Research Solutions Reports Fiscal Fourth Quarter and Full Year 2019 Financial Results

ENCINO, Calif., Sept. 19, 2019 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a SaaS provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal fourth quarter and full year ended June 30, 2019.

Research Solutions, Inc. (RSSS) Logo

Fiscal Fourth Quarter 2019 Highlights vs. Year-Ago Quarter

Platform revenue up 52% to $804,000, with a 33% increase in total Platform deployments to 301. Annual recurring revenue up 43% to $3.2 million.
Transaction revenue increased to $6.7 million compared to $6.6 million, with customer count up to 1,090 compared to 1,081.
Total gross margin up 260 basis points to 29.8%.
Net loss from continuing operations was $0.2 million, or nil per share, compared to a net loss of $0.1 million, or $(0.01) per share.

Management Commentary

"Fiscal 2019 was another step forward as we continued to grow our SaaS-based Platform business, provide exceptional value through our innovative research tools, and test various sales and marketing strategies," said Peter Derycz, president and CEO of Research Solutions. "In fact, during the fourth quarter our Platform revenue grew 52% over the year-ago quarter and we continued to maintain a customer churn rate far better than the industry standard, which speaks volumes to the value our Platform provides. We remain committed to driving new user growth and are currently optimizing our marketing strategies to further align with this strategy.

"Each day we get smarter about the ways in which to expand our Platform customer base. We have launched various digital marketing campaigns specifically targeting organizations that we know can significantly benefit from our enterprise offering, and we continue to measure the effectiveness of each campaign and strive for lower costs and better efficiency. We are also intensely focused on nurturing leads through better follow-up practices, which we believe will improve conversion rates.

"As we move into fiscal 2020, we are shifting our marketing efforts to focus on business-to-business campaigns, rather than individual customer campaigns. While individual customers provide a great starting point for enterprise leads, we believe a more focused and direct outreach to potential enterprise customers will be more efficient and accelerate revenue growth. We will also continue to focus on upgrading and enhancing our Platform to ensure we are consistently providing the most innovative and valuable research tools for our customers."

Fiscal Fourth Quarter 2019 Financial Results

Total revenue increased 4% to $7.5 million compared to $7.2 million in the same year-ago quarter.

Platform subscription revenue increased 52% to $804,000 compared to $529,000 in the same year-ago quarter. The increase was due to upselling current platform customers and to a 33% increase in the total number of paid Platform deployments from 227 to 301. The quarter ended with annual recurring revenue up 43% to $3.2 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased slightly to $6.7 million compared to $6.6 million in the same year-ago quarter. Total active customers also increased slightly from 1,081 to 1,090 as well as transaction count from 213,000 to 215,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 260 basis points to 29.8% from 27.2% in the same year-ago quarter. The increase was primarily driven by a 150 basis point increase in Platform gross margin and the continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $2.4 million compared to $2.1 million in the same year-ago quarter. The increase was primarily due to greater spending on sales and marketing related to expanding the Platform business.

Net loss from continuing operations was $0.2 million, or nil per share, compared to a net loss of $0.1 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(41,000) compared to $(27,000) 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 June 30, 2019, amounted to $5.4 million compared to $4.9 million at June 30, 2018. There were no outstanding borrowings under the company's $2.5 million revolving line of credit. Apart from a $0.1 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Full Year 2019 Financial Results

Total revenue increased 3% to $28.8 million compared to $28.0 million in 2018.

Platform subscription revenue increased 54% to $2.8 million compared to $1.8 million in 2018. The increase was due to the previously mentioned increase in total paid Platform deployments to 301 and strong growth in annual recurring revenue to $3.2 million.

Transaction revenue was $26.0 million compared to $26.2 million in 2018. Total active customers increased 3% from 1,052 to 1,081, and transaction count was 831,000 compared to 843,000.

Total gross margin increased 280 basis points to 29.0% from 26.2% in 2018. The increase was driven by the continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $9.6 million compared to $9.3 million in 2018. The increase was primarily driven by the company's continued investment in technology and product development.

Net loss from continuing operations in fiscal 2019 improved to $1.2 million, or $(0.05) per share, compared to a net loss of $1.9 million, or $(0.08) per share, in 2018. Adjusted EBITDA improved to $(0.4) million compared to $(1.0) million in 2018.

