Research Solutions Reports Fiscal Third Quarter 2018 Financial Results

ENCINO, Calif., May 15, 2018 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal third quarter ended March 31, 2018.

Research Solutions, Inc. (RSSS) Logo

Fiscal Third Quarter 2018 Highlights vs. Year-Ago Quarter

Total revenue increased 10% to $7.3 million.
Platform revenue up 81% to $489,000, with a 79% increase in total Platform deployments to 208. Annual recurring revenue was up 76% to $2.0 million.
Transaction revenue up 7% to $6.8 million, with customer count up 8% to 1,059. Transaction count up 3% to 219,607.
Total gross margin up 240 basis points to 26.3%.
Net loss from continuing operations was $0.3 million, or $(0.01) per share, compared to a net loss of $0.8 million, or $(0.03) per share.

Management Commentary

"Our third quarter demonstrates the continued momentum in our strategy to deliver unique workflow efficiency solutions to research-driven organizations in life sciences, technology and academia," said Peter Derycz, president and CEO of Research Solutions. "This can be seen in our fourth consecutive quarter of approximately 10% total revenue growth and annual recurring revenue in our SaaS Platforms business that has surpassed $2 million.

"We expect our momentum to continue in the remainder of 2018 as we launch version 2.1 and 2.2 of our Platform framework, supported by powerful weekly releases or improvements to smart applications we develop called 'gadgets.' This will be supported by a sales and marketing team that we are reconstructing to drive optimum efficiency and investment returns."

Fiscal Third Quarter 2018 Financial Results

Total revenue increased 10% to $7.3 million compared to $6.6 million in the same year-ago quarter.

Platform subscription revenue increased 81% to $489,000 compared to $271,000 in the year-ago quarter. The increase was due to a 79% increase in the total number of paid Platform deployments to 208. The quarter ended with annual recurring revenue up 76% to $2.0 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 7% to $6.8 million compared to $6.4 million in the same year-ago quarter. Total active customers increased 8% from 985 to 1,059, and transaction count increased 3% from 213,000 to 220,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 240 basis points to 26.3% from 23.9% in the same year-ago quarter. The increase was driven by a 100 basis point increase in Transactions gross margin and a revenue mix shift to the higher-margin Platforms business.

Total operating expenses decreased to $2.2 million compared to $2.4 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 $0.3 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 $(0.1) 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 March 31, 2018 were $4.8 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.

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: Tuesday, May 15, 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: 10004686

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 May 29, 2018.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10004686

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

		Quarter Ended March 31,				Nine Months Ended March 31,
		2018	2017	Change	%	2018	2017	Change	%
Revenue:
	Platforms	$ 489,219	$ 270,920	$ 218,299	80.6%	$ 1,290,568	$ 662,129	$ 628,439	94.9%
	Transactions	6,792,289	6,372,679	419,610	6.6%	19,562,000	18,245,640	1,316,360	7.2%
Total Revenue		7,281,508	6,643,599	637,909	9.6%	20,852,568	18,907,769	1,944,799	10.3%

Gross Profit:
	Platforms	386,034	212,553	173,481	81.6%	1,013,034	528,175	484,859	91.8%
	Transactions	1,532,330	1,374,837	157,493	11.5%	4,390,639	3,868,109	522,530	13.5%
Total Gross Profit		1,918,364	1,587,390	330,974	20.9%	5,403,673	4,396,284	1,007,389	22.9%

Gross profit as a % of revenue:
	Platforms	78.9%	78.5%	0.5%		78.5%	79.8%	-1.3%
	Transactions	22.6%	21.6%	1.0%		22.4%	21.2%	1.2%
Total Gross Profit		26.3%	23.9%	2.5%		25.9%	23.3%	2.7%

