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Reprints Desk's Parent Company Reports Fiscal Fourth Quarter and Full Year 2017 Financial Results

ENCINO, Calif. – September 18, 2017 – Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal fourth quarter and full year ended June 30, 2017.

The preliminary results below are from continuing operations and exclude the results of the Reprints and ePrints business whose assets were sold on June 30, 2017. In addition, prior period results for the Reprints and ePrints business are classified as discontinued operations.

Fiscal Fourth Quarter 2017 Summary vs. Year-Ago Quarter

  • Total revenue increased 11% to $6.8 million.
  • Platform revenue up 145% to $318,000, with a 137% increase in total Platform deployments to 140. Annual recurring revenue was up 137% to $1.4 million.
  • Transaction revenue up 8% to $6.5 million, with customer count up 11% to 1,001. Transaction count up 11% to 212,386.
  • Total gross margin up 180 basis points to 25.0%.
  • Net loss from continuing operations was $0.8 million, or $(0.03) per share, compared to a net loss of $0.2 million, or $(0.01) per share.

Management Commentary

“As our preliminary results indicated, the market momentum for our SaaS Platform business continues to grow,” said Peter Derycz, president and CEO of Research Solutions. “Fourth quarter deployments more than doubled to 140, with annual recurring revenue up 137% to $1.4 million. In our Transactions business, the proactive measures we put into place last quarter to grow revenue and improve margins are having their intended effect. We look forward to our operational and financial momentum continuing into fiscal 2018.”

Fiscal Fourth Quarter 2017 Financial Results

Total revenue increased 11% to $6.8 million compared to $6.2 million in the same year-ago quarter.

Platform subscription revenue increased 145% to $318,000 compared to $130,000 in the year-ago quarter. The increase was due to a 137% increase in the total number of paid Platform deployments to 140. The quarter ended with annual recurring revenue up 137% to $1.4 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 8% to $6.5 million compared to $6.0 million in the same year-ago quarter. Total active customers increased 11% from 909 to 1,011, and transaction count also increased 11% from 191,000 to 212,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 180 basis points to 25.0% from 23.2% in the same year-ago quarter. The increase was driven by a revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $2.5 million compared to $1.6 million in the year-ago quarter, driven primarily by the company’s investment in sales, marketing and technology personnel to support increased Platform sales and deployments.

Net loss from continuing operations in the fiscal fourth quarter was $0.8 million, or $(0.03) per share, compared to a net loss of $0.2 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.6) million compared to $0.0 million in the 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 company’s investment in its Platform business.

Cash and cash equivalents at June 30, 2017 were $5.8 million compared to $6.1 million at June 30, 2016. There were no outstanding borrowings under the company’s revolving line of credit, which provides the lesser of $4 million or 80% of eligible accounts receivable. Apart from a $0.3 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Full Year 2017 Financial Results

Total revenue increased 7% to $25.7 million compared to $24.1 million in 2016.

Platform subscription revenue increased 144% to $980,000 compared to $402,000 in 2016. The increase was due to the previously mentioned increase in total paid Platform deployments to 140 and strong annual recurring revenue growth to $1.4 million.

Transaction revenue increased 4% to $24.8 million compared to $23.7 million in 2016. Total active customers increased 11% from 873 to 967, and transaction count increased 9% from 741,849 to 810,083.

Total gross margin increased 30 basis points to 23.7% from 23.4% in 2016. The increase was driven by the revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $9.2 million compared to $6.9 million in 2016, driven primarily by the company’s investment throughout the year in sales, marketing and technology personnel to support increased Platform sales and deployments.

Net loss from continuing operations in fiscal 2017 was $3.1 million, or $(0.14) per share, compared to a net loss of $1.4 million, or $(0.08) per share, in 2016. Adjusted EBITDA totaled $(2.3) million compared to $(0.5) million in 2016. Both the net loss and Adjusted EBITDA reflect the company’s investment in its Platform business.