Further details about these results are available in the company's annual report on Form 10-K, 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, September 19, 2019
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: 10007580

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 October 3, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10007580

Fiscal Fourth Quarter and Full Year 2019 Financial and Operational Summary Tables vs. Year-Ago Quarter

		Quarter Ended June 30,				Year Ended June 30,
		2019	2018	Change	% Change	2019	2018	Change	% Change
Revenue:
	Platforms	$ 803,917	$ 528,581	$ 275,336	52.1%	$ 2,809,201	$ 1,819,149	$ 990,052	54.4%
	Transactions	6,670,685	6,637,292	33,393	0.5%	25,984,721	26,199,292	(214,571)	-0.8%
Total Revenue		7,474,602	7,165,873	308,729	4.3%	28,793,922	28,018,441	775,481	2.8%

Gross Profit:
	Platforms	661,549	427,211	234,338	54.9%	2,301,826	1,440,245	861,581	59.8%
	Transactions	1,566,056	1,518,441	47,615	3.1%	6,041,635	5,909,080	132,555	2.2%
Total Gross Profit		2,227,605	1,945,652	281,953	14.5%	8,343,461	7,349,325	994,136	13.5%

Gross profit as a % of revenue:
	Platforms	82.3%	80.8%	1.5%		81.9%	79.2%	2.8%
	Transactions	23.5%	22.9%	0.6%		23.3%	22.6%	0.7%
Total Gross Profit		29.8%	27.2%	2.7%		29.0%	26.2%	2.7%

Operating Expenses:
	Sales and marketing	659,108	455,250	203,858	44.8%	2,079,045	2,181,693	(102,648)	-4.7%
	Technology and product development	549,198	454,053	95,145	21.0%	2,139,950	1,798,048	341,902	19.0%
	General and administrative	1,060,268	1,062,980	(2,712)	-0.3%	4,488,940	4,385,107	103,833	2.4%
	Depreciation and amortization	8,351	32,731	(24,380)	-74.5%	38,816	152,397	(113,581)	-74.5%
	Stock-based compensation	126,903	75,089	51,814	69.0%	827,172	790,236	36,936	4.7%
	Foreign currency translation loss	7,193	14,589	(7,396)	-50.7%	24,500	(8,020)	32,520	405.5%
Total Operating Expenses		2,411,021	2,094,692	316,329	15.1%	9,598,423	9,299,461	298,962	3.2%
Income (loss) from operations		(183,416)	(149,040)	(34,376)	-23.1%	(1,254,962)	(1,950,136)	695,174	35.6%

Other Income (Expenses):
	Interest expense	-	-	-		-	(4,000)	4,000	100.0%
	Other income (expense)	32,184	20,296	11,888	58.6%	107,308	58,179	49,129	84.4%
	Provision for income taxes	(4,895)	(7,681)	2,786	36.3%	(27,040)	(39,779)	12,739	32.0%
	Gain on sale of disc'd operations	84,275	51,216	33,059	64.5%	214,737	256,995	(42,258)	-16.4%
Total Other Income (Expenses):		111,564	63,831	47,733	74.8%	295,005	271,395	23,610	8.7%
Net income (loss)		$ (71,852)	$ (85,209)	13,357	15.7%	$ (959,957)	$ (1,678,741)	718,784	42.8%

Adjusted EBITDA		$ (40,969)	$ (26,631)	$ (14,338)	-53.8%	$ (364,474)	$ (1,015,523)	$ 651,049	64.1%

Platforms:
	ARR (Annual recurring revenue)	$ 3,224,672	$ 2,252,956	$ 971,716	43.1%	$ 3,224,672	$ 2,252,956	$ 971,716	43.1%
	Deployments	301	227	74	32.6%	301	227	74	32.6%
	ASP (Average sales price)	$ 10,713	$ 9,925	$ 788	7.9%	$ 10,713	$ 9,925	$ 788	7.9%

Transactions:
	Transaction count	214,686	231,247	(16,561)	-7.2%	831,099	842,939	(11,840)	-1.4%
	Corporate customers	832	851	(19)	-2.2%	835	830	5	0.6%
	Academic customers	258	230	28	12.2%	246	222	24	10.8%
	Total customers	1,090	1,081	9	0.8%	1,081	1,052	29	2.8%

