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November 14, 2017

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Reprints Desk Parent Company Research Solutions Reports Fiscal First Quarter 2018 Financial Results

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ENCINO, Calif. – November 14, 2017 – Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal first quarter ended September 30, 2017.

The Reprints and ePrints business was sold on June 30, 2017 and is classified as a discontinued operation.

Fiscal First Quarter 2018 Summary vs. Year-Ago Quarter

  • Total revenue increased 9% to $6.7 million.
  • Platform revenue up 126% to $388,000, with a 115% increase in total Platform deployments to 161. Annual recurring revenue was up 112% to $1.6 million.
  • Transaction revenue up 6% to $6.4 million, with customer count up 9% to 1,022. Transaction count up 7% to 205,066.
  • Total gross margin up 270 basis points to 25.9%.
  • Net loss from continuing operations was $0.8 million, or $(0.04) per share, compared to a net loss of $0.5 million, or $(0.02) per share.

Management Commentary

“The momentum of fiscal 2017 has continued into our first quarter, with continued strong growth in Platforms supported by a Transactions business that has responded to our margin-enhancing initiatives,” said Peter Derycz, president and CEO of Research Solutions. “We look forward to carrying this momentum into the launch of version 2.0 of our Article Galaxy Platform, which goes live in December.

“2.0 will feature a more robust back end system and quite a few user interface enhancements, new administration functionality, as well as a host of new Gadgets. This update should help convert a strong pipeline of potential business that we expect will drive another successful year in our transformation to the research intelligence SaaS solution for science and technology.”

Fiscal First Quarter 2018 Financial Results

Total revenue increased 9% to $6.7 million compared to $6.2 million in the same year-ago quarter.

Platform subscription revenue increased 126% to $388,000 compared to $172,000 in the year-ago quarter. The increase was due to a 115% increase in the total number of paid Platform deployments to 161. The quarter ended with annual recurring revenue up 112% to $1.6 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 6% to $6.4 million compared to $6.0 million in the same year-ago quarter. Total active customers increased 9% from 936 to 1,022, and transaction count increased 7% from 191,000 to 205,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 270 basis points to 25.9% from 23.2% in the same year-ago quarter. The increase was driven by margin growth in the Transactions business and a revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $2.6 million compared to $1.9 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 was $0.8 million, or $(0.04) per share, compared to a net loss of $0.5 million, or $(0.02) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.5) million compared to $(0.4) 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 September 30, 2017 were $4.5 million compared to $5.8 million at June 30, 2017. There were no outstanding borrowings under the company’s revolving line of credit, which matured on October 31, 2017. The company is attempting to extend the maturity date of the line of credit to October 31, 2019, and the material terms and financial and performance covenants of the line of credit are expected to change. Apart from a $300,000 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 results and the company’s outlook, followed by a question and answer period.

Date: Tuesday, November 14, 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: 10003701

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 November 28, 2017.

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

International replay number: 1-412-317-6671

Replay ID: 10003701

Fiscal First Quarter 2018 Financial and Operational Summary Tables vs. Year-Ago Quarter

 

 

 

Quarter Ended September 30,

 

 

 

$ 2017

$ 2016

$ Change

% Change

 

Revenue:

 

 

 

 

 

 

Platforms

387,945

172,072

215,873

125.5%

 

 

Transactions

6,359,895

6,006,399

353,496

5.9%

 

Total Revenue

6,747,840

6,178,471

569,369

9.2%

 

Gross Profit:

 

 

 

 

 

 

Platforms

303,958

142,108

161,850

113.9%

 

 

Transactions

1,445,481

1,291,400

154,081

11.9%

 

Total Gross Profit

1,749,439

1,433,508

315,931

22.0%

 

Gross profit as a % of revenue:

 

 

 

 

 

 

Platforms

78.4%

82.6%

-4.2%

 

 

 

Transactions

22.7%

21.5%

1.2%

 

 

Total Gross Profit

25.9%

23.2%

2.7%

 

 

Operating Expenses:

 

 

 

 

 

 

Sales and marketing

899,695

580,778

318,917

54.9%

 

 

General and administrative

1,363,486

1,211,008

152,478

12.6%

 

 

Depreciation and amortization

40,568

30,469

10,099

33.1%

 

 

Stock-based compensation

 286,242

102,589

183,653

179.0%

 

 

Foreign currency translation loss

(12,387)

3,324

(15,711)

-472.7%

 

Total Operating Expenses

2,577,604

1,928,168

649,436

33.7%

 

Income (loss) from operations

(828,165)

(494,660)

(333,505)

67.4%

 

Other Income (Expenses):

 

 

 

 

 

 

Interest expense

(3,000)

(3,000)

                    -

0.0%

 

 

Other income (expense)

12,802

 4,710

8,092

171.8%

 

 

Provision for income taxes

(11,751)

(13,605)

1,854

13.6%

 

 

Income from discontinued operations

                     -  

95,889

(95,889)

-100.0%

 

 

Gain on sale of discontinued operations

           57,149

                     -  

          57,149

 

 

Total Other Income (Expenses):

55,200

 83,994

(28,794)

-34.3%

 

Net income (loss)

(772,965)

(410,666)

(362,299)

-88.2%

 

Adjusted EBITDA

(513,742)

(358,278)

(155,464)

-43.4%

 

Platforms:

 

 

 

 

 

 

ARR (Annual recurring revenue)

1,590,830

751,489

839,341

111.7%

 

 

Deployments

161

75

86

114.7%

 

 

ASP (Average sales price)

9,881

10,020

(139)

-1.4%

 

Transactions:

 

 

 

 

