Research Solutions at East Coast IDEAS: Transforming to SaaS Growth

On Wednesday, 11 June 2025, Research Solutions Inc. (NASDAQ:RSSS) presented at The 15th Annual East Coast IDEAS Conference, unveiling its strategic pivot to a SaaS-based platform. The company highlighted its impressive financial momentum and growth potential but also acknowledged challenges like potential budget cuts in academic libraries. The shift from transactional to SaaS revenue is expected to enhance profitability.

Key Takeaways

• Research Solutions is transitioning to a SaaS platform, aiming to boost revenue from $20 million to $30 million.
• The company reported strong financials, with SaaS revenue growing over 20% organically.
• Gross margins have improved significantly, now approaching 50%.
• A focus on organic growth, strategic acquisitions, and potential stock buybacks is central to their strategy.
• Concerns remain about the impact of budget cuts in academic libraries.

Financial Results

• Revenue Segments:

- SaaS revenue is growing over 20% organically, while transactional revenue remains flat.

• SaaS Metrics:

- Annual Recurring Revenue (ARR) has surpassed $20 million.

- Gross margin is above 85%, with net retention rates around 100%.

• Profitability:

- Adjusted EBITDA stands at $5.1 million, with cash flow from operations at $6.7 million.

• Cash Position:

- The company holds $9.9 million in cash, expected to exceed $10 million by fiscal year-end.

Operational Updates

• Strategic Focus:

- Emphasizing growth in SaaS revenue, with investments in sales and process improvements.

• Customer Base:

- Diverse clientele includes pharmaceutical, biotech, and academic institutions, contributing 50% of revenue.

• Technology and AI:

- AI-driven products like SITE are growing rapidly, enhancing research capabilities.

Future Outlook

• Growth Strategy:

- Plans to fuel organic growth and pursue strategic acquisitions.

• Acquisition Targets:

- Looking at deals in the $1 million to $5 million ARR range.

• Potential Stock Buybacks:

- Considering buybacks due to current stock valuation and cash position.

• Academic Market Concerns:

- Monitoring the impact of potential budget cuts in university libraries.

Q&A Highlights

• Competitive Advantages:

- SITE product offers superior search results and unique features like a "FICO score" for articles.

• Academic vs. Corporate Focus:

- The SITE acquisition has strengthened the company’s academic offerings.

• Market Dynamics:

- Universities are increasingly using Research Solutions’ technology as they adapt to AI.

For a deeper dive into the discussion, readers are encouraged to refer to the full transcript below.

Full transcript - The 15th Annual East Coast IDEAS Conference:

Roy Olivier, CEO, Research Solutions: Our next presenting company is Research Solutions. Trades on the Nasdaq under the symbol RSSS. Company is involved in a very vital component of the research process, helping researchers obtain documents that are necessary, helping them create the research that is necessary in the world. Here to speak on the company is Roy Olivier, company’s CEO. With him, Bill Nerthen, the company’s CFO.

And in the audience, the chief strategy officer, Josh Nicholson. Roy? Thanks, John. Appreciate it. Welcome and I look forward to giving you a little more details on what we do.

I’m gonna skip through some of these quick slides. At a high level, what we do is our mission is to advance with the world’s knowledge by simplifying research. And research, like a lot of segments today, are being overwhelmed with the amount of information being distributed and created. And our tools are really to help streamline that process for research intensive organizations. A little bit about our investment summary.

You know, we we do participate in a large growing market that right now is being driven of course by AI as well as the digitization of research and adoption of the AI enabled workflows. We do play in non cyclical demand markets and we’re typically mission critical especially in larger organizations. We do have a SaaS platform. So part of our revenue is derived from SaaS software revenue. We have strong financial momentum which I’m gonna go through in a couple slides.

We typically have very high renewal rates. Our renewal rates are typically in the low nineties. Our net renewal rates are over a 100%. They’ve run as high as a 110% in the past. And we also have a multi lever growth strategy combining organic growth rates as well as layering in acquisitions that make sense for the business.

When we talk about the transformation, we’ve really transformed the business in the 2017 to ’21 time frame from a business focused on delivery of peer reviewed scientific articles, a low margin but critical business to support research, to a vertical SaaS platform with AI capabilities to provide our research organizations with the ability to search for, analyze, acquire, manage content across the entire research process. That’s really resulted in top line growth growing from five to 15. We’ve increased pretty significantly our recurring revenue or sticky revenue, if you will, from about 6,000,000 in ARR back at the end of twenty one to over 20,000,000 today. That’s increased the mix of our revenue from transactional one time revenue to SaaS revenue from 16% to 37% and has had a very positive impact on our gross margins, profitability, as well as expanding our TAM. As we’ve added products, we’ve added new verticals and of course revenue sources there.

