RESEARCH SOLUTIONS INC 17th Annual Midwest IDEAS Conference

Roy? Thanks, Dave. Appreciate it.

Yeah. Everybody. I guess I love the hat.

I used to work in Fort Worth, Texas, and we wore suits back in those days, and I remember when the CEO came down and said, "You guys can't wear cowboy boots with suits anymore." Everybody was very upset. I still have my boots, though. Anyway, what we do. As mentioned, we really are an end-to-end platform for research. A vast majority of our clients today are corporate clients. About 80-some-odd percent of our revenue is corporate. The remaining revenue is derived from either government or primarily academic institutions, specifically university libraries. What we typically do on the corporate side is we provide the workflow tool that supports the R in R&D.

If an organization is doing research on EV battery technology or pretty much anything else, they will use a platform to search the world's corpus of scientific research, basically what is a peer-reviewed scientific journal, and then they will start to create their own product. All the workflow tools that happen in between is where we play. So our installations are people like Bayer, BASF, L'Oréal. We're involved in multiple top-secret Navy stuff where they're doing research on specific types of warfare. Anybody that needs access to the world's scientific research. I even use it. I'm a big Formula 1 fan. If you guys are, you might have heard about, a few years ago, there was a thing called phase-change materials they thought one manufacturer was using to cool their wheels. You can research that in our platform.

I learned all about something I'd not heard of the day before I heard the term phase-change materials. Our mission as a company is really to simplify the complexity around research. We've really been focusing on transitioning the business from a transactional business that sold the article to a SaaS software business. In the process of doing that, we've shown material top-line growth improvement, stickier revenue streams. Our revenue mix, as it's moved from transactional, relatively low gross margin, to SaaS software, which is 85-plus percent gross margin, has improved dramatically, which has had a big positive impact on profitability, cash flow, et cetera. What we do from a big-picture point of view is support four steps of research. How do I find research similar to whatever project I'm kicking off? How do I acquire that research? How do I manage it, share it in a copyright-compliant way?

How do I create my own drug, my own peer-reviewed or article-to-be peer reviewed, along with all of the underlying analysis? Our discovery tool is Scite. It's sold as a subscription product. Our access tool, and that's the business we've been in for 20 years now, this is our 20th year, is both subscription and transactional in nature through the sale of the actual articles. Our manage tool is subscription-based. We do not really play very much in the create side, but we do have some products there that are subscription-based, and we use Scite as our subscription tool as well. Now, we do believe that AI is going to change the way that people access this content. A vast majority of the peer-reviewed scientific research out there today is behind a paywall, so ChatGPT can't find it.

They don't have the rights to get behind that paywall, nor does any other LLM. In fact, I think the general consensus that's reflected in our current stock price is that we will be disrupted and killed by AI. We don't think we will be for a number of reasons, which I'll talk about here. But fundamental to our argument is whether or not you believe AI will have access to 100% of content behind a paywall. You have to form your own opinion as to the answer of that. My view is that's not going to happen. When you look at the publisher industry in general, the top publishers average about $3 billion in revenue and 40% EBITDA margins on the sale of that peer-reviewed scientific content.

They're not going to license that for a $10 million deal to an LLM, because that's an annual number that they sell through subscriptions. Everybody is looking for a method to provide you as a user a better answer by giving you more than just the abstract of the article, more than just the summary, but not so much that you don't need to buy the article. So that's where Scite comes in. Scite, for the last five or six years, has taken all that content, extracted snippets of the content that allow us to give you a much better search result if you're searching bladder cancer, Havana syndrome, peanut butter, whatever it is, and we'll provide you a summary.

But at the end of the day, you as a researcher will need to ultimately go read all of that research and acquire those documents, which you're either going to do through a subscription to the publisher, what's called a token package, which is prepaying for discounts, or individual documents, which is our transactional business. I'm frankly going to skip the rest of this deck because you can read it in your spare time. I'm going to talk about will AI kill us, and how are we thinking about the world as we look forward? Today, our products are SaaS platform products.

They're accessed primarily in terms of number of users through somebody logging into Article Galaxy, buying an article, taking delivery, putting it in a personal folder, sharing it with their research team, or if they're in Scite, they're going into Scite, they're asking research-based questions and getting answers that spit out, "Here's the articles I used to give you this answer." All those articles have individual DOIs, which is a unique marker for each article, and then you go buy them using Article Galaxy. But I think we all know, just like every one of our lives has been impacted by AI, that today people are starting their journey inside of ChatGPT or Claude or Copilot. On the corporate side, our view as a third party, we don't really care who wins.

Copilot's got a big install base and a lot of traction simply because they have Office 365, and it's part of that. Our strategy shifted about a year ago from focusing exclusively on platform development to how do we be where our customer is? They're going to be in these LLMs. We've released two products over the last six months, literally, I think four months. One is a product that connects Scite into Copilot, Claude, any of the LLMs. The other connects Article Galaxy into those products. The way it works today is where I used to go into Scite and say, "Tell me about Havana syndrome," and it would search the world's content and give me an answer. I now go in and I can go into my I did this on the plane just because I was bored. I used ChatGPT. I installed the Scite connector into ChatGPT out of the ChatGPT store.

I installed the Article Galaxy connector into ChatGPT out of the ChatGPT store. Then I sat there on the plane, and I said, "Tell me about Havana syndrome." It uses the Scite corpus of material to get behind the paywall where we have access to do that or to search the snippets which we've extracted out of about 40% of the world's content, and it gives you a much better answer than a ChatGPT or Claude can do on their own because they don't have the rights to get behind those paywalls, and they don't have any snippets that they're pulling out of articles based on those rights. What ChatGPT does really well is it gave me a fantastic, fully formatted answer that I could have printed out and used in a university, turned it in.

But at the end of that answer was all of the articles that it referenced to create that summary for me. So my next line was, "Go get me all of those articles, but I only want the free ones." At that point, it talks to Article Galaxy. It says, "Where do you have a subscription in place where you've already paid?" So any article you get out of that subscription is free to you. What is in your corporate library that somebody else has already purchased? What are the reuse rights associated with that article? How many times can somebody else in the organization use it before I have to rebuy it? What is OA or free, and what is paid for? Five seconds later, ChatGPT tells me, "I got five articles. You already own two of them.