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 June 30,			Year Ended June 30,
			2019	2018	Change	2019	2018	Change
Net Income (loss)			$ (71,852)	$ (85,209)	$ 13,357	$ (959,957)	$ (1,678,741)	$ 718,784
	Add (deduct):				-			-
		Interest expense	-	-	-	-	4,000	(4,000)
		Other income (expense)	(32,184)	(20,296)	(11,888)	(107,308)	(58,179)	(49,129)
		Foreign currency translation loss	7,193	14,589	(7,396)	24,500	(8,020)	32,520
		Provision for income taxes	4,895	7,681	(2,786)	27,040	39,779	(12,739)
		Depreciation and amortization	8,351	32,731	(24,380)	38,816	152,397	(113,581)
		Stock-based compensation	126,903	75,089	51,814	827,172	790,236	36,936
		Gain on sale of discontinued operations	(84,275)	(51,216)	(33,059)	(214,737)	(256,995)	42,258
	Adjusted EBITDA		$ (40,969)	$ (26,631)	$ (14,338)	$ (364,474)	$ (1,015,523)	$ 651,049

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.

Investor Relations:

Gateway Investor Relations
Cody Slach
Tel 1-949-574-3860
RSSS@gatewayir.com

Media Contact:

Research Solutions, Inc.
Mitja Alexander Linss
Tel 1-617-763-2312
mlinss@reprintsdesk.com

Research Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets

	June 30,		June 30,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	5,353,090	$	4,908,180
Accounts receivable, net of allowance of $100,175 and $115,040, respectively		4,493,169		4,251,251
Prepaid expenses and other current assets		323,591		326,887
Prepaid royalties		-		93,336
Total current assets		10,169,850		9,579,654

Other assets:
Property and equipment, net of accumulated depreciation of $789,788 and $749,923, respectively		36,828		59,043
Deposits and other assets		14,406		14,372
Right of use asset, net of accumulated amortization of $270,777 and $155,698, respectively		192,245		307,324
Total assets	$	10,413,329	$	9,960,393

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	4,862,895	$	4,686,946
Deferred revenue		2,310,206		1,665,746
Lease liability, current portion		129,187		119,786
Total current liabilities		7,302,288		6,472,478

Long-term liabilities:
Lease liability, long-term portion		79,326		208,513
Total liabilities		7,381,614		6,680,991

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; 24,375,948 and 24,016,999 shares issued and outstanding, respectively		24,376		24,017
Additional paid-in capital		23,631,481		22,904,691
Accumulated deficit		(20,514,557)		(19,554,599)
Accumulated other comprehensive loss		(109,585)		(94,707)
Total stockholders' equity		3,031,715		3,279,402
Total liabilities and stockholders' equity	$	10,413,329	$	9,960,393

Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Loss

	Years Ended
	June 30,
	2019		2018

Revenue:
Platforms	$	2,809,201	$	1,819,149
Transactions		25,984,721		26,199,292
Total revenue		28,793,922		28,018,441

Cost of revenue:
Platforms		507,375		378,904
Transactions		19,943,086		20,290,212
Total cost of revenue		20,450,461		20,669,116
Gross profit		8,343,461		7,349,325

Operating expenses:
Selling, general and administrative		9,559,608		9,147,064
Depreciation and amortization		38,816		152,397
Total operating expenses		9,598,424		9,299,461
Loss from operations		(1,254,963)		(1,950,136)

Other income (expenses):
Interest expense		-		(4,000)
Other income		107,308		58,179
Total other income		107,308		54,179

Loss from operations before provision for income taxes		(1,147,655)		(1,895,957)
Provision for income taxes		(27,040)		(39,779)

Loss from continuing operations		(1,174,695)		(1,935,736)

Gain from sale of discontinued operations		214,737		256,995

Net loss		(959,958)		(1,678,741)

Other comprehensive loss
Foreign currency translation		(14,878)		(23,978)
Comprehensive loss	$	(974,836)	$	(1,702,719)

Loss per common share:
Loss per share from continuing operations, basic and diluted	$	(0.05)	$	(0.08)
Income per share from discontinued operations, basic and diluted	$	0.01	$	0.01
Net loss per share, basic and diluted	$	(0.04)	$	(0.07)
Weighted average common shares outstanding, basic and diluted		23,815,761		23,473,105

SOURCE Research Solutions, Inc.