Operating Expenses:
	Sales and marketing	522,894	698,346	(175,452)	-25.1%	1,726,443	1,683,704	42,739	2.5%
	Technology and product development	436,672	396,765	39,907	10.1%	1,343,995	1,062,790	281,204	26.5%
	General and administrative	1,091,930	1,120,481	(28,551)	-2.5%	3,322,127	3,341,788	(19,660)	-0.6%
	Depreciation and amortization	32,768	33,906	(1,138)	-3.4%	119,666	96,801	22,865	23.6%
	Stock-based compensation	114,340	112,326	2,014	1.8%	715,147	518,012	197,135	38.1%
	Foreign currency translation loss	(9,737)	6,272	(16,009)	-255.2%	(22,609)	27,227	(49,836)	-183.0%
Total Operating Expenses		2,188,866	2,368,095	(179,229)	-7.6%	7,204,769	6,730,322	474,447	7.0%

Income (loss) from operations		(270,502)	(780,705)	510,203	65.4%	(1,801,096)	(2,334,038)	532,942	22.8%

Other Income (Expenses):
	Interest expense	2,000	(3,000)	5,000	166.7%	(4,000)	(9,000)	5,000	55.6%
	Other income (expense)	13,769	10,143	3,626	35.7%	37,883	20,277	17,606	86.8%
	Provision for income taxes	(10,531)	(5,544)	(4,987)	-90.0%	(32,098)	(28,486)	(3,612)	-12.7%
	Income from discontinued operations	-	141,616	(141,616)	-100.0%	-	460,131	(460,131)	-100.0%
	Gain on sale of discontinued operations	69,277	-	69,277		205,779	-	205,779
Total Other Income (Expenses):		74,515	143,215	(68,700)	-48.0%	207,564	442,922	(235,358)	-53.1%

Net income (loss)		$ (195,987)	$ (637,490)	$ 441,503	69.3%	$ (1,593,532)	$ (1,891,116)	$ 297,584	15.7%

Platforms:
	ARR (Annual recurring revenue)					$ 1,982,867	$ 1,124,451	$ 858,416	76.3%
	Deployments					208	116	92	79.3%
	ASP (Average sales price)					$ 9,533	$ 9,694	$ (161)	-1.7%
Transactions:
	Transaction count	219,607	212,827	6,780	3.2%	629,692	597,697	31,995	5.4%
	Corporate customers	848	802	46	5.7%	823	773	50	6.5%
	Academic customers	211	183	28	15.3%	218	179	39	21.7%
	Total customers	1,059	985	74	7.5%	1,042	952	89	9.4%

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, 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 March 31,			Nine Months Ended March 31,
			2018	2017	Change	2018	2017	Change
Net Income (loss)			$ (195,987)	$ (637,490)	$ 441,503	$ (1,593,532)	$ (1,891,116)	$ 297,584
	Add (deduct):
		Interest expense	(2,000)	3,000	(5,000)	4,000	9,000	(5,000)
		Other income (expense)	(13,769)	(10,143)	(3,626)	(37,883)	(20,277)	(17,606)
		Foreign currency translation loss	(9,737)	6,272	(16,009)	(22,609)	27,227	(49,836)
		Provision for income taxes	10,531	5,544	4,987	32,098	28,486	3,612
		Depreciation and amortization	32,768	33,906	(1,138)	119,666	96,801	22,865
		Stock-based compensation	114,340	112,326	2,014	715,147	518,012	197,135
		Income from discontinued operations	-	(141,616)	141,616	-	(460,131)	460,131
		Gain on sale of discontinued operations	(69,277)	-	(69,277)	(205,779)	-	(205,779)
	Adjusted EBITDA		$ (133,131)	$ (628,201)	$ 495,070	$ (988,892)	$ (1,691,998)	$ 703,106

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+% 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; 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

	March 31,		June 30,
	2018		2017
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,801,305	$	5,773,950
Accounts receivable, net of allowance of $119,462 and $119,536, respectively		4,336,057		5,465,299
Prepaid expenses and other current assets		302,811		196,820
Prepaid royalties		127,906		566,282
Total current assets		9,568,079		12,002,351

