ENCINO, Calif., Sept. 29, 2014 /PRNewswire/ -- Research Solutions, Inc. (OTCQB:RSSS), a pioneer in facilitating the flow of information from publishers of scientific, technical and medical (STM) content to life science enterprises and other research-intensive organizations, reported financial results for its fiscal fourth quarter and year ended June 30, 2014.

Fiscal Fourth Quarter 2014 Financial Highlights vs. Year-Ago Quarter

• Article Galaxy revenues increased 12% to $5.0 million
• Article Galaxy transactions increased 10% to 132,000
• Article Galaxy gross profit up 22% to $1.3 million, with gross profit as a percentage of revenue up 230 basis points to 25.8%
• Active customer accounts increased 29% to 710

"Our results in fiscal 2014 reflected our transition from a hybrid digital-print business to our fully digital solution that improves the flow of high-value STM content," said Research Solutions president and CEO, Peter Derycz. "Our strategic decision to focus completely on Article Galaxy, our cloud-based software-as-a-service (SaaS) solution, created a decline in our print based revenue in fiscal 2014, but positioned the company for growth and profitability in fiscal 2015 and beyond. In fact, the explosive adoption rate of Article Galaxy, as demonstrated by our growing customer base, puts us on track for positive adjusted EBITDA in fiscal Q1 2015."

Fiscal Fourth Quarter 2014 Financial Results

Consolidated revenue in the fourth quarter of 2014 declined 14% to $9.7 million, compared to $11.3 million in the same year-ago quarter. The decrease is primarily attributable to the company's migration from print to its cloud-based solution, Article Galaxy. Article Galaxy revenue increased 12% in the fourth quarter of 2014 to $5.0 million, compared to $4.5 million in the same year-ago quarter.

Consolidated gross profit in the fourth quarter decreased 13% to $2.1 million compared to $2.4 million in the same year-ago quarter. Article Galaxy gross profit was up 22% to $1.3 million versus $1.1 million in the same year-ago quarter. Gross profit as a percentage of revenue from Article Galaxy increased 230 basis points to 25.8% in the fourth quarter, versus 23.5% in the same year-ago quarter. 

Consolidated net loss in the fourth quarter totaled $600,000 or ($0.03) per basic and diluted share, compared to net income of $543,000 or $0.03 per diluted share in the same year-ago quarter.

Adjusted EBITDA totaled a loss of $351,000 compared to a gain of $415,000 in the same year-ago quarter (see definition and further discussion about the presentation of adjusted EBITDA, a non-GAAP term, below).

Article Galaxy transactions increased 10% to 132,000 during the fourth quarter, versus 121,000 in the same year ago quarter. Active customer accounts increased 29% to 710 in the fourth quarter, versus 551 in the same year-ago quarter (see the definition of transactions and active customer accounts in the section, "Transactions and Active Customer Accounts," below).

Fiscal Year 2014 Financial Results

Consolidated revenue totaled $36.5 million in 2014, declining 20% from $45.5 million in 2013.  The decrease in consolidated revenue primarily is attributable to a decline in print based revenue and the migration to Article Galaxy. Article Galaxy revenue increased 11% in 2014 to $18.7 million versus $16.8 million in 2013.

Consolidated net loss totaled $1.9 million or ($0.11) per basic and diluted earnings per share in 2014, compared to net income of $197,000 or $0.01 per basic and diluted share in 2013.

Consolidated gross profit decreased 13% in 2014 to $8.3 million, compared to $9.6 million in 2013. Article Galaxy gross profit was up 16% to $4.5 million in 2014, versus $3.9 million in 2013. Gross profit as a percentage of revenue from Article Galaxy increased 100 basis points to 24.1% in 2014 versus 23.2% in 2013. 

Adjusted EBITDA totaled a loss of $916,000 compared to gain of $1.1 million in 2013.

Active customer accounts increased 28% to 635 in 2014, versus 497 in 2013. Article Galaxy transactions increased 11% in 2014 to 509,000 versus 461,000 in 2013.

Cash at June 30, 2014 totaled $2.1 million, up more than $375,000 compared to $1.7 million at June 30, 2013.  The increase in cash is primarily due to cash generated from operations as well as financing activities.

As of June 30, 2014, there were no outstanding borrowings under the company's revolving line of credit with Silicon Valley Bank, which is the lesser of $4,000,000 or 80% of eligible accounts receivable. This amount equaled approximately $2,185,000 of available credit at June 30, 2014.

At June 30, 2014, the company had net operating loss carry forwards of approximately $7.0 million applicable to federal tax liability expiring in 2030 and approximately $4.6 million applicable to state tax liability expiring in 2020.

Further details about the company's results in 2014 are available in its annual report on Form 10-K, available in the investor relations section of the company's website at www.researchsolutions.com.

Management Commentary

"During fiscal 2014, we made significant progress executing on strategic initiatives designed to drive growth and shareholder value," said Derycz. "Our industry-leading technology and strengthened sales force were key drivers for attracting new customers in fiscal 2014. During the year we added several key new customers in life sciences and research-intensive organizations that accelerated the adoption rate of our solution by more than 28%.

"We are encouraged by our ability to increase Article Galaxy annual revenue and generate record gross profit despite the challenges of our transition from print to digital. We believe this underscores the strength of our industry and our leading position within it. We have come through fiscal 2014 stronger and have gained deeper customer loyalty, and we are quickly becoming an industry standard as the 'Bloomberg' of scientific, technical and medical (STM) content.

"Article Galaxy represents a highly scalable business model, and our solution tends to be very sticky from a customer standpoint given its ability to easily source content on a granular level. We plan to introduce additional enhancements to the Article Galaxy platform that will increase customer engagement as we expand our presence in the STM information marketplace. 

