Research Solutions (RSSS) AI Stock Analysis

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Research Solutions

(NASDAQ:RSSS)

62Neutral

Research Solutions shows promising revenue growth and cash flow generation, with stability in its balance sheet due to no debt. However, profitability challenges and negative valuation metrics weigh down the stock. Technical indicators suggest some caution with mixed signals, while the recent earnings call indicates growth potential tempered by operational challenges.

Positive Factors

Financial Performance

Gross margins were the highest in company history, expanding for the seventh consecutive quarter.

New Customer Growth

Strong new logo growth in the quarter led to 61 net new deployments, with B2B ARR growing 5% sequentially.

Strategic Initiatives

Growth initiatives include expanded offerings, new AI offerings, and cross-selling, which should lead to Platforms gross margin improvements.

Negative Factors

Customer Churn

Research Solutions saw significantly higher uncontrollable churn (acquisitions, bankruptcy, etc.) accounting for the majority of the churn.

Market Valuation

Shares trade at 2.4x FY25 revenue versus its direct peer group average RELX and CLVT at 5.6x, a gap believed to close as the Company continues its transition.

Research Solutions (RSSS) vs. S&P 500 (SPY)

Market Cap

$91.41M

Dividend YieldN/A

Average Volume (3M)79.02K

Price to Earnings (P/E)―

Beta (1Y)0.17

Revenue Growth18.51%

EPS Growth-714.65%

CountryUS

Employees145

SectorTechnology

Sector Strength45

IndustrySoftware - Application

Share Statistics

EPS (TTM)-0.13

Shares Outstanding32,646,828

10 Day Avg. Volume103,012

30 Day Avg. Volume79,015

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.89

Price to Cash Flow (P/CF)22.10

P/FCF Ratio22.10

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$5.12

Price Target Upside82.86% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering3

Research Solutions Business Overview & Revenue Model

Company DescriptionResearch Solutions (RSSS) is a technology company that provides cloud-based software solutions aimed at simplifying the process of accessing and managing scientific, technical, and medical (STM) content. The company operates primarily in the information services and technology sectors, offering platforms and services that enable researchers, academic institutions, and corporate customers to streamline document retrieval and content management.

How the Company Makes MoneyResearch Solutions makes money through a subscription-based revenue model and transactional services. Key revenue streams include subscription fees from its cloud-based platform, Article Galaxy, which offers on-demand document retrieval and management services. The company also generates revenue from per-transaction fees when users access or purchase specific articles or documents. Significant partnerships with academic institutions, corporate research divisions, and publishers help broaden its customer base and ensure a continuous flow of content, contributing to its earnings.

Research Solutions Financial Statement Overview

Summary

Research Solutions exhibits a solid growth trajectory in revenue with significant cash flow generation. While the balance sheet is strong with no debt, profitability remains a challenge. The company needs to focus on improving operational efficiency and cost management to enhance profitability and return on equity to ensure sustainable growth.

Income Statement

Positive

Research Solutions shows a steady revenue growth trajectory with a significant increase of approximately 21.2% in TTM (Trailing-Twelve-Months) compared to the previous period. However, profitability metrics such as the net profit margin are concerning, with a substantial negative net income in TTM, indicating challenges in cost management despite the higher revenue growth.

Balance Sheet

Positive

The company's balance sheet demonstrates stability with a strong equity base, evidenced by an equity ratio of 26% in TTM. The absence of debt is a positive indicator of financial prudence. However, the relatively low return on equity of -64.6% in TTM due to negative net income suggests inefficiencies in generating profits from shareholders' equity.

Cash Flow

Positive

The cash flow statement highlights a strong free cash flow generation, with a growth rate of 67.6% in TTM. The operating cash flow to net income ratio is positive, at -0.008 in TTM, indicating that the company is generating cash from operations despite negative earnings. This suggests a potential for operational resilience and cash flow stability.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
48.21M	44.62M	37.70M	32.93M	31.76M	31.06M
	Gross Profit
22.40M	19.64M	14.70M	12.02M	10.29M	9.64M
	EBIT
1.51M	-769.54K	238.61K	-1.49M	-318.99K	-832.37K
	EBITDA
2.68M	66.73K	291.26K	-1.47M	-235.14K	-628.28K
	Net Income Common Stockholders
-4.06M	-3.79M	571.62K	-1.63M	-285.09K	-779.69K
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.25M	6.10M	13.55M	10.60M	11.00M	9.31M
	Total Assets
7.81M	41.86M	21.83M	17.03M	16.92M	14.81M
	Total Debt
85.20K	0.00	0.00	0.00	0.00	79.33K
	Net Debt
-2.16M	-6.10M	-13.55M	-10.60M	-11.00M	-9.23M
	Total Liabilities
4.22M	30.17M	14.50M	12.14M	11.49M	9.95M
	Stockholders Equity
3.55M	11.69M	7.33M	4.88M	5.43M	4.86M
Cash Flow		Free Cash Flow
5.83M	3.48M	3.34M	-461.49K	1.85M	2.42M
	Operating Cash Flow
5.85M	3.55M	3.38M	-417.20K	1.87M	2.42M
	Investing Cash Flow
-19.15K	-10.10M	-344.66K	-44.29K	-19.85K	0.00
	Financing Cash Flow
-826.75K	-905.85K	-97.26K	63.27K	-159.97K	1.55M

