ENCINO, Calif., Feb. 14, 2017 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal second quarter ended December 31, 2016.
Fiscal Second Quarter 2017 Summary vs. Year-Ago Quarter
- Total revenue was $8.5 million compared to $9.3 million.
- Platform revenue was up 137% to $219,000 with a 159% increase in total platform deployments to 96. Annual recurring revenue was up 126% to $905,000.
- Transaction revenue was up 3% to $5.9 million with customer count up 9% to 936. Transaction count was up 7% to approximately 193,000.
- Total gross margin was up 160 basis points to 18.7%.
- Net loss was $(0.8) million or $(0.04) per share, compared to a net loss of $(0.3) million or $(0.02) per share. The increased loss was due to the company's continued investment in its recurring revenue platform business.
Management Commentary
"During the second quarter, our platform business continued its strong revenue momentum, growing more than double the same quarter last year and 27% on a sequential quarterly basis," said Peter Derycz, president and CEO of Research Solutions. "Roughly two-thirds of this growth came from new customers, reaffirming the sizeable market of small-to-medium sized businesses our platform solution enables us to target.
"While customer and transaction count in our transaction business were up high-single digits, this year's holiday calendar had less work days than past seasons, slightly impacting second quarter revenue. However, transactions have historically produced fairly reliable repeat revenue.
"We continued to invest for future growth in our platform business, bolstering our U.S. field sales with two new hires covering the Mid-Atlantic and Midwest regions, as well as the addition of key technology personnel. Since our platform is essentially a virtual store that can be accessed from anywhere, 24 hours a day, seven days a week, we also strengthened our international presence with the addition of two new, European-based resellers which cover the key markets within Scandinavia and mainland Europe, including Germany, France, Switzerland, The Netherlands, and others."
"We have seen these strategic investments continue to drive the intended results," continued Derycz. "In fact, in January we signed our 100th platform customer and hit the $1 million in annual recurring revenue milestone. We plan to debut an enhanced version of the platform by the end of March, which will show expanded capabilities, features and functionality. When combined with the predictability of our transactions business, we believe the outlook for the remainder of our fiscal year is strong."
Fiscal Second Quarter 2017 Financial Results
Total revenue was $8.5 million compared to $9.3 million in the same year-ago quarter. The decrease was primarily attributable to a 31% ($1.1 million) decline in the company's legacy Reprints and ePrints business. Order volumes often fluctuate from period-to-period depending upon customer marketing budgets and the publication of journal articles matching their requirements. While this segment is cash flow positive, it is a low margin business that requires limited resources and time.
Platform subscription revenue was up 137% to $219,000 compared to $93,000 in the year-ago quarter. The increase was due to a 159% increase in total platform deployments to 96. The quarter ended with annual recurring revenue up 126% to $905,000 (see the company's definition of annual recurring revenue below).
Transaction revenue increased 3% to $5.9 million compared to $5.7 million in the year-ago quarter, driven primarily by a 9% increase in active customer accounts to 936. In addition, transaction count was up 7% to approximately 193,000 (see the company's definition of active customer accounts and transactions below).
Total gross margin was up 160 basis points to 18.7% compared to 17.1% in the year-ago quarter. The improvement was primarily driven by increased revenue from higher margin platform sales and slightly higher margin from the company's non-core Reprints and ePrints business due to lower content costs.
Total operating expenses increased to $2.4 million compared to $1.9 million in the year-ago quarter, driven primarily by further investment in the company's sales force and, to a lesser extent, technology personnel to support increased platform sales and deployments.
Net loss in the fiscal second quarter was $(0.8) million or $(0.04) per share, compared to a net loss of $(0.3) million or $(0.02) per share in the same year-ago quarter. Adjusted EBITDA totaled $(0.5) million compared to a slight positive in the same year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below). Both the net loss and Adjusted EBITDA reflect the aforementioned personnel investments in the company's fast-growing platform business.
Cash and cash equivalents at December 31, 2016 increased 10% to $6.7 million compared to $6.1 million at June 30, 2016. There were no outstanding borrowings under the company's revolving line of credit with Silicon Valley Bank, which provides the lesser of $4 million or 80% of eligible accounts receivable. Additionally, 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 quarterly results and the company's outlook, followed by a question and answer period.
Date: Tuesday, February 14, 2017
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: 10002411
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 at 1-949-574-3860.
