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Research Solutions Reports Fiscal Second Quarter 2021 Results

Reports 35 Percent Year-over-Year Increase in Platform Annual Recurring Revenue to $5.0 Million

Feb 11, 2021

HENDERSON, Nev., Feb. 11, 2021 /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 2021 second quarter ended December 31, 2020.

Fiscal Second Quarter 2021 Summary Compared to Prior Year Quarter:

  • Platform revenue increased 29% to $1.2 million, Annual recurring revenue increased 35% to $5.0 million
  • Total gross margin improved 190 basis points to 32.1%
  • Total revenue decreased 1% to $7.4 million
  • Net loss of $(261,000), an improvement of $332,000; loss per share of $(0.01), a two-cent improvement
  • Adjusted EBITDA of $161,000, an improvement of $345,000

"I am pleased with the continued momentum within our Platforms business with 29 net deployments in the second quarter, and surpassing the $5 million mark for Annual Recurring Revenue, representing a 35% increase from the same quarter a year ago," said Peter Derycz, President and CEO of Research Solutions. "While our total transaction count is steadily increasing, the number of paid transactions is decreasing as we continue to transition away from new, large transaction customers in favor of higher margin SMB platform customers. This is, in part, why our transaction revenue decreased in the second quarter."

Fiscal Second Quarter 2021 Results

Total revenue decreased 1% to $7.4 million, compared to $7.5 million in the same year-ago quarter.

Platform subscription revenue increased 29% to approximately $1.2 million compared to $950,000 in the year-ago quarter. The increase was primarily due to an increase in the total number of paid Platform deployments, including 29 net deployments added in the quarter. The quarter ended with annual recurring revenue of $5.0 million, up 6% sequentially and 35% year-over-year (see the company's definition of annual recurring revenue below).

Transaction revenue decreased 5% to $6.2 million compared to $6.6 million in the prior-year quarter. Total transaction count, which consists of paid and unpaid transactions, increased 3.5% from the year-ago quarter to 220,000. The improvement was due to an increase in unpaid transactions, offset by a decrease in paid transactions. Customers that have purchased the Article Galaxy platform benefit from unpaid transactions (such as open access, direct publisher subscription and token content) as part of its offering, and the increase in unpaid transactions reflects customers' ever growing dependence on the platform.  As we continue to gain higher margin SMB platform customers, we expect unpaid transactions to continue to increase. There were 1,109 transaction customers in the quarter, compared to 1,139 customers in the second quarter of fiscal year 2020 (see the company's definition of active customer accounts and transactions below).

Total gross margin improved 190 basis points from the prior-year quarter to 32.1%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $2.7 million, a $330,000 decrease from the year-ago quarter.

Net loss in the second quarter was $(261,000), or a loss of $(0.01)  per share, compared to a net loss of ($592,000), or $(0.03) per share, in the prior-year quarter. Adjusted EBITDA was $161,000, a $345,000 improvement from the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents on December 31, 2020, amounted to $10.2 million, similar to the prior quarter and an increase from $9.3 million as of June 30, 2020. 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, February 11, 2021
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: 10012898

The conference call will be broadcast live and available for replay until March 4, 2021, by dialing 1-844-512-2921 and using the replay ID 10012898, and via the investor relations section of the company's website at http://researchsolutions.investorroom.com/.

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



Quarter Ended December 31,


Six Months Ended December 31,



2020

2019

Change

% Change


2020

2019

Change

% Change

Revenue:











Platforms

$   1,220,535

$      949,825

$      270,710

28.5%


$   2,362,223

$   1,806,270

$      555,953

30.8%


Transactions

6,229,200

6,580,613

(351,413)

-5.3%


12,835,937

13,319,281

(483,344)

-3.6%

Total Revenue

7,449,735

7,530,438

(80,703)

-1.1%


15,198,160

15,125,551

72,609

0.5%











Gross Profit:











Platforms

1,003,532

787,317

216,216

27.5%


1,941,268

1,493,292

447,976

30.0%


Transactions

1,388,050

1,486,483

(98,433)

-6.6%


2,899,890

3,097,043

(197,153)

-6.4%

Total Gross Profit

2,391,582

2,273,800

117,783

5.2%


4,841,158

4,590,335

250,823

5.5%











Gross profit as a % of revenue:











Platforms

82.2%

82.9%

-0.7%



82.2%

82.7%

-0.5%



Transactions

22.3%

22.6%

-0.3%



22.6%

23.3%

-0.7%


Total Gross Profit

32.1%

30.2%

1.9%



31.9%

30.3%

1.5%












Operating Expenses:











Sales and marketing

487,571

638,837

(151,266)

-23.7%


985,945

1,189,186

(203,241)

-17.1%


Technology and product development

624,747

548,719

76,028

13.9%


1,247,708

1,047,910

199,798

19.1%


General and administrative

1,118,750

1,270,375

(151,624)

-11.9%


2,279,812

2,501,720

(221,908)

-8.9%


Depreciation and amortization

3,039

6,840

(3,801)

-55.6%


6,762

14,398

(7,636)

-53.0%


Stock-based compensation

435,949

523,632

(87,683)

-16.7%


606,739

666,304

(59,565)

-8.9%


Foreign currency translation loss

(17,469)

(5,456)

(12,013)

-220.2%


(41,718)

6,667

(48,385)

-725.7%

Total Operating Expenses

2,652,587

2,982,947

(330,359)

-11.1%


5,085,248

5,426,185

(340,937)

-6.3%

Income (loss) from operations

(261,005)

(709,147)

448,142

63.2%


(244,090)

(835,850)

591,760

70.8%











Other Income (Expenses):











Interest expense

-

-

-



-

-

-



Other income (expense)

399

26,527

(26,128)

-98.5%


634

52,076

(51,442)

-98.8%


Provision for income taxes

-

(806)

806

100.0%


(2,505)

(7,300)

4,795

65.7%


Gain on sale of disc'd operations

-

91,254

(91,254)

-100.0%


-

117,445

(117,445)

-100.0%

Total Other Income (Expenses):

399

116,975

(116,576)

-99.7%


(1,871)

162,221

(164,092)

-101.2%

Net income (loss)

$    (260,606)

$    (592,172)

331,566

56.0%


$    (245,961)

$    (673,629)

427,668

63.5%











Adjusted EBITDA

$      160,514

$    (184,131)

$      344,645

187.2%


$      327,693

$    (148,481)

$      476,174

320.7%














Quarter Ended December 31,


Six Months Ended December 31,



2020

2019

Change

% Change


2020

2019

Change

% Change

Platforms:











ARR (Annual recurring revenue):











  Beginning of Period

$   4,741,183

$   3,498,369

$   1,242,814

35.5%


$   4,446,088

$   3,224,672

$   1,221,416

37.9%


   Incremental ARR

279,871

219,431

60,440

27.5%


574,966

493,128

81,838

16.6%


  End of Period

$   5,021,054

$   3,717,800

$   1,303,254

35.1%


$   5,021,054

$   3,717,800

$   1,303,254

35.1%












Deployments:











  Beginning of Period

432

320

112

35.0%


401

301

100

33.2%


   Incremental Deployments

29

18

11

61.1%


60

37

23

62.2%


  End of Period

461

338

123

36.4%


461

338

123

36.4%












ASP (Average sales price):











  Beginning of Period

$        10,975

$        10,932

$               43

0.4%


$        11,088

$        10,713

$             374

3.5%


  End of Period

$        10,892

$        10,999

$           (108)

-1.0%


$        10,892

$        10,999

$           (108)

-1.0%











Transactions:











Transaction count

220,228

212,759

7,469

3.5%


445,314

428,539

16,775

3.9%


Corporate customers

809

856

(47)

-5.5%


807

855

(48)

-5.6%


Academic customers

300

283

17

6.0%


293

282

11

3.7%


Total customers

1,109

1,139

(30)

-2.6%


1,100

1,137

(37)

-3.3%


 

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 December 31,


Six Months Ended December 31,


2020

2019

Change

% Change


2020

2019

Change

% Change

Net Income (loss)

$    (260,606)

$    (592,172)

$      331,566

56.0%


$    (245,961)

$    (673,629)

$      427,668

63.5%

 Add (deduct):








-


  Interest expense

-

-

-



-

-

-


  Other income (expense)

(399)

(26,527)

26,128

98.5%


(634)

(52,076)

51,442

98.8%

  Foreign currency translation loss

(17,469)

(5,456)

(12,013)

220.2%


(41,718)

6,667

(48,385)

-725.7%

  Provision for income taxes

-

806

(806)

-100.0%


2,505

7,300

(4,795)

-65.7%

  Depreciation and amortization

3,039

6,840

(3,801)

-55.6%


6,762

14,398

(7,636)

-53.0%

  Stock-based compensation

435,949

523,632

(87,683)

-16.7%


606,739

666,304

(59,565)

-8.9%

  Gain on sale of disc. ops.

