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Research Solutions Reports Fiscal Second Quarter 2018 Financial Results

ENCINO, Calif., Feb. 14, 2018 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal second quarter ended December 31, 2017.

Research Solutions, Inc. (RSSS) Logo

Fiscal Second Quarter 2018 Summary vs. Year-Ago Quarter

  • Total revenue increased 12% to $6.8 million.
  • Platform revenue up 89% to $413,000, with a 92% increase in total Platform deployments to 184. Annual recurring revenue was up 89% to $1.7 million.
  • Transaction revenue up 9% to $6.4 million, with customer count up 12% to 1,044. Transaction count up 6% to 205,019.
  • Total gross margin up 280 basis points to 25.4%.
  • Net loss from continuing operations was $0.7 million, or $(0.03) per share, compared to a net loss of $1.1 million, or $(0.05) per share.

Management Commentary

"Our second quarter showed continued robust growth in our SaaS-based Platforms offering, which helped support a strong quarter in our Transactions business," said Peter Derycz, president and CEO of Research Solutions. "Version 2.0 of our Article Galaxy Platform went live in December and the early feedback on user experience has been quite positive. We look forward to completing the migration by March and implementing other major framework additions, like self-registration, in the next several months.

"We began the calendar year with a particularly strong month in our Platforms business, and look forward to building upon this momentum as the year unfolds. We expect this will be driven not only by the framework additions, but weekly improvements produced by our gadget factory, and a sales & marketing department we are refining to drive optimum efficiency and investment returns."

Fiscal Second Quarter 2018 Financial Results

Total revenue increased 12% to $6.8 million compared to $6.1 million in the same year-ago quarter.

Platform subscription revenue increased 89% to $413,000 compared to $219,000 in the year-ago quarter. The increase was due to a 92% increase in the total number of paid Platform deployments to 184. The quarter ended with annual recurring revenue up 89% to $1.7 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 9% to $6.4 million compared to $5.9 million in the same year-ago quarter. Total active customers increased 12% from 936 to 1,044, and transaction count increased 6% from 193,000 to 205,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 280 basis points to 25.4% from 22.6% in the same year-ago quarter. The increase was driven by a 150 basis point increase in Transactions gross margin and a revenue mix shift to the higher-margin Platforms business. 

Total operating expenses were unchanged at $2.4 million compared to the year-ago quarter, aligned with the company's strategy to optimize its sales resources, including the reallocation of expenses and more efficient ways of acquiring customers through content generation and digital and inbound marketing.

Net loss from continuing operations was $0.7 million, or $(0.03) per share, compared to a net loss of $1.1 million, or $(0.05) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.3) million compared to $(0.7) million in the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents at December 31, 2017 were $4.9 million compared to $5.8 million at June 30, 2017. There were no outstanding borrowings under the company's $2.5 million revolving line of credit. Apart from a $0.3 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Further details about these results are available in the company's quarterly report on Form 10-Q, which is available in the investor relations section of the company's website at www.researchsolutions.com.

Conference Call

Research Solutions President and CEO Peter Derycz and CFO Alan Urban will host an investor conference call to discuss these results and the company's outlook, followed by a question and answer period.

Date: Wednesday, February 14, 2018
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-855-327-6837
International dial-in number: 1-631-891-4304
Conference ID: 10004236

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.    

The conference call will be broadcast live and available for replay here and via the investor relations section of the company's website at www.researchsolutions.com.   

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through February 28, 2018.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10004236

Fiscal Second Quarter 2018 Financial and Operational Summary Tables vs. Year-Ago Quarter



Quarter Ended December 31,


Six Months Ended December 31,



2017

2016

Change

% Change


2017

2016

Change

% Change

Revenue:











Platforms

$   413,404

$     219,137

$  194,267

88.7%


$        801,349

$        391,209

$   410,140

104.8%


Transactions

6,409,816

5,866,562

543,254

9.3%


12,769,711

11,872,961

896,750

7.6%

Total Revenue

6,823,220

6,085,699

737,521

12.1%


13,571,060

12,264,170

1,306,890

10.7%











Gross Profit:











Platforms

323,042

173,514

149,528

86.2%


627,000

315,622

311,378

98.7%


Transactions

1,412,828

1,201,872

210,956

17.6%


2,858,309

2,493,272

365,037

14.6%

Total Gross Profit

1,735,870

1,375,386

360,484

26.2%


3,485,309

2,808,894

676,415

24.1%











Gross profit as a % of revenue:











Platforms

78.1%

79.2%

-1.0%



78.2%

80.7%

-2.4%



Transactions

22.0%

20.5%

1.6%



22.4%

21.0%

1.4%


Total Gross Profit

25.4%

22.6%

2.8%



25.7%

22.9%

2.8%












Operating Expenses:











Sales and marketing

769,406

854,724

85,318

10.0%


1,669,101

1,435,502

(233,599)

