporate customer makes the gateway more valuable to publishers. To close, the way research is distributed has shifted twice, from print to online, and now from online to AI.

Speaker #7: Customers are using agentic access early, and they stay. The last piece is the supply side. We launched a publisher MCP gateway that makes a publisher's content discoverable to AI agents while keeping paywalled full text protected.

Speaker #7: And that gives the publisher a clean read on what AI demand for their catalog looks like. Around 40 publishers are indexed, and the first two gateway agreements are signed.

Speaker #7: Every publisher that joins makes the corporate product more valuable, and every corporate customer makes the gateway more valuable to publishers. To close, the way research is distributed has shifted twice—from print to online, and now from online to AI.

Speaker #7: Each time, a new layer formed between the content and the reader, and that layer captured the growth. We built the layer this year—it's live, it's metered, and it's at the base of what we sell.

Josh Nicholson: Each time, a new layer formed between the content and the reader, and that layer captured the growth. We built the layer this year. It's live, it's metered, and it's in the base of what we sell. Fiscal 2027 is about scaling it. Back to you, Wright.

Speaker #7: Fiscal 2027 is about scaling it. Back to you, Roy.

Speaker #5: Thanks, Josh. I think Josh and Dave did a great job framing our results and what we've done to lay the groundwork for the future.

Roy W. Olivier: Thanks, Josh. I think Josh and Dave did a great job framing our results and what we've done to lay the groundwork for the future. I want to close covering a few items. First, let's talk about how I think about FY27. It will continue to be a year of change in our industry as we continue to see mass adoption of AI. We have deep vertical market expertise in research, where being 100% correct is required. I think of us as filling the gap between what an LLM can do and what a research-intensive organization expects. What is changing is how researchers start their research journey and what tools they use daily. What is not changing is that the business is driven by rights management and the costs to do research.

Speaker #5: I want to close by covering a few items. First, let's talk about how I think about FY27. It will continue to be a year of change in our industry as we continue to see massive adoption of AI.

Speaker #5: We have deep vertical market expertise and research, where being 100% correct is required. I think of us as filling the gap between what an LLM can do and what a research-intensive organization expects.

Speaker #5: What is changing is how researchers start their research journey and what tools they use daily. What is not changing is that the business is driven by rights management and the cost to do research.

Speaker #5: What we have always done, we will continue to do—produce tools that researchers can use where they are working, in a copyright-compliant and cost-efficient way.

Roy W. Olivier: What we have always done, we will continue to do: produce tools that researchers can use where they are working in a copyright compliant and cost-efficient way. Managing entitlements, company IP, rights, billing, and reporting, along with access to almost 160 million journal articles from 1,800 publishers and societies, is what is required in enterprise research. Scite's access to behind the paywall information, the unique Scite badge that shows the quality of the article a researcher is looking at, and all the supporting business intelligence to help publishers sell AI rights to researchers based on usage data to improve the LLM experience exponentially for both the enterprise and the publisher. When you add that to the fact that we have multi-year customer relationships with over 1,000 enterprises around the world, we believe we are well-positioned to be part of the AI growth story going forward.

Speaker #5: Managing entitlements, company IP rights, billing and reporting, along with access to almost 160 million journal articles from 1,800 publishers and societies, is what is required in enterprise research.

Speaker #5: Cite's access to behind-the-paywall information, the unique Cite badge that shows the quality of the article a researcher is looking at, and all the supporting business intelligence to help publishers sell AI rights to researchers based on usage data, help improve the LLM experience exponentially for both the enterprise and the publisher.

Speaker #5: When you add that to the fact that we have multi-year customer relationships with over 1,000 enterprises around the world, we believe we're well positioned to be part of the AI growth story going forward.

Speaker #5: So, what does that mean for FY27 results? While we do not give guidance, I expect to see strong corporate and academic B2B sales in FY27 based on our larger and more experienced sales teams and new AI solutions.