We’ve got a large TAM now and we’re at a single digit market share position in that TAM. We’ve increased our customer count materially and expanded our market focus as I mentioned a minute ago. So at a high level, how we solve problems is we’ve got multiple solutions. The being SITE. SITE is a product that allows you to search for as well as run AI questions on peer reviewed scientific research.

In other words, with Cite because it is focused on peer reviewed scientific research and we are searching things in front of and behind the paywalls of the publishers, we typically can provide better answers and less hallucinations than other products out there today. Once you find those articles, you can acquire them using Article Galaxy. Article Galaxy allows an organization whether it’s a library or a corporation to manage their entitlements, which is basically what do I subscribe to? What have I prepaid to get discounts on called tokens? What of my current library can I reuse?

And then where can I acquire these articles the quickest possible way at the best price? And so Article Galaxy has both transaction as well as subscription revenue tied to it. We then have a product called references which allow you to manage those articles. We store a corporate library of everything anybody in that organization has ever bought. We allow you as a researcher to create individual folders or shared folders to mark up documents, to share those documents with a research team.

And then in the future, we will create or develop a product to help you create whatever it is you’re working on. That could be a peer review, an article you wanna get peer reviewed. That could be a patent submission, a new drug, etcetera. SITE also underpins all of our products as it relates to analysis. That includes being able to do a better search.

That includes being able to tell when you’re looking at a scientific article if it is supported by other research or if other research has contrasted the conclusions of that article. It allows you to throw 50 articles in a folder and ask questions, extract tables and more. So we’ll continue to build out solutions in this workflow primarily to serve what we refer to as research intensive corporations and university libraries. What’s driving all this is volume of research which has been exploding and continues to explode. But an output of that is with a lot of publicly available chat GPT AI kind of tools, you’ll get a lot of hallucinations.

With the site product, we have a verifiable AI built specifically for research which reduces hallucinations. And also as you can see on the right, searches full text, provides citation metrics, provides search and now married with our core products allows you to purchase the articles. Our SaaS platform is basically about saving time and hard dollars. When I say time, I mean that there is scientific research that talks about how long it takes a researcher to find and acquire research. We can dramatically reduce that time when you apply that across hundreds of thousands of researchers.

The savings are material. And we also can help you as a company make better decisions about where should I subscribe, where should I prepay for a discount, where should I buy on a pay per view basis. And also out of my corporate library I’ve accumulated over the last ten years, how many of those things can be reused without me having to buy again? I won’t walk you through these details but they’re available on our PowerPoint deck. As you may have may know, we do have a very large customer base today.

I will tell you that pharmaceutical companies, biotech and medical device are about 50% of our revenue. However, we have installs in about 60 different verticals. Cosmetics, oil and gas, aerospace, automotive, cosmetics, a number of vertical markets. We also started a university business a few years ago and certainly with the acquisition of SITE eighteen months ago, our our academic business has grown pretty dramatically. We today do account as customers a number of major university libraries globally.

We also, because of the nature of what we do, we serve a lot of multinationals that are heavily involved in research today. A couple of quotes from our customers. Article Galaxy has been the big time saver for organizations that we serve. SITE has really offered unique capability in terms of utilizing AI full text behind the paywall which produces better search results. From a market opportunity, we do have a very large TAM.

We do very carefully look at TAM. In other words, we do not count organizations that we do not consider to be research intensive. So a company that does not do research is not counted in our TAM. A university library that has never published scientific research is not counted in our TAM. When we think about the segments, we have a what we call enterprise or b to b customer focus.

That’s where a majority of our revenue comes from today. On the b to c side, these are individual subscribers, primarily academics, either graduate students or just undergrad students that are using our tools. And our TAM is counted on is is basically built up in each one of these segments separately. There’s some very little fine print down there that have links in it. So if you wanna understand how we came up with our TAM, you can go there and click on those links and it will lay out for you exactly how we came up with these numbers.

I’ve mentioned before we’re in 60 verticals. A high level about 70 I’m sorry. Yeah. Seventy, seventy five percent of our revenue. I’m sorry.

I’m not awake today. 80 to 85% of our revenue is corporate. 15% ish is academic library. And pretty much any industry that does the r and r and d is a candidate for one or more of our products. A lot of people ask us in one on one meetings about what happens in a downturn.