-16.3%


General and administrative

1,308,483

1,226,181

(82,302)

-6.7%


2,671,969

2,437,189

(234,780)

-9.6%


Depreciation and amortization

46,330

32,426

(13,904)

-42.9%


86,898

62,895

(24,003)

-38.2%


Stock-based compensation

314,565

303,097

(11,468)

-3.8%


600,807

405,686

(195,121)

-48.1%


Foreign currency translation loss

(485)

17,631

18,116

102.8%


(12,872)

20,955

33,827

161.4%

Total Operating Expenses

2,438,299

2,434,059

(4,240)

-0.2%


5,015,903

4,362,227

(653,676)

-15.0%











Income (loss) from operations

(702,429)

(1,058,673)

356,244

33.7%


(1,530,594)

(1,553,333)

22,739

1.5%











Other Income (Expenses):











Interest expense

(3,000)

(3,000)

-

0.0%


(6,000)

(6,000)

-

0.0%


Other income (expense)

11,312

5,424

5,888

108.6%


24,114

10,134

13,980

138.0%


Provision for income taxes

(9,816)

(9,337)

(479)

-5.1%


(21,567)

(22,942)

1,375

6.0%


Income from discontinued operations

-

222,626

(222,626)

-100.0%


-

318,515

(318,515)

-100.0%


Gain on sale of discontinued operations

79,353

-

79,353



136,502

-

136,502


Total Other Income (Expenses):

77,849

215,713

(137,864)

-63.9%


133,049

299,707

(166,658)

-55.6%











Net income (loss)

$ (624,580)

$   (842,960)

$  218,380

25.9%


$   (1,397,545)

$ (1,253,626)

$ (143,919)

-11.5%











Adjusted EBITDA

$ (342,019)

$   (705,519)

$  363,500

51.5%


$      (855,761)

$ (1,063,797)

$   208,036

19.6%











Platforms:











ARR (Annual recurring revenue)






$    1,708,547

$      905,157

$   803,390

88.8%


Deployments






184

96

88

91.7%


ASP (Average sales price)






$           9,286

$           9,429

$         (143)

-1.5%

Transactions:











Transaction count

205,019

193,490

11,529

6.0%


410,085

384,870

25,215

6.6%


Corporate customers

816

754

62

8.2%


811

759

52

6.9%


Academic customers

228

182

46

25.3%


222

178

45

25.1%


Total customers

1,044

936

108

11.5%


1,033

936

97

10.3%

Active Customer Accounts, Transactions and Annual Recurring Revenue

The company defines active customer accounts as the sum of the total quantity of customers per month for each month in the period divided by the respective number of months in the period. The quantity of customers per month is defined as customers with at least one transaction during the month.

A transaction is an order for a unit of copyrighted content fulfilled or managed in the Platform.

The company defines annual recurring revenue as the value of contracted Platform subscription recurring revenue normalized to a one-year period.

Use of Non-GAAP Measure – Adjusted EBITDA

Research Solutions' management evaluates and makes operating decisions using various financial metrics. In addition to the company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP measure provides useful information about the company's operating results.

The tables below provide a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. Adjusted EBITDA is defined as net income (loss), plus interest expense, other income (expense), foreign currency transaction loss, provision for income taxes, depreciation and amortization, stock-based compensation, income from discontinued operations, gain on sale of discontinued operations, and other potential adjustments that may arise.

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):


Quarter Ended December 31,


Six Months Ended December 31,




2017

2016

Change


2017

2016

Change

Net Income (loss)

$ (624,580)

$ (842,960)

$ 218,380


$ (1,397,545)

$ (1,253,626)

$ (143,919)


Add (deduct):










Interest expense

3,000

3,000

-


6,000

6,000

-



Other income (expense)

(11,312)

(5,424)

(5,888)


(24,114)

(10,134)

(13,980)



Foreign currency translation loss

(485)

17,631

(18,116)


(12,872)

20,955

(33,827)



Provision for income taxes

9,816

9,337

479


21,567

22,942

(1,375)



Depreciation and amortization

46,330

32,426

13,904


86,898

62,895

24,003



Stock-based compensation

314,565

303,097

11,468


600,807

405,686

195,121



Income from discontinued operations

-

(222,626)

222,626


-

(318,515)

318,515



Gain on sale of discontinued operations

(79,353)

-

(79,353)


(136,502)

-

(136,502)


Adjusted EBITDA

$ (342,019)

$ (705,519)

$ 363,500


$    (855,761)

$ (1,063,797)

$  208,036

About Research Solutions

Research Solutions, Inc. (OTCQB: RSSS) is a pioneer in cloud-based research intelligence and retrieval solutions for R&D-driven organizations. More than 70 percent of the top 25 pharmaceutical companies in the world rely on services delivered by Research Solutions' wholly owned subsidiary Reprints Desk. The company's Software-as-a-Service (SaaS) Platform provides customers with on-demand access to, and augmented data from, tens of millions of scientific, medical, and technical (STM) documents, helping them to accelerate acquisition at the point of discovery, save time and money, and remain copyright-compliant. For more information, visit www.researchsolutions.com.

