ENCINO, Calif., Feb. 17, 2015 /PRNewswire/ -- Research Solutions, Inc. (OTCQB:RSSS), a pioneer in providing on-demand access to scientific, technical and medical (STM) information for life science companies, academic institutions, and other research intensive organizations, reported financial results for its fiscal second quarter ended December 31, 2014.

Fiscal Second Quarter 2015 Financial Highlights vs. Year-Ago Quarter

• Article Galaxy revenue increased 19% to $5.1 million
• Article Galaxy transactions increased 22% to 138,736
• Article Galaxy gross profit up 34% to $1.3 million, with gross profit as a percentage of revenue up 280 basis points to a record 25.0%
• Active Article Galaxy customer accounts increased 21% to 732
• Adjusted EBITDA increased 136% to $112,000

Fiscal Second Quarter 2015 Financial Results                          

Total revenue in the fiscal second quarter of 2015 increased 7% to $7.9 million, compared to $7.4 million in the same year-ago quarter. The increase is primarily attributable to increased orders resulting from the acquisition of new customers for Article Galaxy, our digital, cloud-based, SaaS solution. Article Galaxy revenue increased 19% in the fiscal second quarter of 2015 to $5.1 million, compared to $4.3 million in the same year-ago quarter.

The increase in Article Galaxy revenue was driven by an increase in transactions, which was up 22% to 138,736 in the fiscal second quarter versus 114,015 in the same year ago quarter. The number of active customer accounts conducting transactions increased by 21% to 732 in the fiscal second quarter, versus 603 in the same year-ago quarter (see the definition of transactions and active customer accounts in the section, "Transactions and Active Customer Accounts," below).

Total gross profit in the fiscal second quarter increased 15% to $1.5 million compared to $1.3 million in the same year-ago quarter. Article Galaxy gross profit increased 34% to $1.3 million versus $945,000 in the same year-ago quarter. Article Galaxy gross margin increased 280 basis points to a record 25.0% in the fiscal second quarter, versus gross margin of 22.2 % in the same year-ago quarter. 

Net loss from continuing operations in the fiscal second quarter improved to a net loss of $94,000 or ($0.01) per diluted share from a net loss of $467,000 or ($0.03) per diluted share in the same year-ago quarter.

Adjusted EBITDA increased 136% to $112,000 compared to an adjusted EBITDA loss of $312,000 in the same year-ago quarter (see definition and further discussion about the presentation of adjusted EBITDA, a non-GAAP term, below).

Cash at December 31, 2014 totaled $1.8 million compared to $1.9 million at June 30, 2014. The decrease in cash is primarily due to cash used in discontinued operations.

As of December 31, 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 $2,245,000 of available credit at December 31, 2014.

At December 31, 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 fiscal second quarter 2015 are available in its quarterly report on Form 10-Q, available in the investor relations section of the company's website at www.researchsolutions.com.

Management Commentary

"In the fiscal second quarter of 2015, we continued to produce strong year-over-year performance from our flagship Article Galaxy solution," said Research Solutions president and CEO, Peter Derycz. "Despite the typical seasonality in our fiscal second quarter, when revenues dip sequentially due to lower customer activity during the holiday season, our revenue per Article Galaxy customer held steady over our prior quarter.

"We also realized an expansion in our Article Galaxy gross profit as a percentage of revenue, which increased 280 basis points to a record 25.0%. Since this improvement was primarily due to reduced production expenses resulting from greater efficiencies, as well as decreased content acquisition costs due to greater economies of scale, we expect this percentage to be sustained or improve even as we advance into traditionally stronger revenue quarters.

"The increased focus by our sales force to build upon their success in the corporate sector and address the much larger and mostly untapped academic market produced solid results, with 32% of new customer accounts coming from academia in the second quarter. And our overall customer acquisition efforts continued to achieve a 9 out of 10 closing ratio when our solution was evaluated against our competitors.

"From an operational perspective, we made several enhancements to our Article Galaxy platform that improved the speed and convenience for customers procuring STM content. We believe these new features will also help us secure new customers in the academic market. The academic market for STM subscription and syndication services is important, since we estimate it represents a $4.5 billion addressable market opportunity as compared to about $500 million for corporate."

Fiscal Q3 2015 Outlook

"As we now pass the halfway point in our fiscal third quarter, we see Article Galaxy continuing its upward trajectory, with new customer wins and increased usage by existing customers producing double-digit revenue growth," continued Derycz. "In fact, we saw 16% growth in January with Article Galaxy revenue compared to the same year-ago month.

"We also began Q3 with a new customer that is one of the largest pharmaceutical companies in the world. With this new win, our client base now includes over half of the Top 20 pharmaceutical companies in terms of global sales in 2014. We expect to realize revenue from this major new customer in the third quarter.

"Our performance in Q3 is also being supported by the official launch of our Article Galaxy Widget in January. The Article Galaxy Widget accelerates scientific discovery by simplifying lowest cost access to research articles indexed by popular search tools and STM databases. Customers who are using the widget to conduct their online research are experiencing a new level of ease, access and affordability.

"These benefits were recognized by the information industry analytics firm, Outsell, which in a recent report elicited Leonardo da Vinci's famous maxim to describe the Article Galaxy Widget: 'Simplicity is the ultimate sophistication.' Outsell stated their initial feedback from the market was 'overwhelmingly positive,' and that our Article Galaxy Widget follows their ideal "Zero Clicks Away" model for procuring scientific, technical and medical research information.

"As we progress through to the end of the year, we expect our digital solutions to continue supplanting our legacy print business as we further penetrate both the corporate and academic markets with Article Galaxy. By doing so, we anticipate eventually realizing the leverage in our new business model, where we see a two times increase in Article Galaxy TTM revenue resulting in a five times increase in adjusted EBITDA." 

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 http://edge.media-server.com/m/p/vrnk9pd7 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 February 24, 2015.

Fiscal Second Quarter 2015 Financial Summary Tables

The following financial information should be read in conjunction with the unaudited financial statements and accompanying notes filed by the company with the Securities and Exchange Commission on February 17, 2015 in its Quarterly Report on Form 10-Q for the period ended December 31, 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 the average 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 (loss), plus interest expense, other income (expense), provision for income taxes, depreciation and amortization, stock-based compensation, income (loss) from discontinued operations, and other potential adjustments that may arise.

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):

About Research Solutions
Research Solutions, Inc. (OTCQB:RSSS) and its wholly-owned subsidiary Reprints Desk, Inc. (www.reprintsdesk.com) are pioneers in providing on-demand access to scientific, technical, and medical (STM) information for life science companies, academic institutions, 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 the over one million 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 help our customers create and speed discoveries, save time and money, and remain copyright compliant. 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.  The Company assumes no obligation to update the cautionary information in this release.

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SOURCE Research Solutions, Inc.