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Research Solutions Reports Fiscal Fourth Quarter and Full Year 2020 Results

Company Reports $4.4M in Platform ARR and Positive Full-Year Adjusted EBITDA

Sep 24, 2020

HENDERSON, Nev., Sept. 24, 2020 /PRNewswire/ -- Research Solutions, Inc. (NASDAQ: RSSS), a pioneer in providing cloud-based workflow solutions for R&D driven organizations, reported financial results for its fiscal fourth quarter and full year 2020 ended June 30, 2020.

Fiscal Fourth Quarter 2020 Highlights

  • Total revenue increased 5.5% to $7.9 million
  • Platform revenue up 33% to $1.1 million, Annual recurring revenue up 38% to $4.4 million.
  • Transaction revenue increased 2% to $6.8 million
  • Total gross margin improved 200 basis points to 31.8%.
  • Earnings of nil per share, unchanged from the prior-year quarter
  • Adjusted EBITDA of $146,000, an improvement of $187,000

Full-Year Fiscal 2020 Highlights

  • Total revenue increased 7.9% to $31.1 million
  • Platform revenue of $3.9 million, a 38% increase, with a 33% increase in total Platform deployments to 401
  • Transaction revenue increased 4.6% to $27.2 million, with customer count up to 1,119 compared to 1,081.
  • Total gross margin increased 200 basis points to 31.0%
  • Loss from continuing operations improved $395,000 to ($780,000), or ($0.03) per share, compared to ($0.05) per share in the prior year
  • Adjusted EBITDA of $143,000, an improvement of $507,000
  • Cash and cash equivalents increased to $9.3 million, up $4.0 million compared to prior year end
  • Successfully uplisted to Nasdaq Capital Market

"Our fourth quarter and fiscal 2020 results reflect the continued momentum across our organization, including the uplisting of our stock to the NASDAQ market on March 23rd. We set another record for annual recurring revenue for our Platforms business thanks to another strong quarter of new deployments. The shift in our marketing approach towards enterprise campaigns contributed to the 100 net new Platform deployments for the full year, including 27 in the fourth quarter." said Peter Derycz, President and CEO of Research Solutions. "Our new partnerships and product initiatives expanded our available product offerings, while simplifying access for our customers, some of whom are involved in researching a potential COVID-19 vaccine. With additional product improvements, partnership opportunities on tap and better lead generation, combined with our strong balance sheet, we are well-positioned for continued progress in fiscal 2021."

Fiscal Fourth Quarter 2020 Results

Total revenue increased 5.5% to $7.9 million, compared to $7.5 million in the same year-ago quarter.

Platform subscription revenue increased 33% to approximately $1.1 million compared to $804,000 in the year-ago quarter. The increase was primarily due to an increase in the total number of paid Platform deployments, including 27 added in the quarter. The quarter ended with annual recurring revenue of $4.4 million, up 7% sequentially and 38% year-over-year (see the company's definition of annual recurring revenue below).

Transaction revenue increased 2% to $6.8 million compared to $6.7 million in the fourth quarter of fiscal 2019. Transaction count increased 7.6% from the year-ago quarter to 231,000, with 1,087 transaction customers essentially unchanged from the fourth quarter of fiscal 2019 (see the company's definition of active customer accounts and transactions below).

Total gross margin improved 200 basis points from the prior-year quarter to 31.8%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $2.5 million, compared to $2.4 million in the fourth quarter of 2019. The increase was primarily due to greater personnel costs.

Net loss in the fourth quarter was ($1,000), or nil per share, compared to a net loss of ($72,000), or nil per share, in the prior-year quarter. Adjusted EBITDA was $146,000, a $187,000 improvement from the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Full-Year Fiscal 2020 Results

Total revenue increased 7.9% to $31.1 million, compared to $28.8 million in fiscal 2019.

Platform subscription revenue was $3.9 million, a 38% increase over the prior year. The increase was primarily due an increase in the total number of paid Platform deployments and upselling current platform customers.

Transaction revenue was $27.2 million, a 4.6% increase compared to the previous year. The increase is primarily due to orders from new customers.

Total gross margin improved 210 basis points over the prior year to 31.0%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $10.5 million compared to $9.6 million in the prior year. The increase was primarily due to greater personnel costs, higher advertising spend, professional service fees, and costs associated with the NASDAQ uplisting in March.

