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Research Solutions Reports Fiscal Second Quarter 2020 Financial Results

Feb 13, 2020

ENCINO, Calif., Feb. 13, 2020 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a SaaS provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal second quarter 2020 ended December 31, 2019.

Research Solutions, Inc. (RSSS) Logo

Fiscal Second Quarter 2020 Highlights vs. Year-Ago Quarter

  • Platform revenue up 42% to $950,000, with a 27% increase in total Platform deployments to 338. Annual recurring revenue up 38% to $3.7 million.
  • Transaction revenue increased 4% to $6.6 million compared to $6.3 million, with customer count up to 1,139 compared to 1,083.
  • Total gross margin up 180 basis points to 30.2%.
  • Net loss from continuing operations was $0.6 million, or $(0.03) per share, compared to a net loss of $0.6 million, or $(0.03) per share.

Management Commentary

"During the second quarter, we maintained our momentum with strong relative growth in both our Platform and Transaction businesses and continued consolidated gross margin expansion," said Peter Derycz, president and CEO of Research Solutions. "With our sales and marketing teams remaining heavily focused on generating new enterprise clients, we made good progress optimizing and fine-tuning our prospecting activities to ensure we are getting in front of the small-to-medium-sized organizations driven by R&D. In addition, we continued to make improvements to the Platform's user experience and interface, along with rolling out multiple updates to various gadgets throughout the quarter.

"As we look to the back half of fiscal 2020, we continue to expect our focus on the enterprise, along with introducing our unique capabilities to an expanded audience through various partnerships, to accelerate Platform revenue growth. Our ability to provide an innovative research platform that is consistently evolving to meet the needs of our customers combined with our retooled sales and marketing strategies gives us confidence that we will continue executing our growth strategy for the remainder of the year and beyond."

Fiscal Second Quarter 2020 Financial Results

Total revenue increased 8% to $7.5 million compared to $7.0 million in the same year-ago quarter.

Platform subscription revenue increased 42% to $950,000 compared to $668,000 in the same year-ago quarter. The increase was primarily due to a 27% increase in the total number of paid Platform deployments from 267 to 338 and upselling current platform customers. The quarter ended with annual recurring revenue up 38% to $3.7 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 4% to $6.6 million compared to $6.3 million in the same year-ago quarter. Total active customers increased 6% from 1,071 to 1,139 and transaction count increased 5% from 203,000 to 213,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 180 basis points to 30.2% from 28.4% in the same year-ago quarter. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business. 

Total operating expenses were $3.0 million compared to $2.7 million in the same year-ago quarter. The increase was primarily due to continued investment in sales and marketing associated with expanding the Platform business.

Net loss from continuing operations was $0.6 million, or $(0.03) per share, compared to a net loss of $0.6 million, or $(0.03) per share, in the year-ago quarter. Adjusted EBITDA totaled $(184,000) compared to $(192,000) 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, 2019, amounted to $6.8 million compared to $5.4 million at June 30, 2019. There were no outstanding borrowings under the company's $2.5 million revolving line of credit and 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: Thursday, February 13, 2020
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: 10008494

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 Gateway Investor Relations 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 March 5, 2020.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10008494

Fiscal Second Quarter 2020 Financial and Operational Summary Tables vs. Year-Ago Quarter




Quarter Ended December 31,


Six Months Ended December 31,








2019

2018

Change

% Change


2019

2018

Change

% Change

Revenue:











Platforms

$     949,825

$     667,545

$     282,280

42.3%


$ 1,806,270

$ 1,256,558

$     549,712

30.4%


Transactions

6,580,613

6,321,297

259,316

4.1%


13,319,281

12,684,805

634,476

4.8%

Total Revenue

7,530,438

6,988,842

541,596

7.7%


15,125,551

13,941,363

1,184,188

7.8%











Gross Profit:











Platforms

787,317

545,468

241,848

44.3%


1,493,292

1,026,222

467,070

31.3%


Transactions

1,486,483

1,442,771

43,712

3.0%


3,097,043

2,909,972

187,071

6.0%

Total Gross Profit

2,273,800

1,988,239

285,560

14.4%


4,590,335

3,936,194

654,141

14.3%











Gross profit as a % of revenue:











Platforms

82.9%

81.7%

1.2%



82.7%

81.7%

1.0%



Transactions

22.6%

22.8%

-0.2%



23.3%

22.9%

0.3%


Total Gross Profit

30.2%

28.4%

1.7%



30.3%

28.2%

2.1%












Operating Expenses:











Sales and marketing

638,837

445,879

192,958

43.3%


1,189,186

877,296

311,890

26.2%


Technology and prod. dev.