We certainly don’t know. We may be able to find out here soon. But as we look at the two thousand and eight crisis, what we saw is scientific research slowed down for a couple of quarters and then started to immediately bounce back up. I I will say in the last sixty days or actually the last six weeks, I’ve talked to virtually every sales rep we have in the organization and ask what they’ve heard from customers. Corporate side, what I’ve been told is customers have some concerns about tariffs.

They’re not being impacted by some of the budget cuts that are going on in Washington right now and they’re continuing to work to develop their their innovation pipeline, whatever that is, drug discovery or whatever. Haven’t seen any increase in closed lost or things being delayed on the corporate side. In the academic side, it’s a bit of a different story. We have academic librarians sharing that they have concerns about what’s going to happen over the next sixty or ninety days. We’ve not seen an uptick in deals marked closed lost.

We have seen an uptick in librarians saying, we’re gonna put this project off for sixty or ninety days and see what’s gonna happen. Their concern is of course the decisions being made by Washington as it relates to grants, percentage of grants can be used for overhead which ultimately will have downward pressure on university libraries. But we still feel very bullish about our Q4 numbers, but I think it’s going to take another quarter to see how this is going to impact our business long term. Our business model today transactions, which is a 25 growth business, I’m sorry, 25% gross margin business is about 63% of our revenue and it’s flattish. Our platform revenue is about 37% of revenue.

It’s 85 plus percent gross margin and it’s a 20 plus percent growth. As I mentioned, platforms 85% gross margin. It is where we focus our entire corporate focus is really on how do we grow what we consider to be strategic recurring SaaS revenue. The transactional revenue has been a great provider of cash flow and EBITDA to the business to fund the development of the platform side and we expect it to continue to be as we look forward. I’ll spend a little bit of time on Mote.

As I mentioned, left hand corner, our net renewal rates are greater than a 100%. Upper right hand corner, those are really built and our business is built on relationships with the copyright owners, the publishers that own this content. And we have three different kinds of relationships with those publishers. One is just reselling their articles to research organizations that need them. The is obtaining AI rights to be able to use the site product to do full text search on their content.

And then the relationship is a new product we’re developing in conjunction with publishers which we internally call RightsDell. And basically think of it this way. If you’re a research organization, you’ve been buying articles for the last twenty years, you’ve not been buying AI rights with any of those articles. So part of our future product roadmap is providing researchers on an individual basis and companies on a group basis a understanding of where they have what rights and how do they acquire the rights they don’t have. So an organization that has 300,000 articles can either one at a time or in one payment buy AI rights for that whole block of articles they already own.

As I mentioned earlier, we are currently working with publishing partners. We work with virtually every publisher in the world today covering some of the publications you see here. And our products do typically want win a number of awards. Like we just won another award in here in the last couple of weeks which I need to update this slide to include. But I’ll turn it over to Bill to walk you through some of the financials.

Bill Nerthen, CFO, Research Solutions: Okay. Thank you. Let’s see. Oops. So this slide shows the two revenue segments and really what is sort of the compelling opportunity here is as Roy talked about the shift to SaaS revenue with 85% gross margin.

It’s growing 20% plus organically. You can see we’re now topped 20,000,000 of ARR in that business. That business, not only 85% plus gross margin, net retention rates around 100%. And so it’s very sticky revenue. And then you have the transaction revenue there, is pretty stable and has about a 25% gross margin.

But what’s really happening is this becomes a bigger and bigger component of the revenue mix. Gross profit goes up on a blended basis, it all drops to the bottom line. So two years ago, we were at about 22% of the revenue with SaaS. The blended gross margin was about 39%. Come to today, it’s now about 37, 38% of the business.

Our blended gross margin is right now near 50% and is gonna push across 50% very soon. And so as this transformation continues to take effect, more and more of that cash flow is gonna drop to the bottom line. The platform, the SaaS platform now generates about two thirds of the gross profit of the company. If I flip, whoops, to here, this is sort of the payoff, right? This is what’s happening.

You can now see we’ve reached an inflection point where this is starting to kick in in the business. And you know, the blue is our adjusted EBITDA and the green is the cash flow from operations. And you can see that transformation in the business as the SaaS mix has become more and more part of the revenue. So now 5,100,000.0 of adjusted EBITDA and more important cash flow from operations about 6,700,000.0. So I think it speaks to the quality of our earnings and our ability to collect as well on these upfront payments related to the SaaS software.

So that’s playing out and it will continue to play out as that mix continues to shift more and more to the SaaS side of the business. And this is sort of where we stand on a balance sheet. It’s a very clean balance sheet. We have about 9,900,000.0 of cash. And just to give you some perspective, we bought SITE in December of twenty twenty three.