 

 

Transaction count

         205,066

         191,380

          13,686

7.2%

 

 

Corporate customers

                806

                763

                 43

5.6%

 

 

Academic customers

                216

                173

                 43

24.9%

 

 

Total customers

             1,022

                936

                 86

9.1%

 

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 September 30,

 

 

 

$ 2017

$ 2016

$ Change

Net Income (loss)

(772,965)

(410,666)

(362,299)

 

Add (deduct):

 

 

 

 

 

Interest expense

3,000

3,000

                      -  

 

 

Other income (expense)

(12,802)

(4,710)

(8,092)

 

 

Foreign currency translation loss

(12,387)

3,324

(15,711)

 

 

Provision for income taxes

             11,751

             13,605

(1,854)

 

 

Depreciation and amortization

             40,568

             30,469

             10,099

 

 

Stock-based compensation

           286,242

           102,589

           183,653

 

 

Income from discontinued operations

                       -  

          (95,889)

             95,889

 

 

Gain on sale of discontinued operations

       (57,149)

                       -  

         (57,149)

 

Adjusted EBITDA

(513,742)

(358,278)

(155,464)

 

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

 

 

 

Sep 30,

 

 

Jun 30,

 

 

 

2017

 

 

2017

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,542,485

 

 

$

5,773,950

 

Accounts receivable, net of allowance of $119,546 and $119,536, respectively

 

 

4,307,776

 

 

 

5,465,299

 

Prepaid expenses and other current assets

 

 

218,893

 

 

 

196,820

 

Prepaid royalties

 

 

657,434

 

 

 

566,282

 

Total current assets

 

 

9,726,588

 

 

 

12,002,351

 

Other assets:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $715,221 and $699,421, respectively

 

 

92,508

 

 

 

85,737

 

Intangible assets, net of accumulated amortization of $648,212 and $623,714, respectively

 

 

31,624

 

 

 

41,870

 

Deposits and other assets

 

 

14,455

 

 

 

14,466

 

Right of use asset, net of accumulated amortization of $72,353 and $45,105, respectively

 

 

390,669

 

 

 

417,917

 

Total assets

 

$

10,255,844

 

 

$

12,562,341

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

4,677,299

 

 

$

6,443,056

 

Deferred revenue

 

 

1,356,950

 

 

 

1,335,475

 

Lease liability, current portion

 

 

113,065

 

 

 

110,888

 

Total current liabilities

 

 

6,147,314

 

 

 

7,889,419

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Lease liability, long-term portion

 

 

299,253

 

 

 

328,299

 

Total liabilities

 

 

6,446,567

 

 

 

8,217,718

 

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; 24,134,992 and 23,883,145  shares issued and outstanding, respectively

 

 

24,135

 

 

 

23,883

 

Additional paid-in capital

 

 

22,513,645

 

 

 

22,267,327

 

Accumulated deficit

 

 

(18,648,823

)

 

 

(17,875,858

)

Accumulated other comprehensive loss

 

 

(79,680

)

 

 

(70,729

)

Total stockholders’ equity

 

 

3,809,277

 

 

 

4,344,623

 

Total liabilities and stockholders’ equity

 

$

10,255,844

 

 

$

12,562,341

 

  

Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss

 

 

 

Three Month Ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Revenue:

 

 

 

 

 

 

 

 

Platforms

 

$

387,945

 

 

$

172,072

 

Transactions

 

 

6,359,895

 

 

 

6,006,399

 

Total revenue

 

 

6,747,840

 

 

 

6,178,471

 

Cost of revenue:

 

 

 

 

 

 

 

 

 Platforms

 

 

83,987

 

 

 

29,964

 

Transactions

 

 

4,914,414

 

 

 

4,714,999

 

Total cost of revenue

 

 

4,998,401

 

 

 

4,744,963

 

Gross profit

 

 

1,749,439

 

 

 

1,433,508

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,537,036

 

 

 

1,897,699

 

Depreciation and amortization

 

 

40,568

 

 

 

30,469

 

Total operating expenses

 

 

2,577,604

 

 

 

1,928,168

 

Loss from operations

 

 

(828,165

)

 

 

(494,660

)

Other income (expenses):

 

 

 

 

 

 

 

 

Interest expense

 

 

(3,000

)

 

 

(3,000

)

Other income

 

 

12,802

 

 

 

4,710

 

Total other income

 

 

9,802

 

 

 

1,710

 

Loss from continuing operations before provision for income taxes

 

 

(818,363

)

 

 

(492,950

)

Provision for income taxes

 

 

(11,751

)

 

 

(13,605

)

Loss from continuing operations

 

 

(830,114

)

 

 

(506,555

)

Discontinued operations:

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

-

 

 

 

95,889

 

Gain from sale of discontinued operations

 

 

57,149

 

 

 

-

 

Income from discontinued operations

 

 

57,149

 

 

 

95,889

 

Net loss

 

 

(772,965

)

 

 

(410,666

)

Other comprehensive loss:

Foreign currency translation

 

 

(8,951

)

 

 

(3,283

)

Comprehensive loss

 

$

(781,916

)

 

$

(413,949

)

Loss per common share:

 

 

 

 

 

 

 

 

Loss per share from continuing operations, basic and diluted

 

$

(0.04

)

 

$

(0.02

)

Income per share from discontinued operations, basic and diluted

 

$

-

 

 

$

-

 

Net loss per share, basic and diluted

 

$

(0.04

)

 

$

(0.02

)

Weighted average common shares outstanding, basic and diluted

 

 

23,380,437

 

 

 

23,131,570

 

 

Source: Research Solutions, Inc.