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Research Solutions Reports Fiscal Third Quarter 2017 Financial Results

ENCINO, Calif. – May 15, 2017 – Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal third quarter ended March 31, 2017.

Fiscal Third Quarter 2017 Summary vs. Year-Ago Quarter

  • Total revenue was $8.6 million compared to $8.7 million.
  • Platform revenue was up 124% to $270,920, with a 152% increase in total Platform deployments to 116. Annual recurring revenue was up 127% to $1.1 million.
  • Transaction revenue was essentially unchanged at $6.4 million, with customer count up 9% to 985. Transaction count was up 7% to 212,827.
  • Total gross margin was 20.0% compared to 20.2%.
  • Net loss was $(0.6) million, or $(0.03) per share, compared to net income of $32,000 or $0.00 per share. The loss was due to the company’s continued investment in its fast growing, recurring revenue Platform business.

Management Commentary

“Our third quarter was yet again highlighted by rapid growth in our Platform business, with triple-digit growth in both revenue and deployments,” said Peter Derycz, president and CEO of Research Solutions. “70% of our 61 fiscal year-to-date deployments are with completely new customers, further reflecting the large and growing market opportunity for our company.

“While transactions and customer count in our Transactions business accelerated from prior year, revenue was essentially flat due to declining orders from existing customers that were mostly offset by orders from new customers.”

“At the end of the quarter, we launched the latest version of our cloud-based Platform solution. The upgrade showcases full mobile responsiveness, design enhancements and the introduction of “gadgets,” or powerful apps that allow for sophisticated data augmentation of content. We believe the gadget concept will revolutionize the way research is done today. Like mobile apps, gadgets are flexible, customizable tools for scientific research that are capable of augmenting scientific documents with data, streamlining cumbersome research processes. Early customer response has been encouraging and we look forward to our expanded sales force introducing the enhanced product to an even wider audience of customers in need of this unique solution.”

Fiscal Third Quarter 2017 Financial Results          

Total revenue was $8.6 million compared to $8.7 million in the same year-ago quarter. The slight decrease was primarily attributable to a 10% ($0.2 million) decline in the company’s legacy Reprints and ePrints business. Reprints and ePrints order volume often fluctuate from period-to-period depending upon customer marketing budgets and the publication of journal articles matching their requirements. While this segment is cash flow positive, it continues to be a low margin business that requires limited resources and time.

Platform subscription revenue was up 124% to $270,920 compared to $121,034 in the year-ago quarter. The increase was due to a 152% increase in total Platform deployments to 116. The quarter ended with annual recurring revenue up 127% to $1.1 million (see the company's definition of annual recurring revenue below).

Transaction revenue was essentially unchanged at $6.4 million, as orders from new customers nearly offset orders from existing customers. Total active customers increased 9% to 985 and transaction count increased 7% to 212,827 (see the company's definition of active customer accounts and transactions below).

Total gross margin was 20.0% compared to 20.2% in the year-ago quarter. The slight decrease was primarily driven by lower Transaction and Reprints and ePrints margin.

Total operating expenses increased to $2.4 million compared to $1.7 million in the year-ago quarter, driven primarily by further investment in the company’s sales force and technology personnel to support increased Platform sales and deployments.

Net loss in the fiscal third quarter was $(0.6) million, or $(0.03) per share, compared to net income of $32,000, or $0.00 per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.5) million compared to $0.2 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 aforementioned personnel investments in the company’s fast-growing Platform business.

Cash and cash equivalents at March 31, 2017 were $5.2 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. With the exception of a $445,000 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 quarterly results and the company’s outlook, followed by a question and answer period.

Date: Monday, May 15, 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: 10002833          

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 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, 2017.

