Research Solutions Q4 FY26 earnings call RSSS

Research Solutions undertook significant changes in its sales organization, turning over almost 50% of its sales team and expanding headcount for FY27. This transition to a more structured sales process led to closing larger deals, an increase in average sales price (ASP) for both products, and 105 net new platform deployments for the full year. Renewal rates showed a 'nice improvement' in Q4 FY26, attributed to a new leadership, an expanded team, and the implementation of customer health measurement tools.

The company made substantial investments in product development and software engineering, resulting in a fourfold increase in development productivity, from approximately 50 software updates per month in Q3 FY25 to 200 in June '26. Two new AI products were released, extending the unique capabilities of Scite and Article Galaxy to popular large language models (LLMs) like ChatGPT, Claude, and Copilot. This strategy aims to 'be where the researchers are working' and these products have been well-received by customers.

AI is reshaping how research is consumed, as evidenced by over 16 million scholarly reads performed by AI agents through Scite MCP connectors since their February launch. By June, calls from AI agents surpassed queries in the company's own Scite assistant interface, indicating a shift in user behavior. This trend is creating demand for verified search, verification, and rights-cleared access, which is increasingly contributing to the recurring platform business. Approximately 43% of content accessed by AI agents is behind a paywall, highlighting the value of Article Galaxy's compliant access.

The Multi-Cloud Platform (MCP) is proving to be an effective expansion engine, with most MCP deals being upsells to existing Scite customers, typically doubling contract values. Article Galaxy MCP deals are attracting new logos, and the mix is shifting towards larger corporate deals, reflected in the nearly doubled average value of new opportunities over the past two years. Customers who adopt MCP demonstrate significantly higher retention rates, linking the retention strategy directly to AI adoption.

Research Solutions launched a publisher MCP Gateway designed to make publisher content discoverable to AI agents while maintaining protection for paywalled full text. This initiative also provides publishers with usage data for AI demand. Around 40 publishers are currently indexed, and the first two Gateway agreements have been signed, aiming to build a mutually beneficial ecosystem where increased publisher participation enhances the corporate product's value, and more corporate customers make the Gateway more attractive to publishers.

Management expects FY27 to be characterized by continued industry change driven by AI adoption. The company aims to bridge the gap between LLM capabilities and the stringent requirements of research-intensive organizations by providing copyright-compliant and cost-efficient tools. The strategic focus includes strong B2B sales, improved renewal and upsell rates, and leveraging AI solutions. While the B2C segment is projected to be flat, and transaction revenue is expected to see low single-digit declines, the overall outlook is for improved EBITDA and cash flows in FY27.

With a strong balance sheet, including $12.6 million in cash and no debt, and consistent cash generation, Research Solutions is evaluating options to enhance shareholder value. Management explicitly stated that the stock price is perceived to be below its intrinsic value and is considering various strategies, including stock buybacks, to directly impact shareholder returns. The company also continues to explore strategic acquisitions that could accelerate growth or add unique capabilities.