Research Solutions, Inc.
(OTCQB:RSSS)

Research Solutions, Inc. (RSSS)

Research Solutions Reports Financial Results for Fiscal First Quarter 2017

Transaction Revenue up 8% to $6.0 Million, with Annual Recurring Revenue up 133% to Record $751,000

Nov 14, 2016

ENCINO, Calif., Nov. 14, 2016 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a pioneer in cloud-based SaaS research intelligence products and services for research-intensive organizations, reported financial results for its fiscal first quarter 2017 ended September 30, 2016. Quarterly comparisons are to the same year-ago quarter unless otherwise noted.

As of its last reporting period, the company began reporting results from Article Galaxy SaaS Platform Subscriptions and Article Galaxy Transactions separately:

  • Platform subscriptions provide access to the company's premium research intelligence products and services on an annual commitment basis. Premium access is provided through a cloud-based software-as-a-service (SaaS) platform allowing customers to initiate orders, manage transactions, automate authentication, obtain reports, and connect seamlessly to corporate intranets. Premium users can also enhance the information resources they already access via subscriptions or internal libraries, as well as organize workgroups for collaboration around scientific information.
  • Transactions primarily represent customer article purchases conducted via both premium paid subscription and free standard platform access.

First Quarter Financial Highlights

  • Platform subscription revenue was up 194% to $172,000, driving related gross profit up 204% to $142,000 (82.6% gross margin).
  • Annual recurring revenue was up 133% to $751,000 at quarter-end.
  • Transaction revenue was up 8% to $6.0 million, driving related gross profit up 1% to $1.3 million (21.5% gross margin).
  • Cash and equivalents at September 30, 2016 totaled $6.6 million, versus $6.1 million at June 30, 2016.

First Quarter Operational Highlights

  • Platform deployments totaled 75, up 27% sequentially and up 168% from the same year-ago quarter.
  • Active customer accounts increased 14% to 936, with the number of corporate customers up 10% to 763 and academic customers up 37% to 173.
  • Transaction count increased 12% to 191,380.

Fiscal First Quarter 2017 Financial and Operational Summary




Quarter Ended September 30,




2016

2015

Change

% Change


Revenue:







Platforms

$   172,072

$      58,463

$   113,609

194.3%



Transactions

6,006,399

5,567,241

439,158

7.9%



Reprints and ePrints

1,480,245

2,401,397

(921,152)

-38.4%


Total Revenue

7,658,716

8,027,101

(368,385)

-4.6%








Gross Profit:







Platforms

142,108

46,701

95,407

204.3%



Transactions

1,291,400

1,277,216

14,184

1.1%



Reprints and ePrints

95,889

230,430

(134,541)

-58.4%


Total Gross Profit

1,529,397

1,554,347

(24,950)

-1.6%








Gross profit as a % of revenue:







Platforms

82.6%

79.9%

2.7%




Transactions

21.5%

22.9%

-1.4%




Reprints and ePrints

6.5%

9.6%

-3.1%



Total Gross Profit

20.0%

19.4%

0.6%









Operating Expenses:







Sales and marketing

580,778

496,641

(84,137)

-16.9%



General and administrative

1,211,008

1,063,262

(147,746)

-13.9%



Depreciation and amortization

30,469

14,738

(15,731)

-106.7%



Stock-based compensation

102,589

143,741

41,152

28.6%



Foreign currency translation loss

3,324

1,317

(2,007)

-152.4%


Total Operating Expenses

1,928,168

1,719,699

(208,469)

-12.1%








Income (loss) from operations

(398,771)

(165,352)

(233,419)

-141.2%








Other Income (Expenses):







Interest expense

(3,000)

(4,993)

1,993

39.9%



Other income (expense)

4,710

2,769

1,941

70.1%



Provision for income taxes

(13,605)

(11,244)

(2,361)

-21.0%


Total Other Income (Expenses):

(11,895)

(13,468)

1,573

11.7%








Net income (loss)

