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Research Solutions Reports Fiscal Third Quarter 2018 Financial Results

May 15, 2018

ENCINO, Calif., May 15, 2018 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal third quarter ended March 31, 2018.

Research Solutions, Inc. (RSSS) Logo

Fiscal Third Quarter 2018 Highlights vs. Year-Ago Quarter

  • Total revenue increased 10% to $7.3 million.
  • Platform revenue up 81% to $489,000, with a 79% increase in total Platform deployments to 208. Annual recurring revenue was up 76% to $2.0 million.
  • Transaction revenue up 7% to $6.8 million, with customer count up 8% to 1,059. Transaction count up 3% to 219,607.
  • Total gross margin up 240 basis points to 26.3%.
  • Net loss from continuing operations was $0.3 million, or $(0.01) per share, compared to a net loss of $0.8 million, or $(0.03) per share.

Management Commentary

"Our third quarter demonstrates the continued momentum in our strategy to deliver unique workflow efficiency solutions to research-driven organizations in life sciences, technology and academia," said Peter Derycz, president and CEO of Research Solutions. "This can be seen in our fourth consecutive quarter of approximately 10% total revenue growth and annual recurring revenue in our SaaS Platforms business that has surpassed $2 million.

"We expect our momentum to continue in the remainder of 2018 as we launch version 2.1 and 2.2 of our Platform framework, supported by powerful weekly releases or improvements to smart applications we develop called 'gadgets.' This will be supported by a sales and marketing team that we are reconstructing to drive optimum efficiency and investment returns."

Fiscal Third Quarter 2018 Financial Results

Total revenue increased 10% to $7.3 million compared to $6.6 million in the same year-ago quarter.

Platform subscription revenue increased 81% to $489,000 compared to $271,000 in the year-ago quarter. The increase was due to a 79% increase in the total number of paid Platform deployments to 208. The quarter ended with annual recurring revenue up 76% to $2.0 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 7% to $6.8 million compared to $6.4 million in the same year-ago quarter. Total active customers increased 8% from 985 to 1,059, and transaction count increased 3% from 213,000 to 220,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 240 basis points to 26.3% from 23.9% in the same year-ago quarter. The increase was driven by a 100 basis point increase in Transactions gross margin and a revenue mix shift to the higher-margin Platforms business. 

Total operating expenses decreased to $2.2 million compared to $2.4 million in the same year-ago quarter. The decrease was primarily due to the continued optimization of sales and marketing resources and open positions.

Net loss from continuing operations improved to $0.3 million, or $(0.01) per share, compared to a net loss of $0.8 million, or $(0.03) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.1) million compared to $(0.6) 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 March 31, 2018 were $4.8 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 $0.2 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: Tuesday, May 15, 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: 10004686

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 May 29, 2018.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10004686

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



Quarter Ended March 31,


Nine Months Ended March 31,



2018

2017

Change

%


2018

2017

Change

%

Revenue:











Platforms

$     489,219

$    270,920

$    218,299

80.6%


$      1,290,568

$         662,129

$        628,439

94.9%


Transactions

6,792,289

6,372,679

419,610

6.6%


19,562,000

18,245,640

1,316,360

7.2%

Total Revenue

7,281,508

6,643,599

637,909

9.6%


20,852,568

18,907,769

1,944,799

10.3%











Gross Profit:











Platforms

386,034

212,553

173,481

81.6%


1,013,034

528,175

484,859

91.8%


Transactions

1,532,330

1,374,837

157,493

11.5%


4,390,639

3,868,109

522,530

13.5%

Total Gross Profit

1,918,364

1,587,390

330,974

20.9%


5,403,673

4,396,284

1,007,389

22.9%











Gross profit as a % of revenue:











Platforms

78.9%

78.5%

0.5%



78.5%

79.8%

-1.3%



Transactions

22.6%

21.6%

1.0%



22.4%

21.2%

1.2%


Total Gross Profit

26.3%

23.9%

2.5%



25.9%

23.3%

2.7%












Operating Expenses:











Sales and marketing

522,894

698,346

(175,452)

