Research Solutions Targets AI-Driven Growth as High-Margin SaaS Revenue Rises
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AI connectors are creating larger enterprise sales opportunities , including high-five-figure, six-figure and proposed seven-figure deals, though IT security reviews and corporate AI approvals are lengthening sales cycles.
The company's shift toward high-margin SaaS is improving its financial profile: software now represents about 43% of revenue, platform gross margins exceed 85%, and management reported $6 million in trailing-12-month EBITDA alongside more than $12 million in cash and no debt.
Olivier said the company's platform supports research workflows across industries, with customers including Bayer, BASF and L'Oréal. Research Solutions also serves customers in pharmaceutical, medical-device and biotechnology markets, which together generate about half of its revenue, according to Olivier.
Research Solutions has shifted its product strategy over the past year toward connecting its Scite and Article Galaxy products with large language model platforms, including Microsoft Copilot, Claude and ChatGPT.
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"Our strategy shifted about a year ago from focusing exclusively on platform development to how do we be where our customer is?" Olivier said. "They're going to be in these LLMs."
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Olivier said the newer AI connector products have increased the size of some sales opportunities, though they have also extended sales cycles because deployments require IT security reviews and discussions with corporate AI committees.
Historically, the average sale for Scite and Article Galaxy has been about $11,000 to $12,000, he said. The company has closed several high-five-figure and six-figure connector deals, according to Olivier, and has proposals in the high-six-figure range as well as one seven-figure proposal.
Research Solutions has about 1,000 corporate customers, Olivier said. He described the company's workflow integrations as difficult to replace once installed, noting that its customer agreements commonly span three to five years. Average customer lifetime value exceeds seven years, he said, while larger customers can remain with the company for more than a decade.
Olivier said Research Solutions has been transitioning from a transaction-based document-delivery business to a SaaS-focused model. The document-delivery business has gross margins of roughly 24% to 25% and generates cash flow that supports software investments, while the platform business carries gross margins above 85%, he said.
Software represented approximately 43% of company revenue, up from 39% a year earlier, according to Chief Financial Officer Dave Kutil. Platform annual recurring revenue increased from about $9 million to roughly $22 million over four years, Kutil said.
Kutil said the revenue mix shift reached an inflection point in fiscal 2023, when the company began generating profitable operations and cash flow. He said the company generated $6 million of EBITDA over the previous 12 months and expects to approximately double net income year over year.
Research Solutions had more than $12 million in cash, no debt and an untapped line of credit, Kutil said. The company has made about $7 million of earn-out payments over the past five quarters and has three payments remaining, which he said are expected to be completed by the end of the company's fiscal year ending June 2027.
Olivier said transactional document-delivery revenue has faced pressure from customer losses, budget constraints and workforce reductions in pharmaceutical markets. The company expects a low-single-digit decline in transactional revenue during the next year before anticipating a return to either slight declines or slight growth, depending on economic conditions and internal initiatives.
On capital allocation, Olivier said Research Solutions has reviewed hundreds of acquisition targets and completed two acquisitions plus a customer purchase during his tenure. However, he said management has slowed its M&A activity while evaluating how AI may affect potential targets. The company is also discussing potential uses for its cash balance, including buybacks, dividends and investments in growth.
Key offerings include self-service workflows for document requests, enterprise-grade managed services for high-volume users, and analytics tools that deliver detailed reporting on spend, usage patterns and supplier performance.
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