Important Cautions Regarding Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the company's products in the market; the company's success in obtaining new customers and new Platform deployments; the company's success in technology and product development; the company's ability to execute its business model and strategic plans; the company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the company's Securities and Exchange Commission Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. The company assumes no obligation to update the cautionary information in this release.

Research Solutions, Inc. and Subsidiaries

Consolidated Balance Sheets



December 31,


June 30,


2017


2017


(unaudited)



Assets




Current assets:




Cash and cash equivalents

$

4,924,620


$

5,773,950

Accounts receivable, net of allowance of $119,462 and $119,536, respectively


3,739,099



5,465,299

Prepaid expenses and other current assets


315,906



196,820

Prepaid royalties


736,145



566,282

Total current assets


9,715,770



12,002,351







Other assets:






Property and equipment, net of accumulated depreciation of $728,271 and $699,421, respectively


81,340



85,737

Intangible assets, net of accumulated amortization of $679,836 and $623,714, respectively


-



41,870

Deposits and other assets


14,383



14,466

Right of use asset, net of accumulated amortization of $99,864 and $45,105, respectively


363,158



417,917

Total assets

$

10,174,651


$

12,562,341







Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable and accrued expenses

$

5,053,770


$

6,443,056

Deferred revenue


1,306,429



1,335,475

Lease liability, current portion


115,263



110,888

Total current liabilities


6,475,462



7,889,419







Long-term liabilities:






Lease liability, long-term portion


269,924



328,299

Total liabilities


6,745,386



8,217,718







Commitments and contingencies












Stockholders' equity:






Preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding


-



-

Common stock; $0.001 par value; 100,000,000 shares authorized; 24,147,582 and 23,883,145 shares issued and outstanding, respectively


24,148



23,883

Additional paid-in capital


22,764,915



22,267,327

Accumulated deficit


(19,273,403)



(17,875,858)

Accumulated other comprehensive loss


(86,395)



(70,729)

Total stockholders' equity


3,429,265



4,344,623

Total liabilities and stockholders' equity

$

10,174,651


$

12,562,341

 

Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss



Three Months Ended


Six Months Ended


December 31,


December 31,


2017


2016


2017


2016









Revenue:












Platforms

$

413,404


$

219,137


$

801,349


$

391,209

Transactions


6,409,816



5,866,562



12,769,711



11,872,961

Total Revenue


6,823,220



6,085,699



13,571,060



12,264,170













Cost of revenue:












Platforms


90,362



45,623



174,349



75,587

Transactions


4,996,988



4,664,690



9,911,402



9,379,689

Total cost of revenue


5,087,350



4,710,313



10,085,751



9,455,276

Gross Profit


1,735,870



1,375,386



3,485,309



2,808,894













Operating expenses:












Selling, general and administrative


2,391,969



2,401,633



4,929,005



4,299,332

Depreciation and amortization


46,330



32,426



86,898



62,895

Total operating expenses


2,438,299



2,434,059



5,015,903



4,362,227

Loss from operations


(702,429)



(1,058,673)



(1,530,594)



(1,553,333)













Other income (expenses):












Interest expense


(3,000)



(3,000)



(6,000)



(6,000)

Other income


11,312



5,424



24,114



10,134

Total other income


8,312



2,424



18,114



4,134













Loss from operations before provision for income taxes


(694,117)



(1,056,249)



(1,512,480)



(1,549,199)

Provision for income taxes


(9,816)



(9,337)



(21,567)



(22,942)













Loss from continuing operations


(703,933)



(1,065,586)



(1,534,047)



(1,572,141)













Discontinued operations:












Income from discontinued operations


-



222,626



-



318,515

Gain from sale of discontinued operations


79,353



-



136,502



-

Income from discontinued operations


79,353



222,626



136,502



318,515













Net loss


(624,580)



(842,960)



(1,397,545)



(1,253,626)













Other comprehensive income (loss):












Foreign currency translation


(6,715)



5,195



(15,666)



1.912

Comprehensive loss

$

(631,295)


$

(837,765)


$

(1,413,211)


$

(1,251,714)













Loss per common share:












Loss per share from continuing operations, basic and diluted

$

(0.03)


$

(0.05)


$

(0.07)


$

(0.06)

Income per share from discontinued operations, basic and diluted

$

-


$

0.01


$

0.01


$

0.01

Net loss per share, basic and diluted

$

(0.03)


$

(0.04)


$

(0.06)


$

(0.05)

Weighted average common shares outstanding, basic and diluted


23,455,654



23,200,975



23,418,046



23,166,272

 

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SOURCE Research Solutions, Inc.

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