548,719

553,272

(4,553)

-0.8%


1,047,910

1,053,067

(5,157)

-0.5%


General and administrative

1,270,375

1,180,599

89,776

7.6%


2,501,720

2,299,210

202,510

8.1%


Depreciation and amortization

6,840

9,733

(2,893)

-29.7%


14,398

20,848

(6,450)

-44.8%


Stock-based compensation

523,632

453,288

70,344

15.5%


666,304

569,197

97,107

14.6%


Foreign currency trans.loss

(5,456)

10,025

(15,481)

-154.4%


6,667

15,005

(8,338)

125.1%

Total Operating Expenses

2,982,947

2,652,796

330,151

12.4%


5,426,185

4,834,623

591,562

10.9%

Income (loss) from operations

(709,147)

(664,557)

(44,590)

-6.7%


(835,850)

(898,429)

62,579

7.5%











Other Income (Expenses):











Interest expense

-

-

-



-

-

-



Other income (expense)

26,527

23,764

2,763

11.6%


52,076

47,249

4,827

9.3%


Provision for income taxes

(806)

(7,442)

6,636

89.2%


(7,300)

(16,663)

9,363

128.3%


Gain on sale of disc'd ops.

91,254

55,698

35,556

63.8%


117,445

97,418

20,027

17.1%

Total Other Income (Expenses):

116,975

72,020

44,955

62.4%


162,221

128,004

34,217

21.1%

Net income (loss)

$   (592,172)

$   (592,537)

365

0.1%


$   (673,629)

$   (770,425)

96,796

14.4%











Adjusted EBITDA

$   (184,131)

$   (191,511)

$          7,380

3.9%


$   (148,481)

$   (293,379)

$     144,898

97.6%











Platforms:











ARR (Annual Recurring Rev.)

$ 3,717,800

$ 2,702,137

$ 1,015,663

37.6%


$ 3,717,800

$ 2,702,137

$ 1,015,663

37.6%


Deployments

338

267

71

26.6%


338

267

71

26.6%


ASP (Average Sales Price)

$       10,999

$       10,120

$             879

8.7%


$       10,999

$       10,120

$             879

8.7%











Transactions:











Transaction count

212,759

202,681

10,078

5.0%


428,539

404,893

23,646

5.8%


Corporate customers

856

838

18

2.1%


855

842

13

1.5%


Academic customers

283

245

38

15.5%


282

242

40

16.5%


Total customers

1,139

1,083

56

5.2%


1,137

1,084

53

4.8%

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, 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,




2019

2018

Change


2019

2018

Change

Net Income (loss)

$   (592,172)

$   (592,537)

$             365


$   (673,629)

$   (770,425)

$       96,796


Add (deduct):







-



Interest expense

-

-

-


-

-

-



Other income (expense)

(26,527)

(23,764)

(2,763)


(52,076)

(47,249)

(4,827)



Foreign currency translation loss

(5,456)

10,025

(15,481)


6,667

15,005

(8,338)



Provision for income taxes

806

7,442

(6,636)


7,300

16,663

(9,363)



Depreciation and amortization

6,840

9,733

(2,893)


14,398

20,848

(6,450)



Stock-based compensation

523,632

453,288

70,344


666,304

569,197

97,107



Gain on sale of disc. ops.

