Research Solutions, Inc. (RSSS) stock intrinsic value fair value estimate & owner earnings analysis

Research Solutions (Reprints Desk, Scite, Resolute) sells research software and scientific articles to pharma, biotech, corporate and academic researchers. It earns money in two ways. Platforms are subscriptions to tools such as Scite.ai and Resolute.ai for search and AI-assisted reading, Article Galaxy for purchasing and managing articles, and References. They are mostly auto-renewing annual contracts paid in advance. Fiscal 2026 (June year-end) Platform revenue was $20.8 million, up 9.8%, at about an 87.5% gross margin. Transactions are pay-per-article delivery of journal content, a low-margin resale business with $27.5 million of revenue at about a 25% gross margin. It fell 8.7% in fiscal 2026 on lower paid order volume, after a 1.8% decline in fiscal 2025. About 46% of content cost comes from three non-exclusive suppliers, and no customer is above 10% of revenue. Earnings power. We measure owner earnings as operating cash flow, less the swing in working capital, less stock compensation, less maintenance capital spending. Capex is tiny, about $40,000 a year. Fiscal 2025 owner earnings were $4.2 million ($0.135 per share) and fiscal 2026 were $5.1 million ($0.157 per share). Fiscal 2024 was near break-even, the year Resolute and Scite were acquired. Earlier years were loss-making or near break-even and describe a smaller, different business. We anchor on about $0.135 per share, the middle of the three years since the acquisitions, roughly $4.35 million. That is deliberately below fiscal 2026, for two reasons. Stock compensation fell to $0.9 million in fiscal 2026 from $1.7 million to $2.2 million in the prior two years, and we do not assume the lower level lasts. Fiscal 2026 also benefited from cuts to general and administrative spending. Trailing owner-earnings growth was +19.6%, and our base case starts at about 0% for year 1, below that rate. Accounting judgements. Two non-cash acquisition items are added back, as they are not operating costs: $1.75 million in fiscal 2025 (a higher estimate of the Scite earnout) and $1.04 million in fiscal 2026 (accreted interest on the earnout). The earnout cash paid ($4.95 million in fiscal 2026) is a one-off price for Scite and sits outside owner earnings. The final earnout is fixed at $7.3 million, due within a year, and is well covered by $12.6 million of cash. We neither add the cash nor subtract the earnout. Deferred revenue (customer prepayments) rose to $11.5 million from $10.7 million, and we remove working-capital swings so that prepayment timing does not inflate earnings. Bear case, about $0.45 a share. Platform growth stalls immediately. Fiscal 2026's 9.8% is well down from 35.8% in fiscal 2025, and much of that earlier growth was Scite being consolidated. Transactions gross profit keeps shrinking about 9% a year, as the last two years suggest, with no cost offset. Owner earnings slide from about $4.3 million to near zero over a decade, and nothing is credited after that. Base case, about $1.73 a share. Platform gross profit grows 4% a year, supported by contracted, prepaid renewals and the 7% rise in deferred revenue, and well below the recent pace. Transactions gross profit shrinks 6% a year, and costs rise 2% a year. Owner earnings stay in the $4.2 million to $5.4 million range for ten years, hold flat for five more years and then fade 10% a year. We credit only Platform growth already visible in prepaid contracts. We leave out AI-content licensing and new products, because no revenue from them is evidenced. Bull case, about $3.13 a share. Platform growth stays at the recent pace, 9%, and tapers to 3% by year 10, which the fiscal 2023 to 2026 record supports. Transactions declines slow to 4% a year, and costs rise 3% a year. Owner earnings reach about $10 million. What would make this wrong: Transactions is 57% of revenue, and if publishers or AI tools cut paid article volume faster, the bear case applies. Platform growth slowed sharply in fiscal 2026, and Scite was the main driver of the earlier growth. Rebuilding stock compensation would cut owner earnings by up to about $0.8 million. Weighted diluted shares are 32.3 million, and the count rose as earnout payments were made partly in stock. The margin-of-safety price of $0.85 is roughly a 50% discount to the base case, reflecting a micro-cap with a shrinking, low-margin segment and supplier concentration.