The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=122859 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 28, 2017.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10002411
Fiscal Second Quarter 2017 Financial and Operational Summary Table
|
Quarter Ended December 31, | ||||||
|
2016 |
2015 |
Change |
% Change | |||
|
Revenue: |
||||||
|
Platforms |
$ 219,137 |
$ 92,578 |
$ 126,559 |
136.7% | ||
|
Transactions |
5,866,562 |
5,702,733 |
163,829 |
2.9% | ||
|
Reprints and ePrints |
2,444,368 |
3,519,915 |
(1,075,547) |
-30.6% | ||
|
Total Revenue |
8,530,067 |
9,315,226 |
(785,159) |
-8.4% | ||
|
Gross Profit: |
||||||
|
Platforms |
173,514 |
75,401 |
98,113 |
130.1% | ||
|
Transactions |
1,201,872 |
1,230,783 |
(28,911) |
-2.3% | ||
|
Reprints and ePrints |
222,626 |
290,118 |
(67,492) |
-23.3% | ||
|
Total Gross Profit |
1,598,012 |
1,596,302 |
1,710 |
0.1% | ||
|
Gross profit as a % of revenue: |
||||||
|
Platforms |
79.2% |
81.4% |
-2.3% |
|||
|
Transactions |
20.5% |
21.6% |
-1.1% |
|||
|
Reprints and ePrints |
9.1% |
8.2% |
0.9% |
|||
|
Total Gross Profit |
18.7% |
17.1% |
1.6% |
|||
|
Operating Expenses: |
||||||
|
Sales and marketing |
854,724 |
498,835 |
355,889 |
71.3% | ||
|
General and administrative |
1,226,181 |
1,092,187 |
133,994 |
12.3% | ||
|
Depreciation and amortization |
32,426 |
16,096 |
16,330 |
101.5% | ||
|
Stock-based compensation |
303,097 |
277,389 |
25,708 |
9.3% | ||
|
Foreign currency transaction loss |
17,631 |
5,805 |
11,826 |
203.7% | ||
|
Total Operating Expenses |
2,434,059 |
1,890,312 |
543,747 |
28.8% | ||
|
Income (loss) from operations |
(836,047) |
(294,010) |
(542,037) |
184.4% | ||
|
Other Income (Expenses): |
||||||
|
Interest expense |
(3,000) |
(3,000) |
- |
0.0% | ||
|
Other income (expense) |
5,424 |
4,641 |
783 |
16.9% | ||
|
Provision for income taxes |
(9,337) |
(6,056) |
(3,281) |
54.2% | ||
|
Total Other Income (Expenses): |
(6,913) |
(4,415) |
(2,498) |
56.6% | ||
|
Net income (loss) |
$ (842,960) |
$ (298,425) |
$ (544,535) |
182.5% | ||
|
Adjusted EBITDA |
$ (482,893) |
$ 5,280 |
$ (488,173) |
9245.7% | ||
|
Transactions: |
||||||
|
Transaction count |
193,490 |
181,135 |
12,355 |
6.8% | ||
|
Corporate customers |
754 |
719 |
35 |
4.9% | ||
|
Academic customers |
182 |
143 |
39 |
27.3% | ||
|
Total customers |
936 |
862 |
74 |
8.6% | ||
|
Six Months Ended December 31, | ||||||
|
2016 |
2015 |
Change |
% Change | |||
|
Revenue: |
||||||
|
Platforms |
$ 391,209 |
$ 151,041 |
$ 240,168 |
159.0% | ||
|
Transactions |
11,872,961 |
11,269,974 |
602,987 |
5.4% | ||
|
Reprints and ePrints |
3,924,613 |
5,921,312 |
(1,996,699) |
-33.7% | ||
|
Total Revenue |
16,188,783 |
17,342,327 |
(1,153,544) |
-6.7% | ||
|
Gross Profit: |
||||||
|
Platforms |
315,622 |
122,102 |
193,520 |
158.5% | ||
|
Transactions |
2,493,272 |
2,507,999 |
(14,727) |
-0.6% | ||
|
Reprints and ePrints |
318,515 |
520,548 |
(202,033) |
-38.8% | ||
|
Total Gross Profit |
3,127,409 |
3,150,649 |
(23,240) |
-0.7% | ||
|
Gross profit as a % of revenue: |
||||||
|
Platforms |
80.7% |
80.8% |
-0.2% |
|||
|
Transactions |
21.0% |
22.3% |
-1.3% |
|||
|
Reprints and ePrints |
8.1% |
8.8% |
-0.7% |
|||
|
Total Gross Profit |
19.3% |
18.2% |
1.2% |
|||
|
Operating Expenses: |
||||||
|
Sales and marketing |
1,435,502 |
995,476 |
440,026 |
44.2% | ||
|
General and administrative |
2,437,189 |
2,155,449 |
281,740 |
13.1% | ||
|
Depreciation and amortization |
62,895 |
30,834 |
32,061 |
104.0% | ||
|
Stock-based compensation |