(91,254)

(55,698)

(35,556)


(117,445)

(97,418)

(20,027)


Adjusted EBITDA

$   (184,131)

$   (191,511)

$         7,380


$   (148,481)

$   (293,379)

$    144,898

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 statements in this press release may contain "forward-looking statements" regarding future events and our future results. All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the markets in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects", "intends," "plans," "believes," "seeks," "estimates," "endeavors," "strives," "may," or variations of such words, and similar expressions are intended to identify such forward-looking statements. Readers are cautioned that these forward-looking statements are subject to a number of risks, uncertainties and assumptions that are difficult to predict, estimate or verify. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Such risks and uncertainties include those factors described in the Company's most recent annual report on Form 10-K, as such may be amended or supplemented by subsequent quarterly reports on Form 10-Q, or other reports filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements. For more information, please refer to the Company's filings with the Securities and Exchange Commission. 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets




December 31,


June 30,



2019


2019



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

6,769,128


$

5,353,090

Accounts receivable, net of allowance of $88,773 and $100,175, respectively



4,150,780



4,493,169

Prepaid expenses and other current assets



315,774



323,591

Prepaid royalties



301,110



-

Total current assets



11,536,792



10,169,850








Other assets:







Property and equipment, net of accumulated depreciation of $804,971 and $789,788,
respectively



22,629



36,828

Deposits and other assets



6,327



14,406

Right of use asset, net of accumulated amortization of $330,109 and $270,777, respectively



132,913



192,245

Total assets


$

11,698,661


$

10,413,329








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

5,856,740


$

4,862,895

Deferred revenue



2,873,415



2,310,206

Lease liability, current portion



134,071



129,187

Total current liabilities



8,864,226



7,302,288








Long-term liabilities:







Lease liability, long-term portion



11,444



79,326

Total liabilities



8,875,670



7,381,614








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; 24,475,556 and 24,375,948 shares issued and outstanding, respectively



24,476



24,376

Additional paid-in capital



24,098,311



23,631,481

Accumulated deficit



(21,188,186)



(20,514,557)

Accumulated other comprehensive loss



(111,610)



(109,585)

Total stockholders' equity



2,822,991



3,031,715

Total liabilities and stockholders' equity


$

11,698,661


$

10,413,329

 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)




Three Months Ended


Six Months Ended



December 31,


December 31,



2019


2018


2019


2018










Revenue:













Platforms


$

949,825


$

667,545


$

1,806,270


$

1,256,558

Transactions



6,580,613



6,321,297



13,319,281



12,684,805

Total revenue



7,530,438



6,988,842



15,125,551



13,941,363














Cost of revenue:













Platforms



162,508



122,077



312,978



230,336

Transactions



5,094,130



4,878,526



10,222,238



9,774,833

Total cost of revenue



5,256,638



5,000,603



10,535,216



10,005,169

Gross profit



2,273,800



1,988,239



4,590,335



3,936,194














Operating expenses:













Selling, general and administrative



2,976,107



2,643,063



5,411,787



4,813,775

Depreciation and amortization



6,840



9,733



14,398



20,848

Total operating expenses



2,982,947



2,652,796



5,426,185



4,834,623

Loss from operations



(709,147)



(664,557)



(835,850)



(898,429)














Other income (expenses):













Interest expense



-



-



-



-

Other income



26,527



23,764



52,076



47,249

Total other income



26,527



23,764



52,076



47,249














Loss from operations before provision for income taxes



(682,620)



(640,793)



(783,774)



(851,180)

Provision for income taxes



(806)



(7,442)



(7,300)



(16,663)














Loss from continuing operations



(683,426)



(648,235)



(791,074)



(867,843)














Gain from sale of discontinued operations



91,254



55,698



117,445



97,418














Net loss



(592,172)



(592,537)



(673,629)



(770,425)














Other comprehensive income (loss):
          
Foreign currency translation



1,543



(1,668)



(2,025)



(6,038)

Comprehensive loss


$

(590,629)


$

(594,205)


$

(675,654)


$

(776,463)














Loss per common share:













Loss per share from continuing operations, basic and diluted


$

(0.03)


$

(0.03)


$

(0.03)


$

(0.04)

Income per share from discontinued operations, basic and diluted


$

-


$

-


$

-


$

0.01

Net loss per share, basic and diluted


$

(0.03)


$

(0.03)


$

(0.03)


$

(0.03)

Weighted average common shares outstanding, basic and diluted



24,185,966



23,787,836



24,140,616



23,716,312















 

SOURCE Research Solutions, Inc.

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