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Research Solutions Reports Fiscal Fourth Quarter and Full Year 2018 Financial Results

Sep 20, 2018

ENCINO, Calif., Sept. 20, 2018 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal fourth quarter and full year ended June 30, 2018.

Research Solutions, Inc. (RSSS) Logo

Fiscal Fourth Quarter 2018 Highlights vs. Year-Ago Quarter

  • Total revenue increased 5% to $7.2 million.
  • Platform revenue up 66% to $529,000, with a 62% increase in total Platform deployments to 227. Annual recurring revenue up 64% to $2.3 million.
  • Transaction revenue up 2% to $6.6 million, with customer count up 7% to 1,081. Transaction count up slightly to 213,000.
  • Total gross margin up 220 basis points to 27.2%.
  • Net loss from continuing operations was $0.1 million, or $(0.01) per share, compared to a net loss of $0.8 million, or $(0.03) per share.

Management Commentary

"As our preliminary results indicated, we experienced strong performance in fiscal 2018 due to continued momentum in our Platform business and steady growth in Transactions," said Peter Derycz, president and CEO of Research Solutions. "At the beginning of our fiscal year, we launched our 'Gadget Factory,' which delivers smart apps to our Platform users and allows us to tailor to specific industry verticals. Our Gadget framework has evolved throughout the year to bring near daily innovation to our users, and it is a critical component to our customer retention and satisfaction."

"We anticipate our Platform momentum to drive our business growth in fiscal 2019. This will include self-registration, which will allow more efficient lead generation and frictionless sign-ups, and even more deployments and transactions. Within our Gadget Factory, we will enhance our delivery of innovation by allowing prospects and customers to request Platform capabilities that best suit their needs. We believe this type of hyper-responsiveness will enhance the value of our offering. We also expect the delivery of these enhancements to be maximized by a re-tooled sales and marketing strategy focused on more efficient ways of acquiring customers. Leading this effort is the recent hiring of new chief sales and marketing officers, and they are focused on driving more efficient growth and optimum investment returns."

Fiscal Fourth Quarter 2018 Financial Results

Total revenue increased 5% to $7.2 million compared to $6.8 million in the same year-ago quarter.

Platform subscription revenue increased 66% to $529,000 compared to $318,000 in the year-ago quarter. The increase was due to a 62% increase in the total number of paid Platform deployments to 227. The quarter ended with annual recurring revenue up 64% to $2.3 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 2% to $6.6 million compared to $6.5 million in the same year-ago quarter. Total active customers increased 7% from 1,011 to 1,081, and transaction count increased slightly from 212,000 to 213,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 220 basis points to 27.2% from 25.0% in the same year-ago quarter. The increase was primarily driven by a 310 basis point increase in Platform gross margin and the continued revenue mix shift to the higher-margin Platform business. 

Total operating expenses decreased to $2.1 million compared to $2.5 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 $0.1 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 $(0.0) 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 June 30, 2018, amounted to $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 $0.2 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Full Year 2018 Financial Results

Total revenue increased 9% to $28.0 million compared to $25.7 million in 2017.

Platform subscription revenue increased 86% to $1.8 million compared to $1.0 million in 2017. The increase was due to the previously mentioned increase in total paid Platform deployments to 227 and strong growth in annual recurring revenue to $2.3 million.

Transaction revenue increased 6% to $26.2 million compared to $24.8 million in 2017. Total active customers increased 9% from 967 to 1,051, and transaction count increased 4% from 810,000 to 843,000.

Total gross margin increased 250 basis points to 26.2% from 23.7% in 2017. The increase was driven by the continued revenue mix shift to the higher-margin Platform business and a 100 basis point increase in Transaction gross margin. 

Total operating expenses increased slightly to $9.3 million compared to $9.2 million in 2017. The increase was primarily driven by greater stock-based compensation costs and the company's continued investment in technology and product development.

Net loss from continuing operations in fiscal 2018 improved to $1.9 million, or $(0.08) per share, compared to a net loss of $3.1 million, or $(0.14) per share, in 2017. Adjusted EBITDA improved to $(1.0) million compared to $(2.3) million in 2017.