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

International replay number: 1-412-317-6671

Replay ID: 10002833     

Fiscal Third Quarter 2017 Financial and Operational Summary Tables

 

 

 

Quarter Ended March 31,

 

 

 

$ 2017

$ 2016

$ Change

% Change

 

Revenue:

 

 

 

 

 

 

Platforms

     270,920

     121,034

     149,886

123.8%

 

 

Transactions

   6,372,679

   6,394,127

       (21,448)

-0.3%

 

 

Reprints and ePrints

   2,000,200

   2,209,056

     (208,856)

-9.5%

 

Total Revenue

   8,643,799

   8,724,217

       (80,418)

-0.9%

 

Gross Profit:

 

 

 

 

 

 

Platforms

       212,553

         99,477

       113,076

113.7%

 

 

Transactions

   1,374,837

   1,475,448

     (100,611)

-6.8%

 

 

Reprints and ePrints

       141,616

       190,089

       (48,473)

-25.5%

 

Total Gross Profit

   1,729,006

   1,765,014

       (36,008)

-2.0%

 

Gross profit as a % of revenue:

 

 

 

 

 

 

Platforms

78.5%

82.2%

-3.7%

 

 

 

Transactions

21.6%

23.1%

-1.5%

 

 

 

Reprints and ePrints

7.1%

8.6%

-1.5%

 

 

Total Gross Profit

20.0%

20.2%

-0.2%

 

 

Operating Expenses:

 

 

 

 

 

 

Sales and marketing

       963,784

       525,681

       438,103

83.3%

 

 

General and administrative

      1,251807

1,011670

       240,137

23.7%

 

 

Depreciation and amortization

         33,906

         30,310

           3,596

11.9%

 

 

Stock-based compensation

       112,326

       130,568

       (18,242)

-14.0%

 

 

Foreign currency translation loss

           6,272

         (2,829)

           9,101

-321.7%

 

Total Operating Expenses

   2,368,095

   1,695,400

       672,695

39.7%

 

Income (loss) from operations

     (639,089)

         69,614

     (708,703)

1018.0%

 

Other Income (Expenses):

 

 

 

 

 

 

Interest expense

         (3,000)

         (6,389)

           3,389

53.0%

 

 

Other income (expense)

         10,143

       (25,639)

         35,782

-139.6%

 

 

Provision for income taxes

         (5,544)

         (5,210)

            (334)

-6.4%

 

Total Other Income (Expenses):

           1,599

       (37,238)

         38,837

104.3%

 

Net income (loss)

   (637,490)

       32,376

   (669,866)

2069.0%

 

Adjusted EBITDA

   (486,585)

    227,663

   (714,248)

313.7%

 

Transactions:

 

 

 

 

 

 

Transaction count

       212,827

       198,160

         14,667

7.4%

 

 

Corporate customers

             802

             763

                39

5.1%

 

 

Academic customers

             183

             139

                44

31.7%

 

 

Total customers

             985

             902

                83

9.2%

 

 

 

 

Nine Months Ended March 31,

 

 

 

$ 2017

$ 2016

$ Change

% Change

 

Revenue:

       

 

 

Platforms

        662,129

        272,075

        390,054

143.4%

 

 

Transactions

     18,245,640

     17,664,101

         581,539

3.3%

 

 

Reprints and ePrints

       5,924,813

       8,130,368

     (2,205,555)

-27.1%

 

Total Revenue

     24,832,582

     26,066,544

     (1,233,962)

-4.7%

 

Gross Profit:

 

 

 

 

 

 

Platforms

         528,175

         221,579

         306,596

138.4%

 

 

Transactions

       3,868,109

       3,983,447

        (115,338)

-2.9%

 

 

Reprints and ePrints

         460,131

         710,637

        (250,506)

-35.3%

 

Total Gross Profit

       4,856,415

       4,915,663

          (59,248)

-1.2%

 

Gross profit as a % of revenue:

 

 

 

 

 

 

Platforms

79.8%

81.4%

-1.7%

 

 

 

Transactions

21.2%

22.6%

-1.4%

 

 

 

Reprints and ePrints

7.8%

8.7%

-1.0%

 

 

Total Gross Profit

19.6%

18.9%

0.7%

 

 

Operating Expenses:

 

 

 

 

 

 

