Research Solutions, Inc.
(OTCQB:RSSS)

Research Solutions, Inc. (RSSS)

Research Solutions Reports Fiscal Fourth Quarter and Full Year 2017 Financial Results

Sep 18, 2017

ENCINO, Calif., Sept. 18, 2017 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal fourth quarter and full year ended June 30, 2017.

Research Solutions, Inc. (RSSS) Logo

The preliminary results below are from continuing operations and exclude the results of the Reprints and ePrints business whose assets were sold on June 30, 2017. In addition, prior period results for the Reprints and ePrints business are classified as discontinued operations.

Fiscal Fourth Quarter 2017 Summary vs. Year-Ago Quarter

  • Total revenue increased 11% to $6.8 million.
  • Platform revenue up 145% to $318,000, with a 137% increase in total Platform deployments to 140. Annual recurring revenue was up 137% to $1.4 million.
  • Transaction revenue up 8% to $6.5 million, with customer count up 11% to 1,001. Transaction count up 11% to 212,386.
  • Total gross margin up 180 basis points to 25.0%.
  • Net loss from continuing operations was $0.8 million, or $(0.03) per share, compared to a net loss of $0.2 million, or $(0.01) per share.

Management Commentary
"As our preliminary results indicated, the market momentum for our SaaS Platform business continues to grow," said Peter Derycz, president and CEO of Research Solutions. "Fourth quarter deployments more than doubled to 140, with annual recurring revenue up 137% to $1.4 million. In our Transactions business, the proactive measures we put into place last quarter to grow revenue and improve margins are having their intended effect. We look forward to our operational and financial momentum continuing into fiscal 2018."

Fiscal Fourth Quarter 2017 Financial Results
Total revenue increased 11% to $6.8 million compared to $6.2 million in the same year-ago quarter.

Platform subscription revenue increased 145% to $318,000 compared to $130,000 in the year-ago quarter. The increase was due to a 137% increase in the total number of paid Platform deployments to 140. The quarter ended with annual recurring revenue up 137% to $1.4 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 8% to $6.5 million compared to $6.0 million in the same year-ago quarter. Total active customers increased 11% from 909 to 1,011, and transaction count also increased 11% from 191,000 to 212,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 180 basis points to 25.0% from 23.2% in the same year-ago quarter. The increase was driven by a revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $2.5 million compared to $1.6 million in the year-ago quarter, driven primarily by the company's investment in sales, marketing and technology personnel to support increased Platform sales and deployments.

Net loss from continuing operations in the fiscal fourth quarter was $0.8 million, or $(0.03) per share, compared to a net loss of $0.2 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.6) million compared to $0.0 million in the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below). Both the net loss and Adjusted EBITDA reflect the company's investment in its Platform business.

Cash and cash equivalents at June 30, 2017 were $5.8 million compared to $6.1 million at June 30, 2016. There were no outstanding borrowings under the company's revolving line of credit, which provides the lesser of $4 million or 80% of eligible accounts receivable. 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.

Full Year 2017 Financial Results
Total revenue increased 7% to $25.7 million compared to $24.1 million in 2016.

Platform subscription revenue increased 144% to $980,000 compared to $402,000 in 2016. The increase was due to the previously mentioned increase in total paid Platform deployments to 140 and strong annual recurring revenue growth to $1.4 million.

Transaction revenue increased 4% to $24.8 million compared to $23.7 million in 2016. Total active customers increased 11% from 873 to 967, and transaction count increased 9% from 741,849 to 810,083.

Total gross margin increased 30 basis points to 23.7% from 23.4% in 2016. The increase was driven by the revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $9.2 million compared to $6.9 million in 2016, driven primarily by the company's investment throughout the year in sales, marketing and technology personnel to support increased Platform sales and deployments.

Net loss from continuing operations in fiscal 2017 was $3.1 million, or $(0.14) per share, compared to a net loss of $1.4 million, or $(0.08) per share, in 2016. Adjusted EBITDA totaled $(2.3) million compared to $(0.5) million in 2016. Both the net loss and Adjusted EBITDA reflect the company's investment in its Platform business.