Roy W. Olivier: What does that mean for FY27 results? While we do not give guidance, I expect to see strong corporate and academic B2B sales in FY27 based on our larger and more experienced sales teams and new AI solutions. We have seen, and we expect to continue to see, improved renewal and upsells based on a larger and more focused team, better tools monitoring leading indicators earlier in the ownership cycle, and AI tools that when installed, directly translate to higher renewal rates. As noted in our press release and above, we have seen a large increase in AI-related product sales and have a strong pipeline going into FY27. I do believe it will be a strong year in that regard. I expect B2C to continue to be a challenging environment as increased competition chases the same individual researcher.

Speaker #5: We have seen, and we expect to continue to see, improved renewals and upsells based on a larger and more focused team, better tools, monitoring leading indicators earlier in the ownership cycle, and AI tools that, when installed, directly translate to higher renewal rates.

Speaker #5: As noted in our press release and above, we've seen a large increase in AI-related product sales and have a strong pipeline going into FY27.

Speaker #5: I do believe it'll be a strong year in that regard. I expect B2C to continue to be a challenging environment, as increased competition chases the same individual researcher.

Speaker #5: I do think our unique value works here as well, but we are typically serving academic researchers in this segment who are very cost sensitive.

Roy W. Olivier: I do think our unique value works here as well, but we are typically serving academic researchers in this segment that are very cost sensitive. What we are losing to, quote, try something else, end quote, we are gaining in higher retention, higher monthly payments using MCP with their LLM of choice. Our ASP lifetime value and renewal rates in this segment are going up. The challenge will be to drive any material growth that is acceptable at an acceptable customer acquisition cost. In short, I think this is a flat business for the year. I do expect to see continued headwinds on transactions or Document Delivery sales, resulting in a low single-digit year-over-year decline as it is a five-year versus its five-year CAGR of about 1% growth. It is an important business and will continue to be one in the new AI world.

Speaker #5: What we are losing to, quote, "try something else," end quote, we are gaining in higher retention and higher monthly payments using MCP with their LLM of choice.

Speaker #5: Our ASP, lifetime value, and renewal rates in this segment are going up. The challenge would be to drive any material growth that is acceptable at an acceptable customer acquisition cost.

Speaker #5: In short, I think this is a flat business for the year. I do expect to see continued headwinds on transactions or Doctel sales, resulting in a low single-digit year-over-year decline, as it's a five-year break-even period.

Speaker #5: Versus its 5-year CAGR of about 1% growth. It's an important business and will continue to be one in the new AI world. Our tools help customers find.

Roy W. Olivier: Our tools help customers find and acquire what they need in a cost-efficient and copyright compliant way. That is not going to change. While I do not have a top-line growth number to tell you, I can say that I expect the output of all of this to be improved EBITDA and cash flows in FY27. We have almost $13 million in cash, no debt, and are generating cash. While we continue to look at acquisitions that will help us accelerate growth and add unique or strategic capability, we do not have anything lined up in the short term. We do recognize that our stock price is far below where we think it should be and are evaluating all options to increase shareholder value, including stock buybacks or other ways to use the cash to directly impact that. With that, I will now turn the call back over to the operator for Q&A.

Speaker #5: and acquire what they need in a cost-efficient and copyright-compliant way. That's not going to change. While I don't have a top-line growth number to tell you, I can say that I expect the output of all of this to be improved EBITDA and cash flows in FY27.

Speaker #5: We have $13 million in cash, no debt, and we are generating cash. While we continue to look at acquisitions that will help us accelerate growth and add unique or strategic capabilities, we do not have anything lined up in the short term.

Roy W. Olivier: While we continue to look at acquisitions that will help us accelerate growth and add unique or strategic capability, we do not have anything lined up in the short term. We do recognize that our stock price is far below where we think it should be and are evaluating all options to increase shareholder value, including stock buybacks or other ways to use the cash to directly impact that. With that, I will now turn the call back over to the operator for Q&A.

Speaker #5: We do recognize that our stock price is far below where we think it should be and are evaluating all options to increase shareholder value, including stock buybacks or other ways to use the cash to directly impact that.

Speaker #5: With that, I'll now turn the call back over to the operator for Q&A. Operator?

Roy W. Olivier: Operator?

Speaker #8: Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, you may press star 1 on your telephone keypad now.