$  (410,666)

$  (178,820)

$  (231,846)

-129.7%








Adjusted EBITDA (a Non-GAAP term)

$  (262,389)

$      (5,556)

$  (256,833)

-4622.6%









Platforms:







Annual Recurring Revenue

$    751,489

$    323,086

$    428,403

132.6%



Deployments

75

28

47

167.9%



Average Sales Price

$      10,020

$      11,539

$      (1,519)

-13.2%


Transactions:







Transaction count

191,380

171,178

20,202

11.8%



Corporate customers

763

693

70

10.1%



Academic customers

173

126

47

37.3%



Total active customers

936

819

117

14.3%

 

Revenue

Platform subscription revenue increased 194% to $ 172,000, driven primarily by a 167% increase in platform deployments. The quarter ended with annual recurring revenue up 133% to $751,000 (see the company's definition of annual recurring revenue, below).

Transaction revenue increased 8% to $6.0 million in the first quarter of fiscal 2017, driven primarily by a 14% increase in active customer accounts (see the company's definition of active customer accounts and transactions, below).

Revenue generated by the company's legacy business, Reprints and ePrints, declined 38% to $1.5 million. The decrease was primarily due to a net decrease in order volume, which typically fluctuates from period-to-period depending upon customer marketing budgets and the publication of journal articles that match their requirements. While this legacy business provides cash flow to the company, it is a low margin business in which the company invests few resources or time.

Total revenue in the quarter declined 4.6% to $7.7 million, due primarily to the decline in Reprints and ePrints.

Gross Profit and Margin

Gross profit from platform subscriptions was up 204% to $142,000, with related gross margin increasing from 79.9% to 82.6%.

Gross profit from transactions was up 1% to $1.3 million for the quarter, with related gross margin declining from 22.9% to 21.5%.

Reprints and ePrints gross profit declined 58% to $96,000, with related gross margin declining from 9.6% to 6.5%. Virtually all of the gross profit generated by this legacy business falls to the bottom line given that there is little related sales or administrative costs, and all personnel costs are included in cost of sales.

Total gross profit in the first fiscal quarter declined 1.6% to $1.5 million, with total gross margin as a percentage of revenue increasing from 19.4% to 20.0%.

Net Loss and Adjusted EBITDA

In the first quarter, net loss totaled $411,000 or $(0.02) per diluted share, as compared to a net loss of $179,000 or $(0.01) per diluted share in the same year-ago quarter. The increase in net loss was largely due to an increase in operating expenses, as the company further expanded its sales force and technology personnel to support increased Platform sales and deployments.

Negative adjusted EBITDA totaled $262,000 versus a negative adjusted EBITDA of $6,000 in the same year-ago quarter. 

Cash and Credit Availability

Cash and equivalents at September 30, 2016 totaled $6.6 million, versus $6.1 million at June 30, 2016. There were no outstanding borrowings under the company's revolving line of credit with Silicon Valley Bank, which provides the lesser of $4.0 million or 80% of eligible accounts receivable. Additionally, the company had no long-term liabilities or debt.

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

Management Commentary

"During the quarter, sales of our cloud-based, research intelligence products and services continued to gain momentum," said Research Solutions president and CEO, Peter Derycz. "In fact, SaaS platform deployments totaled 75 by quarter-end, up 27% from the previous quarter and nearly three times more than in the same year-ago quarter.

"In addition to transaction revenue, our platform deployment generates high-margin annual recurring subscription revenue. Our annual recurring revenue from platform subscriptions was $751,000, up by nearly a third over the previous quarter and more than double over the same year-ago quarter.

"While our transaction revenue is still many times greater than platform revenue, platform gross margin ticked up even higher this quarter to 82.6%, which is about four times that of transactions at 21.5%.  Also, while transactions represent fairly reliable repeat revenue, platforms generate even more predicable recurring revenue.