We went down to about 2,700,000.0 in cash and sort of 15 months later, we’re now sort of back up at 9.9, you know, pushing across 10,000,000. Our fiscal year ends in June. So our q four is this we’re in it right now and we’ve already said we expect that cash number to go up again because q four is pretty seasonally strong time for us. So we’ll be above 10,000,000 in cash as we end our quarter in June. And that cash, most importantly can be used for strategic things.

It is not needed to organically grow the business. It can be used for M and A, which we’ve done some in the past and we continue to look at opportunities. And then when you combine that with sort of now generating more and more EBITDA, we have more debt capability as well that we could take on if we wanted to do a transaction. This is just some stats, some metrics on our business and our ownership. I won’t go into too much detail here.

A lot of this is publicly available and you can crunch the numbers. I think the main thing we feel when we look at things is if you look at sort of again, we’ve got the SaaS ARR growing 20% plus, bottom line’s growing faster, the more the mix shifts, better the gross margin gets, the better the bottom line gets. And so we do feel like it becomes pretty compelling from a valuation perspective. And we really just need to continue to execute and increase that mix shift over time. And that’s that’s what we continue to work on.

So I’ll turn it back to Roy. Thanks, Bill.

Roy Olivier, CEO, Research Solutions: Yeah, just in conclusion, summary for the road ahead. We’ll continue to focus on what we consider to be strategic revenue or platform growth. We do expect that to continue to grow at 20 plus percent. I’ve mentioned on several earnings calls that our BHAG, our big hairy goal, this is not guidance, is to increase our SaaS revenue from 20,000,000 to 30,000,000 in the next couple of years. We’ll need a little bit higher growth rate in order to do that organically because that is an organic number.

But we’ve made significant investments in the last seven months in new chief revenue officer, new salespeople, training, internal improvement of virtually every process associated with sales in order to kind of accelerate that growth rate. We do continue to believe that the general demand for our tools will improve and continue to improve, especially in the AI and advanced analytics. You know, our AI products are growing in some cases over a 100%. I’ve mentioned we have very sticky customers. Once we do an install, our renewal rates are typically in the 90s with a net renewal rates over 100.

And we continue to look at acquisitions that make sense for us. I mean, we look at a lot of deals that are sub million dollar ARR. Those are not particularly exciting for me because we need something that’s going to move that needle. We’ve looked at a few deals that are north of 5,000,000 in ARR. Those are of great interest to us, but since can sometimes be challenging from a valuation or capital point of view.

And we’re doing some stuff to improve our deal flow in the 1 to 5,000,000 range, which is something that I think is our sweet spot. A lot of folks ask what kind of acquisitions. When we think about acquisitions, we’d love to take out direct competitors. There’s not a lot of those. However, what there is, is if we look at that research workflow that’s happening in every research intensive organization in the world, there are numbers of steps.

And there are pieces of technology in that workflow that we do not do today. We partner with other people to deliver that service. So with some large accounts, we may be the contractor of record if you will, but we subcontract with somebody else to provide functionality that we don’t offer. Ultimately, we’d love to acquire those companies while we continue to organically build our capability of our current platform. Just a recap of the numbers.

Love the platform revenue number and the growth rate of that. We expect to continue to have a transactional business that will contribute nicely to our EBITDA and cash flow. And as that revenue mix changes, as Bill pointed out, we’ll start to see a $60,000,000 business with 20 plus percent EBITDA margin. Again, summary, our focus is fueling organic growth by reinvesting the profits from that transactional business and platform business, acquiring strategic M and A to fill gaps in our product portfolio or take out direct competitors. Or at this stage, with the stock price where it is today with $10,000,000 in cash and an acquisition not sitting right in front of us to pull the trigger on.

We continue to have internal discussions about at what point do we start buying back stock, especially at the rate it is now. And why invest? I’ll let you read this on your own. But we think we’re undervalued from where we are today. Certainly as a multiple of our ARR, we’re undervalued.

And we believe we’re on a really good track in terms of driving our results up into the right over the next few years and that’ll ultimately pay off in stock price. Management team, Bill and I have worked together before in a public company. We sold a private equity back in 2017. And the rest of our management team has extensive experience with private equity, with other public companies. Josh, who’s here, is our chief strategy officer.

He founded SITE and has taken over product strategy for our entire organization. So we’ve got a lot of really experienced and great executives to help take this thing to the next level. And with that, I’ll open it up for questions. Yes sir. Yeah.