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: Monday, September 18, 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: 10003523

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 October 2, 2017.

Toll-free replay number: 1-844-512-2921

International replay number: 1-412-317-6671

Replay ID: 10003523

Fiscal Fourth Quarter and Full Year 2017 Financial and Operational Summary Tables

 

 

 

Quarter Ended June 30,

 

 

 

$ 2017

$ 2016

$ Change

%

 

Revenue:

 

 

 

 

 

 

Platforms

318,194

129,963

188,231

144.8%

 

 

Transactions

6,521,313

6,025,972

495,341

8.2%

 

Total Revenue

6,839,507

6,155,935

683,572

11.1%

 

Gross Profit:

 

 

 

 

 

 

Platforms

247,097

106,537

140,560

131.9%

 

 

Transactions

1,460,813

1,323,080

137,733

10.4%

 

Total Gross Profit

1,707,910

1,429,617

278,293

19.5%

 

Gross profit as a % of revenue:

 

 

 

 

 

 

Platforms

77.7%

82.0%

-4.3%

 

 

 

Transactions

22.4%

22.0%

0.4%

 

 

Total Gross Profit

25.0%

23.2%

1.7%

 

 

Operating Expenses:

 

 

 

 

 

 

Sales and marketing

988,962

520,402

468,560

90.0%

 

 

General and administrative

1,326,798

902,667

424,131

47.0%

 

 

Depreciation and amortization

36,893

29,702

7,191

24.2%

 

 

Stock-based compensation

112,151

162,192

(50,041)

-30.9%

 

 

Foreign currency translation loss

(6,362)

994

(7,356)

-740.0%

 

Total Operating Expenses

2,458,442

1,615,957

842,485

52.1%

 

Income (loss) from operations

(750,532)

(186,340)

(564,192)

-302.8%

 

Other Income (Expenses):

 

 

 

 

 

 

Interest expense

(3,000)

(3,000)

-  

0.0%

 

 

Other income (expense)

3,584

(13,382)

16,966

126.8%

 

 

Provision for income taxes

(7,009)

(5,652)

(1,357)

-24.0%

 

 

Income from discontinued operations

113,314

 155,385

(42,071)

-27.1%

 

 

Gain on sale of discontinued operations

         241,196

                     -  

         241,196

 

 

Total Other Income (Expenses):

348,085

133,351

214,734

161.0%

 

Net income (loss)

(402,447)

(52,989)

(349,458)

-659.5%

 

Transactions:

 

 

 

 

 

 

Transaction count

212,386

191,376

21,010

11.0%

 

 

Corporate customers

810

756

54

7.1%

 

 

Academic customers

201

153

48

31.4%

 

 

Total customers

1,011

909

102

11.2%

 

 

 

 

 

Year Ended June 30,

 

 

 

$ 2017

$ 2016

$ Change

%

 

Revenue:

       

 

 

Platforms

980,323

402,038

578,285

143.8%

 

 

Transactions

     24,766,953

     23,690,073

       1,076,880

4.5%

 

Total Revenue

     25,747,276

     24,092,111

       1,655,165

6.9%

 

Gross Profit:

 

 

 

 

 

 

Platforms

         775,272

         328,116

         447,156

136.3%

 

 

Transactions

       5,328,922

       5,306,527

            22,395

0.4%

 

Total Gross Profit

       6,104,194

       5,634,643

         469,551

8.3%

 

Gross profit as a % of revenue:

 

 

 

 

 

 

Platforms

79.1%

81.6%

-2.5%

 

 

 

Transactions

21.5%

22.4%

-0.9%

 

 

Total Gross Profit

23.7%

23.4%

0.3%

 

 

Operating Expenses:

 

 

 

 

 

 

Sales and marketing

       3,388,248

       2,041,559

       1,346,689

66.0%

 

 

General and administrative

       5,015,794

       4,069,786

         946,008

23.2%

 

 