Net loss from continuing operations improved by $395,000 over the prior year to ($780,000). Net loss per share improved by $0.02 from fiscal 2019, to $(0.03) per share. Adjusted EBITDA was $143,000, compared to $(365,000) in the prior year (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents on June 30, 2020, amounted to $9.3 million compared to $5.4 million as of June 30, 2019. There were no outstanding borrowings under the company's $2.5 million revolving line of credit and the company had no long-term liabilities or other debt.

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.

Date: Thursday, September 24, 2020
Time: 5:00 p.m. ET (2:00 p.m. PT)
Toll-free dial-in number: 1-855-327-6837
International dial-in number: 1-631-891-4304
Conference ID: 10011047

The conference call will be broadcast live and available for replay until October 15, 2020, by dialing 1-844-512-2921 and using the replay ID 10011047, and via the investor relations section of the company's website at http://researchsolutions.investorroom.com/.

 

Fiscal Fourth Quarter Financial and Operational Summary Tables vs. Prior-Year Quarter



Quarter Ended June 30,



2020

2019

Change

% Change

Revenue:






Platforms

$    1,066,630

$        803,917

$        262,713

32.7%


Transactions

6,819,150

6,670,685

148,465

2.2%

Total Revenue

7,885,780

7,474,602

411,178

5.5%






Gross Profit:






Platforms

913,389

661,549

251,841

38.1%


Transactions

1,595,144

1,566,056

29,088

1.9%

Total Gross Profit

2,508,533

2,227,605

280,929

12.6%






Gross profit as a % of revenue:






Platforms

85.6%

82.3%

3.3%



Transactions

23.4%

23.5%

-0.1%


Total Gross Profit

31.8%

29.8%

2.0%







Operating Expenses:






Sales and marketing

692,096

659,108

32,988

5.0%


Technology and product development

537,830

549,198

(11,368)

-2.1%


General and administrative

1,132,483

1,060,268

72,215

6.8%


Depreciation and amortization

3,746

8,351

(4,605)

-55.1%


Stock-based compensation

143,054

126,903

16,151

12.7%


Foreign currency translation loss

4,214

7,193

(2,979)

-41.4%

Total Operating Expenses

2,513,423

2,411,021

102,402

4.2%

Income (loss) from operations

(4,890)

(183,416)

178,527

97.3%






Other Income (Expenses):






Interest expense

-

-

-



Other income (expense)

4,306

32,184

(27,878)

-86.6%


Provision for income taxes

25

(4,895)

4,920

100.5%


Gain on sale of disc'd operations

-

84,275

(84,275)

-100.0%

Total Other Income (Expenses):

4,331

111,564

(107,233)

-96.1%

Net income (loss)

$              (559)

$         (71,852)

71,294

99.2%






Adjusted EBITDA

$        146,124

$         (40,969)

$        187,094

456.7%









Quarter Ended June 30,



2020

2019

Change

% Change

Platforms:






ARR (Annual recurring revenue):






  Beginning of Period

$    4,149,830

$    2,987,647

$    1,162,183

38.9%


   Incremental ARR

296,258

237,025

59,233

25.0%


  End of Period

$    4,446,088

$    3,224,672

$    1,221,416

37.9%







Deployments:






  Beginning of Period

374

281

93

33.1%


   Incremental Deployments

27

20

7

35.0%


  End of Period

401

301

100

33.2%







ASP (Average sales price):






  Beginning of Period

$          11,096

$          10,632

$                464

4.4%


  End of Period

$          11,088

$          10,713

$                374

3.5%






Transactions:






Transaction count

230,916

214,686

16,230

7.6%


Corporate customers

808

832

(24)

-2.9%


Academic customers

279

258

21

8.1%


Total customers

1,087

1,090

(3)

-0.3%

 

Fiscal Full Year Financial and Operational Summary Tables vs. Prior-Year




Year Ended June 30,




2020

2019

Change

% Change


Revenue:







Platforms

$    3,890,689

$    2,809,201

$    1,081,488

38.5%



Transactions

27,168,048

25,984,721

1,183,327

4.6%


Total Revenue

31,058,737

28,793,922

2,264,815

7.9%








Gross Profit:







Platforms

3,246,551

2,301,826

944,725

41.0%



Transactions

6,391,331

6,041,635

349,696

5.8%


Total Gross Profit

9,637,882

8,343,461

1,294,421

15.5%








Gross profit as a % of revenue:







Platforms

83.4%

81.9%

1.5%




Transactions

23.5%

23.3%

0.3%



Total Gross Profit

31.0%

29.0%

2.1%









Operating Expenses:







Sales and marketing

2,508,238

2,079,045

429,193

20.6%



Technology and product development

2,121,978

2,139,950

(17,972)

-0.8%



General and administrative

4,864,783

4,488,940

375,843

8.4%



Depreciation and amortization

23,654

38,816

(15,162)

-39.1%



Stock-based compensation

951,595

827,172

124,423

15.0%



Foreign currency translation loss

19,529

24,500

(4,971)

-20.3%


Total Operating Expenses

10,489,777

9,598,423

891,354

9.3%


Income (loss) from operations

(851,895)

(1,254,962)

403,068

32.1%








Other Income (Expenses):







Interest expense

-

-

-




Other income (expense)

80,044

107,308

(27,264)

-25.4%



Provision for income taxes

(7,836)

(27,040)

19,204

71.0%



Gain on sale of disc'd operations

117,445

214,737

(97,292)

-45.3%


Total Other Income (Expenses):

189,653

295,005

(105,352)

-35.7%


Net income (loss)

$      (662,242)

$      (959,957)

297,716

31.0%








Adjusted EBITDA

$        142,883

$      (364,474)

$        507,358

139.2%











Year Ended June 30,




2020

2019

Change

% Change


Platforms:







ARR (Annual recurring revenue):







  Beginning of Period

$    3,224,672

$    2,252,956

$        971,716

43.1%



   Incremental ARR

1,221,416

971,716

249,700

25.7%



  End of Period

$    4,446,088

$    3,224,672

$     1,221,416

37.9%









Deployments:







  Beginning of Period

301

227

74

32.6%



   Incremental Deployments

100

74

26

35.1%



  End of Period

401

301

100

33.2%









ASP (Average sales price):







  Beginning of Period

$          10,713

$             9,925

$                788

7.9%



  End of Period

$          11,088

$           10,713

$                374

3.5%








Transactions:







Transaction count

887,561

831,099

56,462

6.8%



Corporate customers

841

835

6

0.7%



Academic customers

278

246

32

13.0%



Total customers

1,119

1,081

38

3.5%

 

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,




2020

2019

Change

% Change


2020

2019

Change

% Change


Net Income (loss)

$        (559)

$  (71,852)

$    71,294

99.2%


$(662,242)

$(959,957)

$  297,716

31.0%


 Add (deduct):












Other income (expense)

(4,306)

(32,184)

27,878

86.6%


(80,044)

(107,308)

27,264

25.4%



Foreign currency translation loss

4,214

7,193

(2,979)

-41.4%


19,529

24,500

(4,971)

-20.3%



Provision for income taxes

(25)

4,895

(4,920)

-100.5%


7,836

27,040

(19,204)

-71.0%



Depreciation and amortization

3,746

8,351

(4,605)

-55.1%


23,654

38,816

(15,162)

-39.1%



Stock-based compensation

143,054

126,903

16,151

12.7%


951,595

827,172

124,423

15.0%



Gain on sale of disc. ops.

-

(84,275)

84,275

100.0%


(117,445)

(214,737)

97,292

45.3%


 Adjusted EBITDA

$  146,124

$  (40,969)

$  187,094

456.7%


$  142,883

$(364,474)

$  507,358

139.2%

 

About Research Solutions and Reprints Desk
Research Solutions, Inc. (NASDAQ: RSSS) is a pioneer in providing seamless access and simplifies how organizations and individual researchers discover, acquire, and manage scholarly journal articles, book chapters and other content in scientific, technical, and medical (STM) research. More than 70 percent of the top pharmaceutical companies, prestigious universities, and emerging businesses rely on Article Galaxy, a cloud-based SaaS research platform, for simplified and lowest cost access to the latest scientific research and data. Featuring an ecosystem of app-like Gadgets for a personalized research experience, Article Galaxy offers individual as well as enterprise plans, coupled with unparalleled, 24/7 customer support. For more information and details, please visit www.researchsolutions.com and www.reprintsdesk.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. Examples of forward-looking statements in this release include statements regarding improved liquidity, an expanded investor base and driving long-term shareholder value as a result of listing on Nasdaq, continued momentum in the Company's business and financial performance, and the Company's strong outlook. 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. 