405,686 |
421,130 |
(15,444) |
-3.7% | ||
|
Foreign currency transaction loss |
20,955 |
7,122 |
13,833 |
194.2% | ||
|
Total Operating Expenses |
4,362,227 |
3,610,011 |
752,216 |
20.8% | ||
|
Income (loss) from operations |
(1,234,818) |
(459,362) |
(775,456) |
168.8% | ||
|
Other Income (Expenses): |
||||||
|
Interest expense |
(6,000) |
(7,993) |
1,993 |
24.9% | ||
|
Other income (expense) |
10,134 |
7,410 |
2,724 |
36.8% | ||
|
Provision for income taxes |
(22,942) |
(17,300) |
(5,642) |
-32.6% | ||
|
Total Other Income (Expenses): |
(18,808) |
(17,883) |
(925) |
5.2% | ||
|
Net income (loss) |
$(1,253,626) |
$ (477,245) |
$ (776,381) |
162.7% | ||
|
Adjusted EBITDA |
$ (745,282) |
$ (276) |
$ (745,006) |
269929.7% | ||
|
Platforms: |
||||||
|
ARR (Annual recurring revenue) |
$ 905,157 |
$ 401,325 |
$ 503,832 |
125.5% | ||
|
Deployments |
96 |
37 |
59 |
159.5% | ||
|
ASP (Average sales price) |
$ 9,429 |
$ 10,847 |
$ (1,418) |
-13.1% | ||
|
Transactions: |
||||||
|
Transaction count |
384,870 |
352,313 |
32,557 |
9.2% | ||
|
Corporate customers |
759 |
706 |
53 |
7.5% | ||
|
Academic customers |
178 |
135 |
43 |
32.0% | ||
|
Total customers |
936 |
841 |
96 |
11.4% | ||
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, and other potential adjustments that may arise.
Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):
|
Three Months Ended December 31, | |||||||||
|
2016 |
2015 |
2016-2015 | |||||||
|
Net loss |
$ |
(842,960) |
$ |
(298,425) |
$ |
(544,535) | |||
|
Add (deduct): |
|||||||||
|
Interest expense |
3,000 |
3,000 |
- | ||||||
|
Other (income) expense |
(5,424) |
(4,641) |
(783) | ||||||
|
Foreign currency transaction loss |
17,631 |
5,805 |
11,826 | ||||||
|
Provision for income taxes |
9,337 |
6,056 |
3,281 | ||||||
|
Depreciation and amortization |
32,426 |
16,096 |
16,330 | ||||||
|
Stock-based compensation |
303,097 |
277,389 |
25,708 | ||||||
|
Adjusted EBITDA |
$ |
(482,893) |
$ |
5,280 |
$ |
(488,173) | |||
|
Six Months Ended December 31, | |||||||||
|
2016 |
2015 |
2016-2015 | |||||||
|
Net loss |
$ |
(1,253,626) |
$ |
(477,245) |
$ |
(776,381) | |||
|
Add (deduct): |
|||||||||
|
Interest expense |
6,000 |
7,993 |
(1,993) | ||||||
|
Other (income) expense |
(10,134) |
(7,410) |
(2,724) | ||||||
|
Foreign currency transaction loss |
20,955 |
7,122 |
13,833 | ||||||
|
Provision for income taxes |
22,942 |
17,300 |
5,642 | ||||||
|
Depreciation and amortization |
62,895 |
30,834 |
32,061 | ||||||
|
Stock-based compensation |
405,686 |
421,130 |
(15,444) | ||||||
|
Adjusted EBITDA |
$ |
(745,282) |
$ |
(276) |
$ |
(745,006) | |||
About Research Solutions
Research Solutions, Inc. (OTCQB: RSSS) is a pioneer in cloud-based research intelligence and retrieval solutions for R&D-driven organizations. More than 70 percent of the top 25 pharmaceutical companies in the world rely on services delivered by Research Solutions' wholly owned subsidiary Reprints Desk. The company's Software-as-a-Service (SaaS) platform provides customers with on-demand access to, and augmented data from, tens of millions of scientific, medical, and technical (STM) documents, helping them to accelerate acquisition at the point of discovery, save time and money, and remain copyright-compliant. 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 | ||||||
|
December 31, |
June 30, | |||||
|
2016 |
2016 | |||||
|
(unaudited) |
||||||
|
Assets |
||||||
|
Current assets: |
||||||
|
Cash and cash equivalents |
$ |
6,748,627 |
$ |
6,076,875 | ||
|