Depreciation and amortization

         133,694

       90,846

         42,848

47.2%

 

 

Stock-based compensation

         630,163

         713,890

       (83,727)

-11.7%

 

 

Foreign currency translation loss

         20,865

          5,287

       15,578

294.6%

 

Total Operating Expenses

       9,188,764

       6,921,368

       2,267,396

32.8%

 

Income (loss) from operations

     (3,084,570)

     (1,286,725)

     (1,797,845)

-139.7%

 

Other Income (Expenses):

 

 

 

 

 

 

Interest expense

     (12,000)

     (17,382)

     5,382

31.0%

 

 

Other income (expense)

     23,861

     (31,611)

     55,472

175.5%

 

 

Provision for income taxes

    (35,495)

     (28,162)

    (7,333)

-26.0%

 

 

Income from discontinued operations

         573,445

         866,022

   (292,577)

-33.8%

 

 

Gain on sale of discontinued operations

         241,196

                     -  

         241,196

 

 

Total Other Income (Expenses):

         791,007

         788,867

        2,140

0.3%

 

Net income (loss)

(2,293,563)

(497,858)

(1,795,705)

-360.7%

 

 

 

 

 

 

 

Platforms:

 

 

 

 

 

 

ARR (Annual recurring revenue)

1,376,729

580,902

795,827

137.0%

 

 

Deployments

           140

               59

                   81

137.3%

 

 

ASP (Average sales price)

9,834

9,846

(12)

-0.1%

 

Transactions:

       

 

 

Transaction count

         810,083

         741,849

            68,234

9.2%

 

 

Corporate customers

                 782

                 733

                   50

6.8%

 

 

Academic customers

                 185

                 140

                   45

31.7%

 

 

Total customers

                 967

                 873

                   94

10.8%

 

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, 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 June 30,

 

 

 

$ 2017

$ 2016

$ Change

Net Income (loss)

(402,447)

(52,989)

(349,458)

 

Add (deduct):

 

 

 

 

 

Interest expense

               3,000

               3,000

                     -  

 

 

Other income (expense)

(3,584)

13,382

(16,966)

 

 

Foreign currency translation loss

(6,362)

994

(7,356)

 

 

Provision for income taxes

               7,009

               5,652

              1,357

 

 

Depreciation and amortization

             36,893

             29,702

               7,191

 

 

Stock-based compensation

         112,151

         162,192

          (50,041)

 

 

Income from discontinued operations

   (113,314)

     (155,385)

             42,071

 

 

Gain on sale of discontinued operations

         (241,196)

                     -  

         (241,196)

 

Adjusted EBITDA

(607,850)

6,548

(614,398)

 

 

Year Ended June 30,

 

 

 

$ 2017

$ 2016

$ Change

Net Income (loss)

(2,293,563)

(497,858)

(1,795,705)

 

Add (deduct):

                     -  

                     -  

 

 

 

Interest expense

             12,000

         17,382

             (5,382)

 

 

Other income (expense)

           (23,861)

         31,611

           (55,472)

 

 

Foreign currency translation loss

             20,865

         5,287

             15,578

 

 

Provision for income taxes

             35,495

         28,162

               7,333

 

 

Depreciation and amortization

         133,694

         90,846

             42,848

 

 

Stock-based compensation

         630,163

         713,890

           (83,727)

 

 

Income from discontinued operations

        (573,445)

      (866,022)

         292,577

 

 

Gain on sale of discontinued operations

         (241,196)

                     -  

         (241,196)

 

Adjusted EBITDA

(2,299,848)

(476,702)

(1,823,146)

 

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

Consolidated Balance Sheets

 

 

June 30,

 

June 30,

 

 

2017

 

2016

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

5,773,950

 

$

6,076,875

Accounts receivable, net of allowance of $119,536 and $52,084, respectively

 

 

5,465,299

 

 

5,761,860

Prepaid expenses and other current assets

 

 

196,820

 

 