Operator: Thank you. At this time, we will open the floor for questions. If you would like to ask a question, you may press star one on your telephone keypad now. To remove yourself from queue, you may press star two. Again, that is star one to ask a question. We will take our first question from Jacob Stephan with Lake Street Capital Markets. Please go ahead, your line is open.

Speaker #8: To remove yourself from the queue, you may press star 2. Again, that is star 1 to ask a question. And we'll take our first question from Jacob Stephan with Lake Street Capital Markets.

Speaker #8: Please go ahead, your line is open.

Speaker #5: Hey guys, appreciate you taking the questions and appreciate all the color as well. The AI-related ARR number—that's the first time you guys have provided that.

Jacob Stephan: Hey, guys. Appreciate you taking the questions, and appreciate all the color as well. The AI related ARR number, that is the first time you guys have broken that out. How much of that is genuinely incremental customer spend versus kind of like repricing and rebundling of existing subscriptions at renewal? As a part B, you can comment on attach rate with FY 2026 renewal.

Speaker #4: Breaking that out, how much of that is genuinely incremental customer spend versus kind of like repricing and rebundling of existing?

Speaker #7: Subscriptions at renewal? And maybe if, as a part B, you could kind of comment on attach rate with FY26 renewals.

Speaker #5: Um, that's a net ARR growth number of AI-related products. That could be an upsell, or it could be a new sale. I don't think we did that math, and certainly haven't disclosed it.

Roy W. Olivier: That is a net ARR growth number of AI related products that could be an upsell or could be a new sale. I do not think we did that math and certainly have not disclosed it. We will disclose an AI related revenue number going forward, but I do not think we will split it up across what is upsell and what is new. I guess we could, but I will have to give that some thought. I think we said this, but that is compared to near zero a year ago. The point is the MCP, the AI products are starting to generate traction because that $800,000 number is out of a net ARR growth for the year of, I think, 1.8 or 1.9 million. Dave, correct me if I am wrong.

Speaker #5: We will disclose an AI-related revenue number going forward, but I don't think we'll split it up across what's upsell and what's new. I—I guess we could, but I'll have to give that some thought.

Speaker #5: And that's—I think we said this, but that's up. That's compared to near zero a year ago. So the point is, the MCP, the AI products, are starting to generate traction because that $800,000 number is out of a net ARR growth for the year of, I think, $1.8 or $1.9 million.

Speaker #5: Dave, correct me if I'm wrong. Correct. Yep.

Dave Kutil: Correct. Yep.

Speaker #7: Okay, got it. Maybe if you could comment on pricing a little bit. It seems like a lot of the industry is shifting towards kind of a usage-based model.

Jacob Stephan: Okay. Got it. Maybe if you could comment on pricing a little bit. It seems like a lot of the industry is shifting towards kind of a usage-based model. How are you guys pricing this? Is this more of a per seat basis? Is there some usage component to it? Any color there would be helpful.

Speaker #4: How are you guys pricing this? Is this more of a per-seat basis? Is there some usage component to it? Any color there would be helpful.

Speaker #5: We do run some pricing models around usage, but typically the price that's put in front of the customer is—if it's not seats—it's an intermodal price. But it has caps for usage, and above that, they have to buy additional usage.

Roy W. Olivier: We do run some pricing models around usage, but typically the price that is put in front of the customer is, if it is not seats, it is an enterprise, but it has caps for usage. Above that, they have to buy additional usage.

Speaker #4: Okay, so very similar to kind of how Anthropic and OpenAI are currently working as well. Yes. Maybe just the last one for me, then. Onsite MCP and Article Galaxy MCP.

Jacob Stephan: Okay. So very similar to kind of how Anthropic and OpenAI are currently working as well.

Roy W. Olivier: Yes.

Jacob Stephan: Maybe just last one for me then. On Scite MCP and Article Galaxy MCP, if a researcher gets your information or data inside of one of those two, I guess what keeps them from paying for either Scite or Article Galaxy? Is the MCP kind of a pull-through channel that you guys are using, and driving transaction orders, or is there some kind of intermediary in there?

Speaker #4: So if a researcher gets your information or data inside of one of those two, I guess what keeps them from paying for either Scite or Article Galaxy?

