Q3 2026 Research Solutions Inc Earnings Call Transcript
Key Points
- Platform subscription revenue increased 7% year-over-year to $5.2 million, driven by 15 net new platform deployments and expansion within existing customers.
- Gross margin improved 220 basis points to 51.7%, reflecting a favorable revenue mix shift toward higher-margin platform business.
- Net income surged 297% to $860,000, or $0.03 per diluted share, compared to $216,000 in the prior year quarter.
- Adjusted EBITDA rose 14% to $1.6 million, with trailing 12-month adjusted EBITDA margin expanding 220 basis points to 12.3%.
- New AI-based MCP products launched, already generating a sales pipeline exceeding $1 million and improving B2C conversion and retention.
- B2C customer acquisition cost reduced by 24% while maintaining flat monthly recurring revenue, with improved lifetime value.
- Strong new bookings with 61 new or upsell logos representing $961,000 in ARR, including sizable academic and corporate deals.
- Operating expenses decreased to $5.2 million from $5.7 million, demonstrating disciplined cost management and operating leverage.
- Cash and cash equivalents remained stable at $12.1 million with no outstanding borrowings, providing financial flexibility.
- Integration of Resolute's curated databases into MCPs expands unique data offerings and creates additional revenue opportunities.
- Total revenue declined to $12.1 million from $12.7 million year-over-year, missing top-line growth expectations.
- B2B churn remained a significant drag, with 46 logos representing $398,000 in ARR lost, including one large account at $130,000.
- Transaction revenue fell to $7.0 million from $7.8 million, due to a previously discussed churned account and volume reductions from larger customers.
- B2C ARR declined 7.5% year-over-year to $6.4 million, though showing signs of improvement.
- Cash flow from operations dropped to $1.0 million from $2.9 million, reflecting timing of customer billings and strategic prepays.
- Total active transaction customer count decreased to 1,346 from 1,380 in the prior year period.
- Platform gross margin slightly decreased to 86.4% from 87.4% due to hosting and infrastructure investments.
- M&A opportunities are challenging due to the company's low valuation multiple (2.7x-3.4x EV/revenue) versus seller expectations.
- B2C business faces seasonal slowdown as universities let out for summer, potentially impacting Q4 results.
- Churn issues are not expected to be fully resolved in a single quarter, requiring ongoing reorganization and process improvements.
Good afternoon, everyone, and thank you for participating in today's conference call to discuss Research Solutions Financial and Operating Results for its Fiscal 2026 third quarter ended March 31, 2026. As a reminder, this conference is being recorded. I'd like to now turn the conference over to your host, John Beisler, Investor Relations.
Thank you, operator. Good afternoon, everyone. Thank you for joining us today for Research Solutions third quarter fiscal year 2026 earnings call. On the call today are Roy W. Olivier, President, Chairman, and Chief Executive Officer; and Dave Kutil, Chief Financial Officer.
After the market closed this afternoon, the company issued a press release announcing its results for the third quarter of fiscal 2026. The release is available on the company's website, researchsolutions.com. Before Roy and Dave begin their prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and made under the Private Securities
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