"The dramatic increase in client activity over recent months suggests we have arrived at an inflection point in terms of our growth and opportunity. In fact, the first quarter of our current 2015 fiscal year has already demonstrated significant strength. Based on transactions and contracts signed to date as well as our expanding pipeline, we believe that we are on pace to achieve strong revenue growth and significant profitability in fiscal 2015.  This positive outlook is supported by a healthy industry and our existing customer base of global life science and research-intensive organizations."

Fiscal Q1 2015 Outlook

In fiscal first quarter 2015 ending September 30, 2014, management expects revenue from Article Galaxy to range from $5.0 to $5.1 million, and revenue from reprints to range from $2.1 to $2.3 million, with total revenue from continuing operations to range from $7.1 to $7.4 million. This compares to fiscal first quarter 2014 revenue of $4.5 million from Article Galaxy and $2.1 million from reprints, with total revenue from continuing operations of $6.6 million or an increase of 8% to 12%. In fiscal first quarter 2015, management also expects adjusted EBITDA from continuing operations to range from $100,000 to $200,000, compared to $51,000 in the same year-ago period.

With the divesture of the company's TAAG printing and logistics subsidiary on September 15, 2014, in fiscal first quarter 2015 the company will report the results from the subsidiary as discontinued operations and recognize a gain on deconsolidation of former subsidiary of approximately $1.0 million.

Conference Call

Research Solutions President and CEO Peter Derycz and CFO Alan Urban will host the conference call, followed by a question and answer period.

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 at www.media-server.com/m/p/wfrsqmam and via the investor relations section of the company's website at www.researchsolutions.com. 

A replay of the conference call will be available immediately after the call and through October 29, 2014.

Fourth Quarter and Full Year 2014 Financial Summary Tables
The following financial information should be read in conjunction with the audited financial statements and accompanying notes filed by the company with the Securities and Exchange Commission on September 29, 2014 in its Annual Report on Form 10-K for the period ended June 30, 2014, and which can be viewed at www.sec.gov.

Transactions and Active Customer Accounts
We define a transaction as an order for a unit of copyrighted content fulfilled or managed in Article Galaxy.

We define active customer accounts as the sum of whole and partial customers for the respective quarter or year. A whole customer is one with at least one Article Galaxy transaction in every month of the respective quarter or year. A partial customer is one with at least one Article Galaxy transaction in one or more months, but not every month of the respective quarter or year.

For example, if a customer has at least one transaction in every month of the quarter, they are counted as a whole customer. However, if they have at least one transaction in only one of the three months of the quarter, they are counted as a partial customer (one third of a customer).

On an annual basis, if a customer has at least one transaction in every month of the year, they are counted as a whole customer. However, if they have at least one transaction in only six of the twelve months of the year, they are counted as a partial customer (one half of a customer).

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 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 from operations (which excludes interest and income taxes), plus depreciation and amortization, stock-based compensation, and other potential adjustments that may arise.

Reconciliation of Adjusted EBITDA to Income (Loss) from Operations:

About Research Solutions
Research Solutions, Inc. (OTCQB:RSSS) and its wholly-owned subsidiary Reprints Desk, Inc. (www.reprintsdesk.com) are pioneers in facilitating the flow of information from the publishers of scientific, technical, and medical (STM) content to enterprise customers in life science and other research intensive organizations. Our customers include 70% of the top 25 pharma companies in the world. Our cloud based software-as-a-service (SaaS) solution, Article Galaxy, provides customers with access to hundreds of thousands of newly published articles each year in addition to the tens of millions of existing articles that have been published in the past, helping them to identify the content that is critical to their research. We have arrangements with numerous STM content publishers that allow electronic access and distribution of their content. In addition to serving end users of content, we also serve STM publishers by facilitating compliance with applicable copyright laws.

About Reprints Desk®
Reprints Desk 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 the every Document Delivery Vendor Scorecard from industry analyst and advisory firm Outsell Inc. since 2008.

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 Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q.  Examples of forward-looking statements in this release include statements related to our new strategic focus, product verticals, anticipated revenue and profitability.  The Company assumes no obligation to update the cautionary information in this release.

Discontinued Operations and Deconsolidation of French Subsidiary – TAAG
On August 18, 2014 the Board of Directors of the Company authorized management to commit to a plan to sell TAAG immediately at a reasonable price in relation to its current fair value, and in the event such sale is not consummated by September 10, 2014, that management proceed with an insolvency filing by TAAG under French law.  Accordingly effective August 18, 2014 the operations of TAAG will be classified as discontinued operations.  On September 15, 2014, the French Tribunal de Commerce appointed an Administrator for TAAG following a declaration of insolvency by our legal representative.  As a result, effective September 15, 2014, the Company relinquished control of TAAG to the Tribunal and TAAG ceased to be our subsidiary and will be deconsolidated from our financial statements.  In accordance with consolidation guidance we will derecognize the assets, liabilities and other comprehensive income of TAAG with a resulting gain on deconsolidation of approximately $1,000,000 recorded on our consolidated statements of operations on September 15, 2014.  In addition, comparative information for prior periods that is presented in future financial statements will be restated to segregate the assets, liabilities, revenue, expenses, and cash flows related to TAAG as discontinued operations.

Below is a Proforma Consolidated Balance Sheet and Proforma Consolidated Statement of Operations and Other Comprehensive Income (Loss) that present the proforma impact of TAAG as if it was classified as a discontinued operation at June 30, 2014.

SOURCE Research Solutions, Inc.