Research Solutions Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price2.80

Price Trends

50DMA

2.95

Negative

100DMA

3.39

Negative

200DMA

3.05

Negative

Market Momentum

MACD

-0.11

Negative

RSI

57.53

Neutral

STOCH

67.09

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RSSS, the sentiment is Neutral. The current price of 2.8 is above the 20-day moving average (MA) of 2.56, below the 50-day MA of 2.95, and below the 200-day MA of 3.05, indicating a neutral trend. The MACD of -0.11 indicates Negative momentum. The RSI at 57.53 is Neutral, neither overbought nor oversold. The STOCH value of 67.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for RSSS.

Research Solutions Risk Analysis

Research Solutions disclosed 31 risk factors in its most recent earnings report. Research Solutions reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Research Solutions Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RSSS	62 Neutral	$91.41M	―	-32.33%	―	18.51%	-714.65%
Sector *	58 Neutral	$10.03B	10.00	-6.85%	3.09%	7.49%	-11.58%
PSQH	54 Neutral	$78.96M	―	-309.46%	―	385.52%	-33.32%
ALTS	46 Neutral	$82.81M	―	-34.75%	―	―	87.49%
UPLD	43 Neutral	$61.69M	―	-208.78%	―	-7.74%	28.24%
LPSN	42 Neutral	$68.46M	―	-137.76%	―	-22.27%	-20.58%
CSAI	33 Underperform	$72.87M	―		―	―	―

* Technology Sector Average

Performance Comparison

RSSS

Research Solutions

2.80

-0.20

-6.67%

ALTS

ALT5 Sigma Corporation

5.15

0.82

18.94%

LPSN

Liveperson

0.75

0.29

63.04%

UPLD

Upland Software

2.19

-0.08

-3.52%

PSQH

PSQ Holdings

1.84

-2.02

-52.33%

CSAI

Cloudastructure, Inc. Class A

4.58

-20.83

-81.98%

Research Solutions Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -28.39% | Next Earnings Date: May 8, 2025

Earnings Call Sentiment Positive

The earnings call highlighted significant growth in revenue, platform subscription, and ARR, alongside improvements in gross margin and cash flow. However, challenges such as customer churn, an increased net loss, and a seasonal B2C slowdown highlight areas of concern. Overall, the positive aspects slightly outweigh the negative ones, suggesting an optimistic outlook with some caution.

Highlights

Revenue Growth

Total revenue for the second quarter of fiscal 2025 was $11.9 million, a 15.5% increase from the second quarter of fiscal 2024.

Platform Subscription Revenue Increase

Platform subscription revenue increased 47% to $4.6 million, driven by a net increase of Platform deployments and contributions from Scite.

Annual Recurring Revenue (ARR) Growth

The company ended the quarter with $19.1 million in ARR, up 23% year-over-year, with strong growth in both B2B and B2C Platform deployments.

Record Platform Deployments

Achieved 61 net new B2B Platform deployments, the highest organic performance the company has ever posted.

Improved Gross Margin

Gross margin for the second quarter was 48.9%, a 540-basis-point improvement over the second quarter of fiscal 2024.

Cash Flow and Balance Sheet Strength

Generated $1 million in cash flow from operations during the quarter, with cash and cash equivalents increasing to $7.7 million.

Lowlights

Customer Churn and Upsell Challenges

The company is not where it wants to be in terms of churn and upsells, indicating room for improvement in retaining and expanding existing customers.

Net Loss Increase

Net loss for the quarter was $2 million, compared to a net loss of $54,000 in the prior year quarter, influenced by a $2.4 million provision related to Scite's contingent earn-out liability.

Seasonal Slowdown in B2C

B2C slowed at the end of the quarter due to the holiday break, with expectations of a continued slowdown impacting January.

Company Guidance

During the Research Solutions, Inc. Second Quarter 2025 Earnings Conference Call, the company reported a notable performance with a 15.5% increase in total revenue, reaching $11.9 million compared to the same period in fiscal 2024. Platform subscription revenue surged by 47% to $4.6 million, driven by a net increase in Platform deployments and a 75% pro forma revenue growth from Scite. Annual recurring revenue (ARR) rose to $19.1 million, marking a 23% year-over-year increase, with $1.5 million net incremental ARR growth and 61 net B2B Platform deployments. The gross margin improved to 48.9%, up by 540 basis points from the previous year, led by the Platforms business gross margin of 86.5%. The company recorded an income from operations of $0.1 million and adjusted EBITDA of $963,000, with cash and cash equivalents increasing to $7.7 million.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.