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: Thursday, September 20, 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: 10005491

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 4, 2018.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10005491

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








Quarter Ended June 30,


Year Ended June 30,



2018

2017

Change

% Change


2018

2017

Change

% Change

Revenue:











Platforms

$ 528,581

$   318,194

$ 210,387

66.1%


$ 1,819,149

$    980,323

$    838,826

85.6%


Transactions

6,637,292

6,521,313

115,979

1.8%


26,199,292

24,766,953

1,432,339

5.8%

Total Revenue

7,165,873

6,839,507

326,366

4.8%


28,018,441

25,747,276

2,271,165

8.8%











Gross Profit:











Platforms

427,211

247,097

180,114

72.9%


1,440,245

775,272

664,973

85.8%


Transactions

1,518,441

1,460,813

57,628

3.9%


5,909,080

5,328,922

580,158

10.9%

Total Gross Profit

1,945,652

1,707,910

237,742

13.9%


7,349,325

6,104,194

1,245,131

20.4%











Gross profit as a % of revenue:











Platforms

80.8%

77.7%

3.2%



79.2%

79.1%

0.1%



Transactions

22.9%

22.4%

0.5%



22.6%

21.5%

1.0%


Total Gross Profit

27.2%

25.0%

2.2%



26.2%

23.7%

2.5%












Operating Expenses:











Sales and marketing

455,250

682,455

(227,205)

-33.3%


2,181,693

2,366,159

(184,466)

-7.8%


Technology & product dev.

454,053

413,249

40,804

9.9%


1,798,048

1,476,039

322,009

21.8%


General and administrative

1,062,980

1,220,056

(157,076)

-12.9%


4,385,107

4,561,844

(176,737)

-3.9%


Depreciation & amortization

32,731

36,893

(4,162)

-11.3%


152,397

133,694

18,703

14.0%


Stock-based compensation

75,089

112,151

(37,062)

-33.0%


790,236

630,163

160,073

25.4%


Foreign currency trans. loss

14,589

(6,362)

20,951

329.3%


(8,020)

20,865

(28,885)

-138.4%

Total Operating Expenses

2,094,692

2,458,442

(363,750)

-14.8%


9,299,461

9,188,764

110,697

1.2%











Income (loss) from operations

(149,040)

(750,532)

601,492

80.1%


(1,950,136)

(3,084,570)

1,134,434

36.8%











Other Income (Expenses):











Interest expense

-

(3,000)

3,000

100.0%


(4,000)

(12,000)

8,000

66.7%


Other income (expense)

20,296

3,584

16,712

466.3%


58,179

23,861

34,318

143.8%


Provision for income taxes

(7,681)

(7,009)

(672)

-9.6%


(39,779)

(35,495)

(4,284)

-12.1%


Income from disc. ops.

-

113,314

(113,314)

-100.0%


-

573,445

(573,445)

-100.0%


Gain on sale of disc. ops.

51,216

241,196

(189,980)

-78.8%


256,995

241,196

15,799

6.6%

Total Other Income (Expenses):

63,831

348,085

(284,254)

-81.7%


271,395

791,007

(519,612)

-65.7%











Net income (loss)

$  (85,209)

$ (402,447)

317,238

78.8%


$  (1,678,741)

$  (2,293,563)

614,822

26.8%











Adjusted EBITDA

$  (26,631)

$ (607,850)

$ 581,219

95.6%


$  (1,015,523)

$  (2,299,848)

$ 1,284,325

55.8%











Platforms:











ARR (Annual recurring revenue)






$  2,252,956

$  1,376,729

$    876,227

63.6%


Deployments






227

140

87

62.1%


ASP (Average sales price)






$         9,925

$         9,834

$             91

0.9%












Transactions:











Transaction count

213,247

212,386

861

0.4%


842,939

810,083

32,856

4.1%


Corporate customers

851

810

41

5.1%


830

782

48

6.1%


Academic customers

230

201

29

14.4%


221

185

36

19.5%


Total customers

1,081

1,011

70

6.9%


1,051

967

84

8.7%

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,


Year Ended June 30,




2018

2017

Change


2018

2017

Change

Net Income (loss)

$     (85,209)

$   (402,447)

$    317,238


$(1,678,741)

$(2,293,563)

$    614,822


Add (deduct):










Interest expense

-

3,000

(3,000)


4,000

12,000

(8,000)



Other income (expense)

(20,296)

(3,584)

(16,712)