"During the quarter, we also continued to see our customer acquisition efforts maintain a 90-plus percent closing rate when our solution is evaluated against the competition. Further, in most instances, when it comes to platform sales, we have virtually no competition except for a customer's home-grown system, and these systems are typically inefficient and costly, and certainly far less useful and capable than our offerings.

"Our success also reflects how we have continued to make strong and steady progress enhancing our platform. Numerous new features and capabilities have made it an even more engaging and indispensable tool for corporate and academic researchers and scientists around the world. Our relentless drive for improvements and enhancements has sustained our enviable position as far and away the world-class leader in our space. More importantly, this is driving strong growth in platform sales, which has the effect of increasing our solution's market penetration even further.

"We are also now appealing to an increasingly wider audience of small to medium size businesses, that is, companies with up to 1,000 employees, and particularly those firms which have been using home-grown systems and methods for accessing STM information and managing their journal subscriptions. Our cloud-based SaaS research intelligence platform, which provides premium access and custom feature sets, represents a very compelling value proposition for these organizations.  While our customers have long included more than 70% of the world's top 25 pharma companies, we are seeing our subscription-based platform increasingly being adopted by this broader market.

"Looking ahead, we plan to continue to reinvest our available resources into enhancing our platform and preparing it for its next stage of growth and development. As we announced earlier this year, we are focused on developing and delivering new software-as-a-service offerings in calendar year 2017 that will provide a best-in-class research platform for businesses and business professionals.

"These new offerings will allow us to expand into multiple new and lucrative market segments, including further tapping the larger SMB market. Our existing blue chip customer base will also benefit from the new SaaS offerings, allowing us to further build upon these valuable relationships.

"Given the already existing superiority of our research intelligence platform and our great competitive lead, our ability to leverage and maximize our sales and marketing resources to drive growth both domestically and internationally continues to be our most important challenge. In the first quarter we made good progress in this regard, and this effort will continue throughout the fiscal year.

"Broadening our international presence is an important aspect to our subscription business model and one that is important to consider when evaluating our future prospects. This is because at the core of our platform is a virtual store that is open 24 hours a day, seven days a week, and accessible on any virtually any computer or mobile device, by anyone anywhere in the world.  Moreover, reaching and servicing more international customers does not require setting up new regional offices or other capital-intensive resources. So, as we grow our sales and marketing teams and support staff, we believe we can continue to stay a relatively lean and efficient organization.

"We are very excited by our growth prospects and the technology we are bringing to market. As we continue through the fiscal year, we expect to maintain healthy growth in transactions and SaaS platform deployments, with this continuing to be driven by our unique offering which attracts both increased customer usage and new customer wins."

Conference Call

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

Date:

Monday, November 14, 2016

Time:

Noon Eastern time (9:00 a.m. Pacific time)

Toll-free dial-in number:

1-855-327-6837

International dial-in number:

1-631-891-4304

Conference ID:

10001982

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

The conference call will be webcast live here and via a link provided in the investor relations section of the company's website at www.researchsolutions.com. Online participants may submit questions and comments via the webcast player.

A dial-in and webcast replay of the conference call will be available after 3:00 p.m. Eastern time and through November 28, 2016:

Toll-free replay number:

1-844-512-2921    

International replay number:

1-412-317-6671

Replay ID:

10001982

Webcast replay:

Click here

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 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.

Adjusted EBITDA - Use of Non-GAAP Measure

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 attached tables 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 (loss) from discontinued operations, and other potential adjustments that may arise.

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



Three Months Ended September 30,




2016



2015

Net income (loss)


$

(410,666)


$

(178,820)

Add (deduct):







Interest expense



3,000



4,993

Other (income) expense



(4,710)



(2,769)

Foreign currency transaction loss



3,324



1,317

Provision for income taxes



13,605



11,244

Depreciation and amortization



30,469



14,738

Stock-based compensation



102,589



143,741

Adjusted EBITDA


$

(262,389)


$

(5,556)

 

About Research Solutions
Research Solutions, Inc. (OTCQB: RSSS) is a pioneer in cloud-based SaaS research intelligence products and services for research-intensive organizations. More than 70 percent of the top 25 pharmaceutical companies in the world rely on services powered by Research Solutions' wholly owned subsidiary, Reprints Desk. The company's cloud-based SaaS solution provides customers with on demand  access to the over one million newly published scientific, technical, and medical (STM) articles each year in addition to tens of millions of articles previously published, helping them to create and speed discoveries, save time and money, and remain copyright-compliant.  For more information about Research Solutions, visit www.researchsolutions.com.