Accounts receivable, net of allowance of $47,035 and $52,084, respectively |
5,065,558 |
5,761,860 | ||||
|
Prepaid expenses and other current assets |
220,750 |
164,610 | ||||
|
Prepaid royalties |
1,217,915 |
173,665 | ||||
|
Total current assets |
13,252,850 |
12,177,010 | ||||
|
Other assets: |
||||||
|
Property and equipment, net of accumulated depreciation of $667,067 and $642,051, respectively |
70,530 |
82,207 | ||||
|
Intangible assets, net of accumulated amortization of $583,280 and $546,679, respectively |
77,998 |
104,848 | ||||
|
Deposits and other assets |
18,968 |
7,594 | ||||
|
Total assets |
$ |
13,420,346 |
$ |
12,371,659 | ||
|
Liabilities and Stockholders' Equity |
||||||
|
Current liabilities: |
||||||
|
Accounts payable and accrued expenses |
$ |
7,140,143 |
$ |
5,690,768 | ||
|
Deferred revenue |
1,167,529 |
639,834 | ||||
|
Total current liabilities |
8,307,672 |
6,330,602 | ||||
|
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; 23,875,188 and 23,809,593 shares issued and outstanding, respectively |
23,875 |
23,810 | ||||
|
Additional paid-in capital |
21,966,029 |
21,642,763 | ||||
|
Accumulated deficit |
(16,835,921) |
(15,582,295) | ||||
|
Accumulated other comprehensive loss |
(41,309) |
(43,221) | ||||
|
Total stockholders' equity |
5,112,674 |
6,041,057 | ||||
|
Total liabilities and stockholders' equity |
$ |
13,420,346 |
$ |
12,371,659 | ||
|
See notes to condensed consolidated financial statements |
|
Research Solutions, Inc. and Subsidiaries | |||||||||||||
|
Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) | |||||||||||||
|
(Unaudited) | |||||||||||||
|
Three Months Ended |
Six Months Ended | ||||||||||||
|
December 31, |
December 31, | ||||||||||||
|
2016 |
2015 |
2016 |
2015 | ||||||||||
|
Revenue |
$ |
8,530,067 |
$ |
9,315,226 |
$ |
16,188,783 |
$ |
17,342,327 | |||||
|
Cost of revenue |
6,932,055 |
7,718,924 |
13,061,374 |
14,191,678 | |||||||||
|
Gross profit |
1,598,012 |
1,596,302 |
3,127,409 |
3,150,649 | |||||||||
|
Operating expenses: |
|||||||||||||
|
Selling, general and administrative |
2,401,633 |
1,874,216 |
4,299,332 |
3,579,177 | |||||||||
|
Depreciation and amortization |
32,426 |
16,096 |
62,895 |
30,834 | |||||||||
|
Total operating expenses |
2,434,059 |
1,890,312 |
4,362,227 |
3,610,011 | |||||||||
|
Loss from operations |
(836,047) |
(294,010) |
(1,234,818) |
(459,362) | |||||||||
|
Other income (expenses): |
|||||||||||||
|
Interest expense |
(3,000) |
(3,000) |
(6,000) |
(7,993) | |||||||||
|
Other income |
5,424 |
4,641 |
10,134 |
7,410 | |||||||||
|
Total other income (expenses) |
2,424 |
1,641 |
4,134 |
(583) | |||||||||
|
Loss from operations before provision for income taxes |
(833,623) |
(292,369) |
(1,230,684) |
(459,945) | |||||||||
|
Provision for income taxes |
(9,337) |
(6,056) |
(22,942) |
(17,300) | |||||||||
|
Net loss |
(842,960) |
(298,425) |
(1,253,626) |
(477,245) | |||||||||
|
Other comprehensive income (loss): |
5,195 |
(7,066) |
1,912 |
(5,363) | |||||||||
|
Foreign currency translation | |||||||||||||
|
Comprehensive loss |
$ |
(837,765) |
$ |
(305,491) |
$ |
(1,251,714) |
$ |
(482,608) | |||||
|
Loss per common share: |
|||||||||||||
|
Net loss per share, basic and diluted |
$ |
(0.04) |
$ |
(0.02) |
$ |
(0.05) |
$ |
(0.03) | |||||
|
Weighted average common shares outstanding, basic and diluted |
23,200,975 |
17,656,087 |
23,166,272 |
17,610,079 | |||||||||
|
See notes to condensed consolidated financial statements |
SOURCE Research Solutions, Inc.