 

 

Research Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets








June 30,


June 30,



2020


2019

Assets





Current assets:





Cash and cash equivalents


$

9,311,556


$

5,353,090

Accounts receivable, net of allowance of $88,485 and $100,175, respectively



4,449,260



4,493,169

Prepaid expenses and other current assets



241,747



323,591

Prepaid royalties



720,367



-

Total current assets



14,722,930



10,169,850








Other assets:







Property and equipment, net of accumulated depreciation of $804,999 and $789,788, respectively



11,276



36,828

Deposits and other assets



6,155



14,406

Right of use asset, net of accumulated amortization of $390,691 and $270,777, respectively



72,331



192,245

Total assets


$

14,812,692


$

10,413,329








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

6,349,845


$

4,862,895

Deferred revenue



3,524,507



2,310,206

Lease liability, current portion



79,326



129,187

Total current liabilities



9,953,678



7,302,288








Long-term liabilities:







Lease liability, long-term portion



-



79,326

Total liabilities



9,953,678



7,381,614








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; 26,032,263 and 24,375,948  shares issued and outstanding, respectively



26,032



24,376

Additional paid-in capital



26,134,819



23,631,481

Accumulated deficit



(21,176,799)



(20,514,557)

Accumulated other comprehensive loss



(125,038)



(109,585)

Total stockholders' equity



4,859,014



3,031,715

Total liabilities and stockholders' equity


$

14,812,692


$

10,413,329

 

 

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






Years Ended



June 30,



2020


2019






Revenue:







Platforms


$

3,890,689


$

2,809,201

Transactions



27,168,048



25,984,721

Total revenue



31,058,737



28,793,922








Cost of revenue:







 Platforms



644,138



507,375

Transactions



20,776,717



19,943,086

Total cost of revenue



21,420,855



20,450,461

Gross profit



9,637,882



8,343,461








Operating expenses:







Selling, general and administrative



10,466,123



9,559,608

Depreciation and amortization



23,654



38,816

Total operating expenses



10,489,777



9,598,424

Loss from operations



(851,895)



(1,254,963)








Other income



80,044



107,308








Loss from operations before provision for income taxes



(771,851)



(1,147,655)

Provision for income taxes



(7,836)



(27,040)








Loss from continuing operations



(779,687)



(1,174,695)








Gain from sale of discontinued operations



117,445



214,737








Net loss



(662,242)



(959,958)








Other comprehensive loss:

Foreign currency translation



(15,453)



(14,878)

Comprehensive loss


$

(677,695)


$

(974,836)








Loss per common share:







Loss per share from continuing operations, basic and diluted


$

(0.03)


$

(0.05)

Income per share from discontinued operations, basic and diluted


$

-


$

0.01

Net loss per share, basic and diluted


$

(0.03)


$

(0.04)

Weighted average common shares outstanding, basic and diluted



24,760,790



23,815,761

 

 

Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows






Years Ended



June 30,



2020



2019







Cash flow from operating activities:






Net loss


$

(662,242)



$

(959,958)

Gain from sale of discontinued operations



(117,445)




(214,737)

Loss from continuing operations



(779,687)




(1,174,695)

Adjustment to reconcile net loss to net cash provided by operating activities:








Depreciation and amortization



23,654




38,816

Amortization of lease right



119,914




115,079

Fair value of vested stock options



610,634




523,978

Fair value of vested restricted common stock



340,961




303,194

Changes in operating assets and liabilities:








Accounts receivable



43,909




(241,918)

Prepaid expenses and other current assets



199,289




218,033

Prepaid royalties



(720,367)




93,336

Deposits and other assets



8,094




-

Accounts payable and accrued expenses



1,486,950




175,949

Deferred revenue



1,214,301




644,460

Lease liability



(129,187)




(119,786)

Net cash provided by operating activities



2,418,465




576,446









Cash flow from investing activities:








Purchase of property and equipment



-




(15,828)

Net cash used in investing activities



-




(15,828)









Cash flow from financing activities:








Common stock repurchase and retirement



(321,601)




(200,023)

Proceeds from the exercise of stock options



1,875,000




100,000

Net cash provided by (used in) financing activities



1,553,399




(100,023)









Effect of exchange rate changes



(13,398)




(15,685)

Net increase in cash and cash equivalents



3,958,466




444,910

Cash and cash equivalents, beginning of period



5,353,090




4,908,180

Cash and cash equivalents, end of period


$

9,311,556



$

5,353,090










Supplemental disclosures of cash flow information:









Cash paid for income taxes


$

7,836



$

27,040


















 

 

SOURCE Research Solutions, Inc.

For further information: Steven Hooser or John Beisler, Three Part Advisors, (214) 872-2710, shooser@threepa.com; jbeisler@threepa.com