About Reprints Desk
Reprints Desk, Inc. improves how journal articles and clinical reprints are accessed, procured, and legally used in evidence-based promotions, medical affairs, and scientific, technical, and medical (STM) research. Organizations fueled by intellectual property choose Reprints Desk because of its collaborative business approach, efficient article supply system and services, and commitment to quality post-sales support. Reprints Desk has ranked #1 in every Document Delivery Vendor Scorecard from industry analyst and advisory firm Outsell Inc. since 2008. For more information about Reprints Desk, visit www.reprintsdesk.com.

Cautionary Note 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; 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




September 30,


June 30,



2016


2016



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

6,566,214


$

6,076,875

Accounts receivable, net of allowance of $47,635 and $52,084, respectively



4,577,150



5,761,860

Prepaid expenses and other current assets



150,918



164,610

Prepaid royalties



418,065



173,665

Total current assets



11,712,347



12,177,010








Other assets:







Property and equipment, net of accumulated depreciation of $654,177 and $642,051, respectively



78,866



82,207

Intangible assets, net of accumulated amortization of $564,480 and $546,679, respectively



92,256



104,848

Deposits and other assets



7,544



7,594

Total assets


$

11,891,013


$

12,371,659








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

5,316,477


$

5,690,768

Deferred revenue



871,367



639,834

Total current liabilities



6,187,844



6,330,602








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; 23,887,723 and 23,809,593  shares issued and outstanding, respectively



23,888



23,810

Additional paid-in capital



21,718,746



21,642,763

Accumulated deficit



(15,992,961)



(15,582,295)

Accumulated other comprehensive loss



(46,504)



(43,221)

Total stockholders' equity



5,703,169



6,041,057

Total liabilities and stockholders' equity


$

11,891,013


$

12,371,659

 

  

 Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Income (Loss)




Three Months Ended



September 30,



2016


2015






Revenue


$

7,658,716


$

8,027,101

Cost of revenue



6,129,319



6,472,754

Gross profit



1,529,397



1,554,347








Operating expenses:







Selling, general and administrative



1,897,699



1,704,961

Depreciation and amortization



30,469



14,738

Total operating expenses



1,928,168



1,719,699

Loss from operations



(398,771)



(165,352)








Other income (expenses):







Interest expense



(3,000)



(4,993)

Other income



4,710



2,769

Total other income (expenses)



1,710



(2,224)








Loss from operations before provision for income taxes



(397,061)



(167,576)

Provision for income taxes



(13,605)



(11,244)








Net loss



(410,666)



(178,820)








Other comprehensive income (loss):
     
Foreign currency translation



(3,283)



1,703

Comprehensive loss


$

(413,949)


$

(177,117)








Loss per common share:







Net loss per share


$

(0.02)


$

(0.01)

Weighted average common shares outstanding, basic and diluted



23,131,570



17,564,070

 

See notes to consolidated financial statements available in the company's 10-Q as filed with the Securities and Exchange Commission

Logo - http://photos.prnewswire.com/prnh/20160623/382926LOGO

SOURCE Research Solutions, Inc.

For further information: Investor Relations Contact: Alan Urban, CFO, Research Solutions, Inc., Tel +1 (818) 646-2202, ir@researchsolutions.com; Media Contact: Ian Palmer, Chief Sales and Marketing Officer, Research Solutions, Inc., Tel +1 (415) 533-8308, ipalmer@reprintsdesk.com


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