Sales and marketing

       2,399,286

       1,521,157

         878,129

57.7%

 

 

General and administrative

       3,688,996

       3,167,119

         521,877

16.5%

 

 

Depreciation and amortization

            96,801

           61,144

            35,657

58.3%

 

 

Stock-based compensation

         518,012

         551,698

          (33,686)

-6.1%

 

 

Foreign currency translation loss

            27,227

             4,293

            22,934

534.2%

 

Total Operating Expenses

       6,730,322

       5,305,411

       1,424,911

26.9%

 

Income (loss) from operations

     (1,873,907)

       (389,748)

     (1,484,159)

-380.8%

 

Other Income (Expenses):

 

 

 

 

 

 

Interest expense

            (9,000)

         (14,382)

              5,382

37.4%

 

 

Other income (expense)

            20,277

         (18,229)

            38,506

-211.2%

 

 

Provision for income taxes

          (28,486)

         (22,510)

            (5,976)

-26.5%

 

Total Other Income (Expenses):

          (17,209)

         (55,121)

            37,912

68.8%

 

Net income (loss)

   (1,891,116)

     (444,869)

   (1,446,247)

-325.1%

 

Adjusted EBITDA

   (1,231,867)

        227,387

   (1,459,254)

641.7%

 

Platforms:

       

 

 

ARR (Annual recurring revenue)

     1,124,451

        496,027

        628,424

126.7%

 

 

Deployments

                 116

                  46

                   70

152.2%

 

 

ASP (Average sales price)

           9,694

         10,783

         (1,090)

-10.1%

 

Transactions:

       

 

 

Transaction count

         597,697

         550,473

            47,224

8.6%

 

 

Corporate customers

                 773

                725

                   48

6.6%

 

 

Academic customers

                 179

                136

                   43

31.9%

 

 

Total customers

                 952

                861

                   91

10.6%

 

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, and other potential adjustments that may arise.

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):

 

 

Three Months Ended March 31,

 

 

 

$ 2017

 

 

$ 2016

 

2017-2016

$ Change

Net loss

 

 

(637,490)

 

 

32,376

 

 

(669,866)

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense

 

 

3,000

 

 

6,389

 

 

(3,389)

Other (income) expense

 

 

(10,143)

 

 

25,639

 

 

(35,782)

Foreign currency transaction loss

 

 

6,272

 

 

(2,829)

 

 

9,101

Provision for income taxes

 

 

5,544

 

 

5,210

 

 

334

Depreciation and amortization

 

 

33,906

 

 

30,310

 

 

3,596

Stock-based compensation

 

 

112,326

 

 

130,568

 

 

(18,242)

Adjusted EBITDA

 

 

(486,585)

 

 

227,663

 

 

(714,248)

 

 

 

Nine Months Ended March 31,

 

 

 

$ 2017

 

 

$ 2016

 

2017-2016

$ Change

Net loss

 

 

(1,891,116)

 

 

(444,869)

 

 

(1,446,247)

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense

 

 

9,000

 

 

14,382

 

 

(5,382)

Other (income) expense

 

 

(20,277)

 

 

18,229

 

 

(38,506)

Foreign currency transaction loss

 

 

27,227

 

 

4,293

 

 

22,934

Provision for income taxes

 

 

28,486

 

 

22,510

 

 

5,976

Depreciation and amortization

 

 

96,801

 

 

61,144

 

 

35,657

Stock-based compensation

 

 

518,012

 

 

551,698

 

 

(33,686)

Adjusted EBITDA

 

 

(1,231,867)

 

 

227,387

 

 

(1,459,254)

 

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 Condensed Consolidated Balance Sheets

 

 

 

March 31,

 

June 30,

 

 

$ 2017

 

$ 2016

 

 

(unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

 

5,242,978

 

 

6,076,875

Accounts receivable, net of allowance of $47,510 and $52,084, respectively

 

 

5,186,517

 

 

5,761,860

Prepaid expenses and other current assets

 

 

196,553

 