-25.1%


1,726,443

1,683,704

42,739

2.5%


Technology and product development

436,672

396,765

39,907

10.1%


1,343,995

1,062,790

281,204

26.5%


General and administrative

1,091,930

1,120,481

(28,551)

-2.5%


3,322,127

3,341,788

(19,660)

-0.6%


Depreciation and amortization

32,768

33,906

(1,138)

-3.4%


119,666

96,801

22,865

23.6%


Stock-based compensation

114,340

112,326

2,014

1.8%


715,147

518,012

197,135

38.1%


Foreign currency translation loss

(9,737)

6,272

(16,009)

-255.2%


(22,609)

27,227

(49,836)

-183.0%

Total Operating Expenses

2,188,866

2,368,095

(179,229)

-7.6%


7,204,769

6,730,322

474,447

7.0%











Income (loss) from operations

(270,502)

(780,705)

510,203

65.4%


(1,801,096)

(2,334,038)

532,942

22.8%











Other Income (Expenses):











Interest expense

2,000

(3,000)

5,000

166.7%


(4,000)

(9,000)

5,000

55.6%


Other income (expense)

13,769

10,143

3,626

35.7%


37,883

20,277

17,606

86.8%


Provision for income taxes

(10,531)

(5,544)

(4,987)

-90.0%


(32,098)

(28,486)

(3,612)

-12.7%


Income from discontinued operations

-

141,616

(141,616)

-100.0%


-

460,131

(460,131)

-100.0%


Gain on sale of discontinued operations

69,277

-

69,277



205,779

-

205,779


Total Other Income (Expenses):

74,515

143,215

(68,700)

-48.0%


207,564

442,922

(235,358)

-53.1%











Net income (loss)

$   (195,987)

$   (637,490)

$    441,503

69.3%


$    (1,593,532)

$     (1,891,116)

$        297,584

15.7%











Platforms:











ARR (Annual recurring revenue)






$      1,982,867

$       1,124,451

$         858,416

76.3%


Deployments






208

116

92

79.3%


ASP (Average sales price)






$            9,533

$            9,694

$               (161)

-1.7%

Transactions:











Transaction count

219,607

212,827

6,780

3.2%


629,692

597,697

31,995

5.4%


Corporate customers

848

802

46

5.7%


823

773

50

6.5%


Academic customers

211

183

28

15.3%


218

179

39

21.7%


Total customers

1,059

985

74

7.5%


1,042

952

89

9.4%

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 March 31,


Nine Months Ended March 31,




2018

2017

Change


2018

2017

Change

Net Income (loss)

$      (195,987)

$     (637,490)

$       441,503


$     (1,593,532)

$       (1,891,116)

$         297,584


Add (deduct):










Interest expense

(2,000)

3,000

(5,000)


4,000

9,000

(5,000)



Other income (expense)

(13,769)

(10,143)

(3,626)


(37,883)

(20,277)

(17,606)



Foreign currency translation loss

(9,737)

6,272

(16,009)


(22,609)

27,227

(49,836)



Provision for income taxes

10,531

5,544

4,987


32,098

28,486

3,612



Depreciation and amortization

32,768

33,906

(1,138)


119,666

96,801

22,865



Stock-based compensation

114,340

112,326

2,014


715,147

518,012

197,135



Income from discontinued operations

-

(141,616)

141,616


-

(460,131)

460,131



Gain on sale of discontinued operations

(69,277)

-

(69,277)


(205,779)

-

(205,779)


Adjusted EBITDA

$       (133,131)

$      (628,201)

$       495,070


$        (988,892)

$      (1,691,998)

$          703,106

About Research Solutions

Research Solutions, Inc. (OTCQB: RSSS) provides workflow efficiency solutions for R&D-driven organizations in life sciences, technology and academia worldwide. Our Software-as-a-Service platform provides tools or "Gadgets" that allow users to discover, access, manage and collaborate around science, technology and medical (STM) content and data. Our customers range from 70+% of the top 25 global pharmaceutical companies to emerging small and medium-sized businesses. We generate recurring revenue from subscriptions to our SaaS platform and transactional revenue from the sale of STM content. 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