Other assets:
Property and equipment, net of accumulated depreciation of $741,398 and $699,421, respectively		72,434		85,737
Intangible assets, net of accumulated amortization of $701,436 and $623,714, respectively		21,600		41,870
Deposits and other assets		14,459		14,466
Right of use asset, net of accumulated amortization of $99,864 and $45,105, respectively		335,380		417,917
Total assets	$	10,011,952	$	12,562,341

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	4,687,974	$	6,443,056
Deferred revenue		1,652,160		1,335,475
Lease liability, current portion		117,507		110,888
Total current liabilities		6,457,641		7,889,419

Long-term liabilities:
Lease liability, long-term portion		239,555		328,299
Total liabilities		6,697,196		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; 23,980,383 and 23,883,145 shares issued and outstanding, respectively		23,980		23,883
Additional paid-in capital		22,853,945		22,267,327
Accumulated deficit		(19,469,389)		(17,875,858)
Accumulated other comprehensive loss		(93,780)		(70,729)
Total stockholders' equity		3,314,756		4,344,623
Total liabilities and stockholders' equity	$	10,011,952	$	12,562,341

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2018		2017		2018		2017

Revenue:
Platforms	$	489,219	$	270,920	$	1,290,568	$		662,129
Transactions		6,792,289		6,372,679		19,562,000			18,245,640
Total revenue		7,281,508		6,643,599		20,852,568			18,907,769

Cost of revenue:
Platforms		103,185		58,367		277,534			133,954
Transactions		5,259,959		4,997,842		15,171,361			14,377,531
Total cost of revenue		5,363,144		5,056,209		15,448,895			14,511,485
Gross profit		1,918,364		1,587,390		5,403,673			4,396,284

Operating expenses:
Selling, general and administrative		2,156,097		2,334,189		7,085,102			6,633,521
Depreciation and amortization		32,768		33,906		119,666			96,801
Total operating expenses		2,188,865		2,368,095		7,204,768			6,730,322
Loss from operations		(270,501)		(780,705)		(1,801,095)			(2,334,038)

Other income (expenses):
Interest expense		2,000		(3,000)		(4,000)			(9,000)
Other income		13,769		10,143		37,883			20,277
Total other income		15,769		7,143		33,883			11,277

Loss from operations before provision for income taxes		(254,732)		(773,562)		(1,767,212)			(2,322,761)
Provision for income taxes		(10,531)		(5,544)		(32,098)			(28,486)

Loss from continuing operations		(265,263)		(779,106)		(1,799,310)			(2,351,247)

Discontinued operations:
Income from discontinued operations		-		141,616		-			460,131
Gain from sale of discontinued operations		69,277		-		205,779			-
Income from discontinued operations		69,277		141,616		205,779			460,131

Net loss		(195,986)		(637,490)		(1,593,531)			(1,891,116)

Other comprehensive income (loss): Foreign currency translation		(7,385)		(18,090)		(23,051)			(16,178)
Comprehensive loss	$	(203,371)	$	(655,580)	$	(1,616,582)	$		(1,907,294)

Loss per common share:
Loss per share from continuing operations, basic and diluted	$	(0.01)	$	(0.03)	$	(0.08)	$	(0.10)
Income per share from discontinued operations, basic and diluted	$	-	$	-	$	0.01	$	0.02
Net loss per share, basic and diluted	$	(0.01)	$	(0.03)	$	(0.07)	$	(0.08)
Weighted average common shares outstanding, basic and diluted		23,498,796		23,265,939		23,444,569		23,199,010

SOURCE Research Solutions, Inc.

For further information: Investor Relations, Liolios Group, Inc., Cody Slach, Tel +1 (949) 574-3860, RSSS@liolios.com, or Media Contact, Research Solutions, Inc., Mitja-Alexander Linss, Director of Marketing, Tel +1 (617) 835 0854, mlinss@reprintsdesk.com