Further details about these results are available in the company's annual report on Form 10-K, 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: Monday, September 18, 2017
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: 10003523

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 October 2, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10003523

Fiscal Fourth Quarter and Full Year 2017 Financial and Operational Summary Tables






Quarter Ended June 30,



2017

2016

Change

%

Revenue:






Platforms

$       318,194

$       129,963

$       188,231

144.8%


Transactions

6,521,313

6,025,972

495,341

8.2%

Total Revenue

6,839,507

6,155,935

683,572

11.1%






Gross Profit:






Platforms

247,097

106,537

140,560

131.9%


Transactions

1,460,813

1,323,080

137,733

10.4%

Total Gross Profit

1,707,910

1,429,617

278,293

19.5%






Gross profit as a % of revenue:






Platforms

77.7%

82.0%

-4.3%



Transactions

22.4%

22.0%

0.4%


Total Gross Profit

25.0%

23.2%

1.7%







Operating Expenses:






Sales and marketing

988,962

520,402

468,560

90.0%


General and administrative

1,326,798

902,667

424,131

47.0%


Depreciation and amortization

36,893

29,702

7,191

24.2%


Stock-based compensation

112,151

162,192

(50,041)

-30.9%


Foreign currency translation loss

(6,362)

994

(7,356)

-740.0%

Total Operating Expenses

2,458,442

1,615,957

842,485

52.1%

Income (loss) from operations

(750,532)

(186,340)

(564,192)

-302.8%






Other Income (Expenses):






Interest expense

(3,000)

(3,000)

-

0.0%


Other income (expense)

3,584

(13,382)

16,966

126.8%


Provision for income taxes

(7,009)

(5,652)

(1,357)

-24.0%


Income from discontinued operations

113,314

155,385

(42,071)

-27.1%


Gain on sale of discontinued operations

241,196

-

241,196


Total Other Income (Expenses):

348,085

133,351

214,734

161.0%






Net income (loss)

$      (402,447)

$        (52,989)

$      (349,458)

-659.5%






Transactions:






Transaction count

212,386

191,376

21,010

11.0%


Corporate customers

810

756

54

7.1%


Academic customers

201

153

48

31.4%


Total customers

1,011

909

102

11.2%









Year Ended June 30,



2017

2016

Change

%

Revenue:






Platforms

$       980,323

$       402,038

$       578,285

143.8%


Transactions

24,766,953

23,690,073

1,076,880

4.5%

Total Revenue

25,747,276

24,092,111

1,655,165

6.9%






Gross Profit:






Platforms

775,272

328,116

447,156

136.3%


Transactions

5,328,922

5,306,527

22,395

0.4%

Total Gross Profit

6,104,194

5,634,643

469,551

8.3%






Gross profit as a % of revenue:






Platforms

79.1%

81.6%

-2.5%



Transactions

21.5%

22.4%

-0.9%


Total Gross Profit

23.7%

23.4%

0.3%







Operating Expenses:






Sales and marketing

3,388,248

2,041,559

1,346,689

66.0%


General and administrative

5,015,794

4,069,786

946,008

23.2%


Depreciation and amortization

133,694

90,846

42,848

47.2%


Stock-based compensation

630,163

713,890

(83,727)

-11.7%


Foreign currency translation loss

20,865

5,287

15,578

294.6%

Total Operating Expenses

9,188,764

6,921,368

2,267,396

32.8%






Income (loss) from operations

(3,084,570)

(1,286,725)

(1,797,845)

-139.7%






Other Income (Expenses):






Interest expense

(12,000)

(17,382)

5,382

31.0%


Other income (expense)

23,861

(31,611)

55,472

175.5%


Provision for income taxes

(35,495)

(28,162)

(7,333)

-26.0%


Income from discontinued operations

573,445

866,022

(292,577)

-33.8%


Gain on sale of discontinued operations

241,196

-

241,196


Total Other Income (Expenses):

791,007

788,867

2,140

0.3%






Net income (loss)

$  (2,293,563)

$      (497,858)

$  (1,795,705)

-360.7%






Platforms:






ARR (Annual recurring revenue)

$    1,376,729

$       580,902

$       795,827

137.0%


Deployments

140

59

81

137.3%


ASP (Average sales price)

$            9,834

$            9,846

$                (12)

-0.1%

Transactions:






Transaction count

810,083

741,849

68,234

9.2%


Corporate customers

782

733

50

6.8%


Academic customers

185

140

45

31.7%


Total customers

967

873

94

10.8%

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 June 30,




2017

2016

Change

Net Income (loss)

$      (402,447)

$        (52,989)

$      (349,458)


Add (deduct):






Interest expense

3,000

3,000

-



Other income (expense)

(3,584)

13,382

(16,966)



Foreign currency translation loss

(6,362)

994

(7,356)



Provision for income taxes

7,009

5,652

1,357



Depreciation and amortization

36,893

29,702

7,191



Stock-based compensation

112,151

162,192

(50,041)