 

164,610

Prepaid royalties

 

 

1,276,576

 

 

173,665

Total current assets

 

 

11,902,624

 

 

12,177,010

Other assets:

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $682,849 and $642,051, respectively

 

 

83,662

 

 

82,207

Intangible assets, net of accumulated amortization of $602,779 and $546,679, respectively

 

 

58,499

 

 

104,848

Deposits and other assets

 

 

19,061

 

 

7,594

Right of use asset, net of accumulated amortization of $18,018

 

 

445,004

 

 

Total assets

 

 

12,508,850

 

 

12,371,659

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

6,338,404

 

 

5,690,768

Deferred revenue

 

 

1,163,813

 

 

639,834

Lease liability, current portion

 

 

88,124

 

 

Total current liabilities

 

 

7,590,341

 

 

6,330,602

Long-term liabilities:

 

 

 

 

 

 

Lease liability, long-term portion

 

 

357,063

 

 

Total liabilities

 

 

7,947,404

 

 

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; 23,925,910 and 23,809,593 shares issued and outstanding, respectively

 

 

23,926

 

 

23,810

Additional paid-in capital

 

 

22,070,330

 

 

21,642,763

Accumulated deficit

 

 

(17,473,411)

 

 

(15,582,295)

Accumulated other comprehensive loss

 

 

(59,399)

 

 

(43,221)

Total stockholders’ equity

 

 

4,561,446

 

 

6,041,057

Total liabilities and stockholders’ equity

 

 

12,508,850

 

 

12,371,659

 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31,

 

March 31,

 

 

$ 2017

 

$ 2016

 

$ 2017

 

$ 2016

 

 

 

 

 

 

 

 

 

Revenue

 

 

8,643,799

 

 

8,724,217

 

 

24,832,582

 

 

26,066,544

Cost of revenue

 

 

6,914,793

 

 

6,959,203

 

 

19,976,167

 

 

21,150,881

Gross profit

 

 

1,729,006

 

 

1,765,014

 

 

4,856,415

 

 

4,915,663

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,334,189

 

 

1,665,090

 

 

6,633,521

 

 

5,244,267

Depreciation and amortization

 

 

33,906

 

 

30,310

 

 

96,801

 

 

61,144

Total operating expenses

 

 

2,368,095

 

 

1,695,400

 

 

6,730,322

 

 

5,305,411

Income (loss) from operations

 

 

(639,089)

 

 

69,614

 

 

(1,873,907)

 

 

(389,748)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(3,000)

 

 

(6,389)

 

 

(9,000)

 

 

(14,382)

Other income (expense)

 

 

10,143

 

 

(25,639)

 

 

20,277

 

 

(18,229)

Total other income (expenses)

 

 

7,143

 

 

(32,028)

 

 

11,277

 

 

(32,611)

Income (loss) from operations before provision for income taxes

 

 

(631,946)

 

 

37,586

 

 

(1,862,630)

 

 

(422,359)

Provision for income taxes

 

 

(5,544)

 

 

(5,210)

 

 

(28,486)

 

 

(22,510)

Net income (loss)

 

 

(637,490)

 

 

32,376

 

 

(1,891,116)

 

 

(444,869)

Other comprehensive income (loss):

Foreign currency translation

 

 

(18,090)

 

 

(6,603)

 

 

(16,178)

 

 

(11,966)

Comprehensive income (loss)

 

$

(655,580)

 

$

25,773

 

$

(1,907,294)

 

$

(456,835)

Basic income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

(0.03)

 

 

-

 

 

(0.08)

 

 

(0.03)

Basic weighted average common shares outstanding

 

 

23,265,939

 

 

17,707,900

 

 

23,199,010

 

 

17,642,449

Diluted income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

(0.03)

 

$

-

 

 

(0.08)

 

 

(0.03)

Diluted weighted average common shares outstanding

 

 

23,265,939

 

 

18,464,000

 

 

23,199,010

 

 

17,642,449

 

Source: Research Solutions, Inc.