-

(91,254)

91,254

100.0%


-

(117,445)

117,445

100.0%

Adjusted EBITDA

$      160,514

$    (184,131)

$      344,645

187.2%


$      327,693

$    (148,481)

$      476,174

320.7%

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 

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 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
Condensed Consolidated Balance Sheets




December 31,


June 30,



2020


2020



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

10,163,504


$

9,311,556

Accounts receivable, net of allowance of $47,830 and $88,485, respectively



4,227,603



4,449,260

Prepaid expenses and other current assets



297,280



241,747

Prepaid royalties



673,864



720,367

Total current assets



15,362,251



14,722,930








Other assets:







Property and equipment, net of accumulated depreciation of $819,263 and $804,999, respectively



11,677



11,276

Deposits and other assets



6,280



6,155

Right of use asset, net of accumulated amortization of $452,577 and $390,691, respectively



10,445



72,331

Total assets


$

15,390,653


$

14,812,692








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

5,799,152


$

6,349,845

Deferred revenue



4,385,507



3,524,507

Lease liability, current portion



11,444



79,326

Total current liabilities



10,196,103



9,953,678








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; 26,266,008 and 26,032,263  shares issued and outstanding, respectively



26,266



26,032

Additional paid-in capital



26,709,401



26,134,819

Accumulated deficit



(21,422,760)



(21,176,799)

Accumulated other comprehensive loss



(118,357)



(125,038)

Total stockholders' equity



5,194,550



4,859,014

Total liabilities and stockholders' equity


$

15,390,653


$

14,812,692

 

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,



2020


2019


2020


2019










Revenue:













Platforms


$

1,220,535


$

949,825


$

2,362,223


$

1,806,270

Transactions



6,229,200



6,580,613



12,835,937



13,319,281

Total revenue



7,449,735



7,530,438



15,198,160



15,125,551














Cost of revenue:













Platforms



217,003



162,508



420,955



312,978

Transactions



4,841,150



5,094,130



9,936,047



10,222,238

Total cost of revenue



5,058,153



5,256,638



10,357,002



10,535,216

Gross profit



2,391,582



2,273,800



4,841,158



4,590,335














Operating expenses:













Selling, general and administrative



2,649,548



2,976,107



5,078,486



5,411,787

Depreciation and amortization



3,039



6,840



6,762



14,398

Total operating expenses



2,652,587



2,982,947



5,085,248



5,426,185

Loss from operations



(261,005)



(709,147)



(244,090)



(835,850)














Other income



399



26,527



634



52,076














Loss from operations before provision for income taxes



(260,606)



(682,620)



(243,456)



(783,774)

Provision for income taxes



-



(806)



(2,505)



(7,300)














Loss from continuing operations



(260,606)



(683,426)



(245,961)



(791,074)














Gain from sale of discontinued operations



-



91,254



-



117,445














Net loss



(260,606)



(592,172)



(245,961)



(673,629)














Other comprehensive income (loss):

Foreign currency translation



5,516



1,543



6,681



(2,025)

Comprehensive loss


$

(255,090)


$

(590,629)


$

(239,280)


$

(675,654)














Loss per common share:













Loss per share from continuing operations, basic and diluted


$

(0.01)


$

(0.03)


$

(0.01)


$

(0.03)

Income per share from discontinued operations, basic and diluted


$

-


$

-


$

-


$

-

Net loss per share, basic and diluted


$

(0.01)


$

(0.03)


$

(0.01)


$

(0.03)

Weighted average common shares outstanding, basic and diluted



25,988,117



24,185,966



25,943,509



24,140,616

 

SOURCE Research Solutions, Inc.

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