164,610

Prepaid royalties

 

 

566,282

 

 

173,665

Total current assets

 

 

12,002,351

 

 

12,177,010

Other assets:

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $699,421 and $642,051, respectively

 

 

85,737

 

 

82,207

Intangible assets, net of accumulated amortization of $623,714 and $546,679, respectively

  

 

41,870

 

 

104,848

Deposits and other assets

 

 

14,466

 

 

7,594

Right of use asset, net of accumulated amortization of $45,105

 

 

417,917

 

 

-

Total assets

 

$

12,562,341

 

$

12,371,659

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

6,443,056

 

$

5,690,768

Deferred revenue

 

 

1,335,475

 

 

639,834

Lease liability, current portion

 

 

110,888

 

 

-

Total current liabilities

 

 

7,889,419

 

 

6,330,602

Long-term liabilities:

 

 

 

 

 

 

Lease liability, long-term portion

 

 

328,299

 

 

-

Total liabilities

 

 

8,217,718

 

 

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; 23,883,145 and 23,809,593 shares issued and outstanding, respectively

 

 

23,883

 

 

23,810

Additional paid-in capital

 

 

22,267,327

 

 

21,642,763

Accumulated deficit

 

 

(17,875,858)

 

 

(15,582,295)

Accumulated other comprehensive loss

 

 

(70,729)

 

 

(43,221)

Total stockholders’ equity

 

 

4,344,623

 

 

6,041,057

Total liabilities and stockholders’ equity

 

$

12,562,341

 

$

12,371,659

  

Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss

 

 

 

Years Ended

 

 

June 30,

 

 

2017

 

2016

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Platforms

 

$

980,323

 

$

402,038

Transactions

 

 

24,766,953

 

 

23,690,073

Total revenue

 

 

25,747,276

 

 

24,092,111

Cost of revenue:

 

 

 

 

 

 

Platforms

 

 

205,051

 

 

73,922

Transactions

 

 

19,438,031

 

 

18,383,546

Total cost of revenue

 

 

19,643,082

 

 

18,457,468

Gross profit

 

 

6,104,194

 

 

5,634,643

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

 

 

9,055,070

 

 

6,830,522

Depreciation and amortization

 

 

133,694

 

 

90,846

Total operating expenses

 

 

9,188,764

 

 

6,921,368

Loss from operations

 

 

(3,084,570)

 

 

(1,286,725)

Other income (expenses):

 

 

 

 

 

 

Interest expense

 

 

(12,000)

 

 

(17,382)

Other income (expense)

 

 

23,861

 

 

(31,611)

Total other income (expenses)

 

 

11,861

 

 

(48,993)

 

 

 

 

 

 

 

Loss from continuing operations before provision for income taxes

 

 

(3,072,709)

 

 

(1,335,718)

Provision for income taxes

 

 

(35,495)

 

 

(28,162)

Loss from continuing operations

 

 

(3,108,204)

 

 

(1,363,880)

Discontinued operations:

 

 

 

 

 

 

Income from discontinued operations

 

 

573,445

 

 

866,022

Gain from sale of discontinued operations

 

 

241,196

 

 

-

Income from discontinued operations

 

 

814,641

 

 

866,022

Net loss

 

 

(2,293,563)

 

 

(497,858)

Other comprehensive loss:

Foreign currency translation

 

 

(27,508)

 

 

(13,874)

Comprehensive loss

 

$

(2,321,071)

 

$

(511,732)

Income (loss) per common share:

 

 

 

 

 

 

Loss per share from continuing operations, basic and diluted

 

$

(0.14)

 

$

(0.08)

Income per share from discontinued operations, basic and diluted

 

$

0.04

 

$

0.05

Net loss per share, basic and diluted

 

$

(0.10)

 

$

(0.03)

Weighted average common shares outstanding, basic and diluted

 

 

23,241,572

 

 

17,769,827

 

Source: Research Solutions, Inc.