Speaker #4: Is the MCP kind of a pullback through the channel that you guys are using and driving transaction orders, or is there some kind of intermediate intermediary in there?

Speaker #5: Today, if you want to run MCP, you have to have the corresponding product. So, you have to have an AG license to run MCP for AG.

Roy W. Olivier: Today, if you want to run MCP, you have to have the corresponding product. You have to have an Article Galaxy license to run MCP for Article Galaxy. You have to have a Scite license to run MCP for Scite. However, we are experimenting with some new models where that won't necessarily be required. On the Article Galaxy side, it's really hard to separate those two. On the Scite side, it would be easier to separate those two, and we're looking at that.

Speaker #5: You have to have a Scite license to run MCP for Scite. However, we are experimenting with some new models where that won't necessarily be required.

Speaker #5: On the AG side, it's really hard to separate those two. On the Scite side, it would be easier to separate those two, and we're looking at that.

Speaker #5: Okay, very helpful. I'll turn it over. Thanks.

Jacob Stephan: Okay. Very helpful. I'll turn it over. Thanks.

Speaker #8: Thank you. And again, if you'd like to ask a question, you may press star 1 now. Our next question will come from Derek Greenberg with Maxim Group.

Operator: Thank you. Again, if you'd like to ask a question, you may press star one now. Our next question will come from Derek Greenberg with Maxim Group. Please go ahead. Your line is open.

Speaker #8: Please go ahead, your line is open.

Speaker #7: Hi, just continuing off the last questions, I was wondering—for the MCP product you'd mentioned, that's primarily been an upsell from current customers—I was wondering how usage is tracking on MCP versus the traditional.

Derek Greenberg: Hi. Just continuing off the last questions. I was wondering, for the MCP product, you had mentioned that that's primarily been an upsell from current customers. I was wondering, how usage is tracking on MCP versus the traditional products. If you were to break those out separately, do you see a drop off in traditional, versus the MCP? Or how you view that dynamic.

Speaker #7: Products—if you were to break those out separately, do you see a drop-off in traditional versus the MCP? How do you view that dynamic? Oh, you want to take that one, John?

Roy W. Olivier: You want to take that one, Josh?

Speaker #7: Yeah, I discussed this a little bit, and I'll talk maybe first about the site MCP. So, if you look at usage in Assistant or Search compared to MCP, really the users are moving over to MCP, and so Assistant usage is declining and MCP is actually, you know, really skyrocketing.

Josh Nicholson: Yeah. I discussed this a little bit. I will talk maybe first about the Scite MCP. If you look at usage in Assistant or Search compared to MCP, really, the users are moving over to MCP. Assistant usage is declining and MCP is actually really skyrocketing. We have over 18 million AI reads. If you look at the growth of that, which we publish on the Scite, you can see it ticking up, even this last week, 1 million reads over that. We are seeing a lot, and this goes to the thesis going to where the users are. We are seeing better retention and more usage through MCP. For Article Galaxy, we have been a bit more conservative on how we roll that out. We are discussing different ways of deploying that.

Speaker #7: And so, we have over 18 million AI reads, and if you look at the growth of that, which we publish on the site, you can see it ticking up—even this last week, a million reads.

Speaker #7: Over that, and so we're seeing a lot. You know, and this goes to the thesis: going to where the users are. And so we're seeing better retention and more usage.

Speaker #7: You know, through MCP, for Article Galaxy, we've been a bit more conservative on how we roll that out. We are discussing different ways of deploying that.

Speaker #7: We do see usage across the customer base, and that usage is interesting, but I would say still pretty early. What we're tracking there is really, you know, looking at the article purchase, article use, you know, how does that compare—platform versus MCP—and, you know, in both those cases, everything is basically plain language.

Josh Nicholson: We do see usage across the customer base, and that usage is interesting, but I would say still pretty early. What we are tracking there is really looking at the article purchase, article use, how does that compare platform versus MCP. In both those cases, everything is basically plain language, so instead of clicking a button here or there, you are telling the tool to do this or to search that. I think it really facilitates the use of both core differentiators of the product in where users are starting to live, including a lot of our own researchers and developers on the team. More and more of us are daily users of Claude, not just in software development, but really across the org. We ourselves use MCPs from some of our tools such as our sales CRM and analytics and things like that.