To comment on your on your question, the company was founded to service corporate clients. So before we acquired we were 90 some odd percent corporate. SITE had a much stronger academic product and academic focus than we did. And one of the frankly value creation items that we looked at when we were bringing these companies together, SITE was very good at b to c which is primarily academic users at a university. They also had a stronger academic product than we did.

We had a stronger corporate product including a global sales force to sell enterprise solutions into libraries and corporate. So a lot of the site growth which has been tremendous since we acquired them is because our Salesforce had the customer relationships that take their product in there. And that’s what drove the mix up where we have a larger academic business today than we did even eighteen months ago. To your question, we’re not sure yet. I’ll make a couple of comments.

One is on the university library budget side, we’re gonna see downward pressure. The question is, most of or a lot of those university budgets are spent on subscriptions to publishers to content. So as there’s more pressure on that budget, there’s not a lot of line items to cut that are anywhere near the size of that. We have seen some universities which you can Google and publicly find information on this that have decided to pause or cancel subscription to one or more publishers and put our technology in there to buy things as they need them instead of subscribing to everything whether they need it or not. We have seen on one extreme, a very large library, one of the most recognized in The United States, actually stop all their publisher subscriptions and just use our product.

And there’s videos on YouTube of that library and talking at conferences about saving 7 figures year over year by doing that. So there could be a tailwind in this for one of our products. With the site product, what’s driving the success there even though there is some downward pressure on these on these university libraries and certainly uncertainty is that all universities are struggling with what are we gonna do with AI. Are we gonna put our head in the sand and are we gonna tell people they can’t use it or are we gonna embrace it and try to train people how to utilize AI to help them? And our our top attended webinars are on how to implement an AI strategy in a university to make it a force multiplier for your students.

And so, you know, right now we feel pretty good about academic, but I think it’s gonna take another quarter before we really understand what these Washington decisions are gonna do to the academic side of the business. Corporate side, I don’t we have not seen anything that concerns us at this point.

Bill Nerthen, CFO, Research Solutions: That’s a great answer.

Roy Olivier, CEO, Research Solutions: Thanks very much. Thank you. Yes, sir. Yep. I think in terms of what we’re providing, a whole bunch of different stuff is the is the unfortunately answer.

The thing we’re providing is if you go to Chad GPT, you ask a question about scientific research, you’re gonna get answers not only based on the scientific research information they have access to, which is predominantly just the abstract of the article. Not the full article, but just the abstract. But you’re also gonna get all the conspiracy theory stuff out there on the Internet about whether that vaccine’s effective or not. Our tool focuses exclusively on the scientific research and it and it reduces hallucinations because in most cases, have access to the full article, not just the abstract of the article. So number one, we have better search results, fewer hallucinations.

Number two, we’ve used that technology to compare the article that you’re looking at on screen with the other 180,000,000 articles that are out there. And we’ve providing you with a badge that tells you how many of those other articles supported the conclusion in this article or contrasted the conclusion in this article. So we provide you and we’re unique in that. We provide you, the user, with a better experience in terms of a FICO score or a Rotten Tomatoes score for the article they’re looking at. thing we do is we allow you to throw a bunch of articles into a folder and summarize them, which is not unique.

But we can also let you ask questions to extract tables of information. Out of these 50 articles, I want to see patients, age groups, outcomes, etcetera. So there’s a lot of unique things we’re doing with AI along that workflow that is beyond what the typical free AI engines or paid for that matter are doing today. And a majority of these companies that are coming out seemingly every month saying, hey, we now do scientific research AI. They’re only doing the abstract or they’re only doing free articles.

The stuff that’s called that’s commonly called OA. We do it on everything. We’re we’re we’re very specific and narrowly focused, so better answers less hallucinations. But we also allow you the ability once you find them after you do the search, you can acquire them. We manage your entitlements.

So we know what you’ve subscribed to, where you’ve prepaid for discounts, and where you wanna pay for the article by clicking and spending $40. We we manage all that. We manage all of the rights that come with that article. So if you’ve acquired an article that doesn’t have AI rights, you can you can click and buy the AI rights and then throw it into chat GPT or you can throw it into our stuff or you can throw it into Copilot and ask questions of that article.

Bill Nerthen, CFO, Research Solutions: Yeah. In case it wasn’t clear, we have access to content that they don’t have. Right. So so tech GPT, can they use your content or go behind your wall?

Roy Olivier, CEO, Research Solutions: No. Yep. We don’t we don’t allow that. And for the most case, those those types of systems are using the abstract of the article. Not the full article.

Bill Nerthen, CFO, Research Solutions: So that’s public. The whole

Roy Olivier, CEO, Research Solutions: article. Right. Other questions? Well, you so much for your time.

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