Research Solutions (NASDAQ: RSSS) is a company that provides innovative digital solutions for researchers and regulatory professionals, acting as a bridge between content publishers and end-users. Through its platform, the company delivers research articles on demand, offering an efficient way to access scientific content. RSSS has recently expanded its services with its high-margin SaaS offering, Article Galaxy (AG), which caters to small and medium-sized enterprises (SMEs) with significant R&D operations.
AG streamlines the research process with workflow solutions, access to premium journal content through partnerships like Springer Nature, and copyright-compliant article sharing. This SaaS segment, growing at over 30% annually, is positioning RSSS for substantial future growth, as the market begins to recognize its potential for scalability and profitability.
Research Solutions Strategic Growth
In 2023, Research Solutions (NASDAQ: RSSS) marked significant progress in its strategic initiatives, culminating in a transformational year. The acquisitions of Resolute.ai and Scite.ai expanded its leadership in discovery and analysis tools, reinforcing its position within the research technology landscape. Scite’s performance, particularly on the B2C front, exceeded expectations, while the B2B segment also saw impressive growth, with additional revenues of $250,000 in Q3 and $290,000 in Q4. This success highlights the company’s effective cross-selling strategy and positions it for further expansion in the vertical SaaS and AI-driven research tools market.
The company also made strides in other areas, including the development of a B2C demand generation engine, brand unification, and enhancements to its B2B pipeline. Integration of key products, such as Article Galaxy and Scite, further strengthened its research platform. The automation of article deliveries reached an all-time high, with 76.8% of documents delivered instantly to researchers.
On the financial side, the company achieved record-breaking revenues of $44.6 million, with platform revenue reaching $14 million. Additionally, EBITDA stood at $2.2 million, and operating cash flow amounted to $3.6 million, despite proxy-related costs. These accomplishments underscore the company’s robust foundation and optimistic outlook for future growth.
Integration and Cross-Sell Progress for Research Solutions
Research Solutions (NASDAQ: RSSS) has made significant strides in integrating its acquisitions, particularly Scite, Resolute, and its core platforms, Article Galaxy and Article Galaxy Scholar. According to CEO Roy Olivier, the integration of Scite with Article Galaxy is mostly complete, featuring single sign-on and seamless access to Scite’s content and badges within Article Galaxy’s interface. The next phase, focused on streamlining user experience and workflow between the platforms, is expected to be finalized in the first half of the fiscal year.
Resolute, however, has not been fully integrated into either platform yet, with plans to incorporate some of its data into Scite after further refinement of existing workflows. On the sales side, the Research Solutions team is now fully trained on cross-selling Scite, which is expected to lead to greater penetration of both the existing customer base and new accounts. Financially, the company is addressing integration costs, particularly related to Resolute, with the goal of improving platform gross margins.
EBITDA Margin Sustainability and Sales Complexity
Research Solutions recent achievement of a 12% EBITDA margin has sparked discussions on its sustainability. CFO Bill Nurthen believes this level is maintainable, though fluctuations in EBITDA are expected due to seasonality. Typically, EBITDA builds through Q1 to Q4, with dips possible in the first quarter. The company operates under the “Rule of 40,” balancing growth and profitability. While it aims to sustain low double-digit margins, Nurthen notes that investments in growth, such as advertising, could impact margins, though any changes will be clearly communicated.
In terms of sales complexity, CEO of Research Solutions Roy Olivier highlighted the challenges posed by the company’s expanding product portfolio. While the core corporate and academic markets remain the focus, selling multiple products simultaneously can prolong the sales cycle. Customers often express interest in additional products, which complicates negotiations. Further, longer procurement processes and detailed comparisons with competitors are extending days to sales. However, despite these challenges, the company continues to secure new customers and has not seen a significant change in its pipeline closure rates. As integration progresses, the management expects the complexity to reduce slightly, though individual products will continue to be sold as separate modules.