Income from discontinued operations

(113,314)

(155,385)

42,071



Gain on sale of discontinued operations

(241,196)

-

(241,196)


Adjusted EBITDA

$      (607,850)

$            6,548

$      (614,398)






Year Ended June 30,




2017

2016

Change

Net Income (loss)

$  (2,293,563)

$      (497,858)

$  (1,795,705)


Add (deduct):

-

-




Interest expense

12,000

17,382

(5,382)



Other income (expense)

(23,861)

31,611

(55,472)



Foreign currency translation loss

20,865

5,287

15,578



Provision for income taxes

35,495

28,162

7,333



Depreciation and amortization

133,694

90,846

42,848



Stock-based compensation

630,163

713,890

(83,727)



Income from discontinued operations

(573,445)

(866,022)

292,577



Gain on sale of discontinued operations

(241,196)

-

(241,196)


Adjusted EBITDA

$  (2,299,848)

$      (476,702)

$  (1,823,146)

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




June 30,


June 30,



2017


2016

Assets





Current assets:





Cash and cash equivalents


$

5,773,950


$

6,076,875

Accounts receivable, net of allowance of $119,536 and $52,084, respectively



5,465,299



5,761,860

Prepaid expenses and other current assets



196,820



164,610

Prepaid royalties



566,282



173,665

Total current assets



12,002,351



12,177,010








Other assets:







Property and equipment, net of accumulated depreciation of $699,421 and $642,051, respectively



85,737



82,207

Intangible assets, net of accumulated amortization of $623,714 and $546,679, respectively



41,870



104,848

Deposits and other assets



14,466



7,594

Right of use asset, net of accumulated amortization of $45,105



417,917



-

Total assets


$

12,562,341


$

12,371,659








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

6,443,056


$

5,690,768

Deferred revenue



1,335,475



639,834

Lease liability, current portion



110,888



-

Total current liabilities



7,889,419



6,330,602








Long-term liabilities:







Lease liability, long-term portion



328,299



-

Total liabilities



8,217,718



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; 23,883,145 and 23,809,593 shares issued and outstanding, respectively



23,883



23,810

Additional paid-in capital



22,267,327



21,642,763

Accumulated deficit



(17,875,858)



(15,582,295)

Accumulated other comprehensive loss



(70,729)



(43,221)

Total stockholders' equity



4,344,623



6,041,057

Total liabilities and stockholders' equity


$

12,562,341


$

12,371,659

 

Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss






Years Ended



June 30,



2017


2016






Revenue:







Platforms


$

980,323


$

402,038

Transactions



24,766,953



23,690,073

Total revenue



25,747,276



24,092,111








Cost of revenue:







 Platforms



205,051



73,922

Transactions



19,438,031



18,383,546

Total cost of revenue



19,643,082



18,457,468

Gross profit



6,104,194



5,634,643








Operating expenses:







Selling, general and administrative



9,055,070



6,830,522

Depreciation and amortization



133,694



90,846

Total operating expenses



9,188,764



6,921,368

Loss from operations



(3,084,570)



(1,286,725)








Other income (expenses):







Interest expense



(12,000)



(17,382)

Other income (expense)



23,861



(31,611)

Total other income (expenses)



11,861



(48,993)








Loss from continuing operations before provision for income taxes



(3,072,709)



(1,335,718)

Provision for income taxes



(35,495)



(28,162)








Loss from continuing operations



(3,108,204)



(1,363,880)








Discontinued operations:







Income from discontinued operations



573,445



866,022

Gain from sale of discontinued operations



241,196



-

Income from discontinued operations



814,641



866,022








Net loss



(2,293,563)



(497,858)








Other comprehensive loss:

Foreign currency translation



(27,508)



(13,874)

Comprehensive loss


$

(2,321,071)


$

(511,732)








Income (loss) per common share:







Loss per share from continuing operations, basic and diluted


$

(0.14)


$

(0.08)

Income per share from discontinued operations, basic and diluted


$

0.04


$

0.05

Net loss per share, basic and diluted


$

(0.10)


$

(0.03)

Weighted average common shares outstanding, basic and diluted



23,241,572



17,769,827

 

SOURCE Research Solutions, Inc.

For further information: Investor Relations: Liolios Group, Inc., Cody Slach, Tel +1 (949) 574-3860, RSSS@liolios.com; or Media Contact: Kaye Public Relations, Inc., Lynda Kaye, Tel +1 (250) 266-5293, lynda@kayepr.com


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