Speaker #7: So instead of clicking a button here or there, you're telling the tool to do this or to search that. And so I think it really facilitates the use of both core differentiators of the product in where users are starting to live, including a lot of our own research.

Speaker #7: Researchers and developers on the team—you know, more and more of us are daily users of Claude, not just in software development, but really across the org.

Speaker #7: And we ourselves use MCPs from some of our tools, such as, you know, our sales CRM and analytics and things like that. Okay, got it.

Derek Greenberg: Okay. Got it. I was wondering if you could talk a little bit more about the Gateway product and maybe the economics there, on both the supply and the demand side, and just how the traction looks with that.

Speaker #7: Then I was wondering if you could talk a little bit more about the Gateway product and maybe the economics there, on both the supply and the demand side, and just increase how the traction looks with that.

Speaker #7: Yeah, on that, that's pretty early, but I think there's very large demand. I think what publishers are trying to figure out is, you know, how does their content exist in this world of AI?

Josh Nicholson: Yeah. On that is pretty early, but I think there is very large demand. I think what publishers are trying to figure out is how does their content exist in this world of AI. As I mentioned, we are trying to help bring content into AI, just as hosting platforms brought content online. I think where we will start to see some of that is that we provide subscription-based access to their subscribers. So we get value to our product, which we are charging for. They get value to their subscribers, and they get usage data for that. I think this is going to evolve over time, and I think we ultimately serve a variety of different mechanisms and paths to serve the AI licensing. But I think it is still early, and there has not been much traction across anyone in the space.

Speaker #7: And so, you know, again, as I mentioned, we're trying to help bring content into AI, just as, you know, hosting platforms brought content online.

Speaker #7: I think where we'll start to see some of that is that we provide subscription-based access to their subscribers. So, we get value for our product, which we're charging for, and they get value for their subscribers.

Speaker #7: And they get usage data for that. I think this is going to evolve over time, and I think, you know, we ultimately serve a variety of different kinds of mechanisms and paths to serve the AI.

Speaker #7: AI licensing—but I think, you know, it's still early and, you know, there hasn't been much traction across anyone in this space. But there is demand, and I think we are seeing good interest from some publishers in exploring this with us.

Josh Nicholson: But there is demand, and I think we are seeing good interest from some publishers in exploring this with us.

Speaker #7: Good, got it. And then just one last one from me. I was wondering, for the pipeline you mentioned—it's growing nicely. I was wondering, last quarter you provided it was over $1 million on the AI products.

Derek Greenberg: Good. Got it. Then just last one from me. I was wondering for the pipeline that you mentioned it was growing nicely. But I was wondering, last quarter you provided it was over $1 million on the AI products. I was wondering if there is any more detail you could provide in terms of what that pipeline may look like today.

Speaker #7: I was wondering if there's any more detail you could provide in terms of what that pipeline may look like today.

Speaker #5: It's well over that today, but I don't have an exact number.

Roy W. Olivier: It is well over that today, but I do not have an exact number.

Speaker #7: Yeah, got it. Thanks for taking my questions.

Derek Greenberg: Yeah. Got it. Thanks for taking my questions.

Speaker #8: Thank you. I'm showing no additional questions at this time. I'd like to now turn the call back to Roy Olivier for any additional closing remarks.

Operator: Thank you. I am showing no additional questions at this time. I would like to now turn the call back to Roy Olivier for any additional closing remarks.

Speaker #8: Thank you, and thanks everyone for joining us on our call.

Roy W. Olivier: Thank you, and thanks, everyone, for joining us on our call today. As a reminder, we will be participating at the Lake Street conference tomorrow in New York City. Look forward to speaking to you in November to discuss the Q1 FY27 results. Have a great day.

Speaker #5: call today. As a reminder, we'll be participating at the Lake Street Conference tomorrow in New York City. Look forward to speaking to you in November to discuss the first quarter FY23 results.

Speaker #5: Have a great day. Thank you.

Josh Nicholson: Thank you.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.