Condensed Consolidated Balance Sheets












March 31,


June 30,



2018


2017



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

4,801,305


$

5,773,950

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



4,336,057



5,465,299

Prepaid expenses and other current assets



302,811



196,820

Prepaid royalties



127,906



566,282

Total current assets



9,568,079



12,002,351








Other assets:







Property and equipment, net of accumulated depreciation of $741,398 and $699,421, respectively



72,434



85,737

Intangible assets, net of accumulated amortization of $701,436 and $623,714, respectively



21,600



41,870

Deposits and other assets



14,459



14,466

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



335,380



417,917

Total assets


$

10,011,952


$

12,562,341








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

4,687,974


$

6,443,056

Deferred revenue



1,652,160



1,335,475

Lease liability, current portion



117,507



110,888

Total current liabilities



6,457,641



7,889,419








Long-term liabilities:







Lease liability, long-term portion



239,555



328,299

Total liabilities



6,697,196



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; 23,980,383 and 23,883,145  shares issued and outstanding, respectively



23,980



23,883

Additional paid-in capital



22,853,945



22,267,327

Accumulated deficit



(19,469,389)



(17,875,858)

Accumulated other comprehensive loss



(93,780)



(70,729)

Total stockholders' equity



3,314,756



4,344,623

Total liabilities and stockholders' equity


$

10,011,952


$

12,562,341

 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)








Three Months Ended


Nine Months Ended



March 31,


March 31,



2018


2017


2018


2017










Revenue:













Platforms


$

489,219


$

270,920


$

1,290,568


$

662,129

Transactions



6,792,289



6,372,679



19,562,000



18,245,640

Total revenue



7,281,508



6,643,599



20,852,568



18,907,769














Cost of revenue:













Platforms



103,185



58,367



277,534



133,954

Transactions



5,259,959



4,997,842



15,171,361



14,377,531

Total cost of revenue



5,363,144



5,056,209



15,448,895



14,511,485

Gross profit



1,918,364



1,587,390



5,403,673



4,396,284














Operating expenses:













Selling, general and administrative



2,156,097



2,334,189



7,085,102



6,633,521

Depreciation and amortization



32,768



33,906



119,666



96,801

Total operating expenses



2,188,865



2,368,095



7,204,768



6,730,322

Loss from operations



(270,501)



(780,705)



(1,801,095)



(2,334,038)














Other income (expenses):













Interest expense



2,000



(3,000)



(4,000)



(9,000)

Other income



13,769



10,143



37,883



20,277

Total other income



15,769



7,143



33,883



11,277














Loss from operations before provision for income taxes



(254,732)



(773,562)



(1,767,212)



(2,322,761)

Provision for income taxes



(10,531)



(5,544)



(32,098)



(28,486)














Loss from continuing operations



(265,263)



(779,106)



(1,799,310)



(2,351,247)














Discontinued operations:













Income from discontinued operations



-



141,616



-



460,131

Gain from sale of discontinued operations



69,277



-



205,779



-

Income from discontinued operations



69,277



141,616



205,779



460,131














Net loss



(195,986)



(637,490)



(1,593,531)



(1,891,116)














Other comprehensive income (loss):
      
Foreign currency translation



(7,385)



(18,090)



(23,051)



(16,178)

Comprehensive loss


$

(203,371)


$

(655,580)


$

(1,616,582)


$

(1,907,294)














Loss per common share:













Loss per share from continuing operations, basic and diluted


$

(0.01)


$

(0.03)


$

(0.08)


$

(0.10)

Income per share from discontinued operations, basic and diluted


$

-


$

-


$

0.01


$

0.02

Net loss per share, basic and diluted


$

(0.01)


$

(0.03)


$

(0.07)


$

(0.08)

Weighted average common shares outstanding, basic and diluted



23,498,796



23,265,939



23,444,569



23,199,010














 

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, Research Solutions, Inc., Mitja-Alexander Linss, Director of Marketing, Tel +1 (617) 835 0854, mlinss@reprintsdesk.com


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