(58,179)

(23,861)

(34,318)



Foreign currency translation loss

14,589

(6,362)

20,951


(8,020)

20,865

(28,885)



Provision for income taxes

7,681

7,009

672


39,779

35,495

4,284



Depreciation and amortization

32,731

36,893

(4,162)


152,397

133,694

18,703



Stock-based compensation

75,089

112,151

(37,062)


790,236

630,163

160,073



Income from discontinued operations

-

(113,314)

113,314


-

(573,445)

573,445



Gain on sale of discontinued operations

(51,216)

(241,196)

189,980


(256,995)

(241,196)

(15,799)


Adjusted EBITDA

$     (26,631)

$   (607,850)

$    581,219


$(1,015,523)

$(2,299,848)

$ 1,284,325

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 percent 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, 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,



2018


2017

Assets





Current assets:





Cash and cash equivalents


$

4,908,180


$

5,773,950

Accounts receivable, net of allowance of $115,040 and $119,536, respectively



4,251,251



5,465,299

Prepaid expenses and other current assets



326,887



196,820

Prepaid royalties



93,336



566,282

Total current assets



9,579,654



12,002,351








Other assets:







Property and equipment, net of accumulated depreciation of $749,923 and $699,421, respectively



59,043



85,737

Intangible assets, net of accumulated amortization of $723,036 and $623,714, respectively



-



41,870

Deposits and other assets



14,372



14,466

Right of use asset, net of accumulated amortization of $155,698 and $45,105, respectively



307,324



417,917

Total assets


$

9,960,393


$

12,562,341








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

4,686,946


$

6,443,056

Deferred revenue



1,665,746



1,335,475

Lease liability, current portion



119,786



110,888

Total current liabilities



6,472,478



7,889,419








Long-term liabilities:







Lease liability, long-term portion



208,513



328,299

Total liabilities



6,680,991



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; 24,016,999 and 23,883,145  shares issued and outstanding, respectively



24,017



23,883

Additional paid-in capital



22,904,691



22,267,327

Accumulated deficit



(19,554,599)



(17,875,858)

Accumulated other comprehensive loss



(94,707)



(70,729)

Total stockholders' equity



3,279,402



4,344,623

Total liabilities and stockholders' equity


$

9,960,393


$

12,562,341

 

Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss






Years Ended



June 30,



2018


2017






Revenue:







Platforms


$

1,819,149


$

980,323

Transactions



26,199,292



24,766,953

Total revenue



28,018,441



25,747,276








Cost of revenue:







  Platforms



378,904



205,051

Transactions



20,290,212



19,438,031

Total cost of revenue



20,669,116



19,643,082

Gross profit



7,349,325



6,104,194








Operating expenses:







Selling, general and administrative



9,147,064



9,055,070

Depreciation and amortization



152,397



133,694

Total operating expenses



9,299,461



9,188,764

Loss from operations



(1,950,136)



(3,084,570)








Other income (expenses):







Interest expense



(4,000)



(12,000)

Other income



58,179



23,861

Total other income



54,179



11,861








Loss from continuing operations before provision for income taxes



(1,895,957)



(3,072,709)

Provision for income taxes



(39,779)



(35,495)








Loss from continuing operations



(1,935,736)



(3,108,204)








Discontinued operations:







Income from discontinued operations



-



573,445

Gain from sale of discontinued operations



256,995



241,196

Income from discontinued operations



256,995



814,641








Net loss



(1,678,741)



(2,293,563)








Other comprehensive loss:







Foreign currency translation



(23,978)



(27,508)

Comprehensive loss


$

(1,702,719)


$

(2,321,071)








Loss per common share:







Loss per share from continuing operations, basic and diluted


$

(0.08)


$

(0.14)

Income per share from discontinued operations, basic and diluted


$

0.01


$

0.04

Net loss per share, basic and diluted


$

(0.07)


$

(0.10)

Weighted average common shares outstanding, basic and diluted



23,473,105



23,241,572

 

SOURCE Research Solutions, Inc.

For further information: Investor Relations: Liolios, Cody Slach, Tel +1 (949) 574-3860, RSSS@liolios.com or Media Contact: Research Solutions, Inc., Mitja Alexander Linss, Tel +1 (617) 763-2312, mlinss@reprintsdesk.com


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