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October, 2 2019

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Research Solutions Reports Fiscal Fourth Quarter and Full Year 2019 Financial Results

ENCINO, Calif. – September 19, 2019 – Research Solutions, Inc. (OTCQB: RSSS), a SaaS provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal fourth quarter and full year ended June 30, 2019.

Fiscal Fourth Quarter 2019 Highlights vs. Year-Ago Quarter

  • Platform revenue up 52% to $804,000, with a 33% increase in total Platform deployments to 301. Annual recurring revenue up 43% to $3.2 million.
  • Transaction revenue increased to $6.7 million compared to $6.6 million, with customer count up to 1,090 compared to 1,081.
  • Total gross margin up 260 basis points to 29.8%.
  • Net loss from continuing operations was $0.2 million, or nil per share, compared to a net loss of $0.1 million, or $(0.01) per share.

Management Commentary

“Fiscal 2019 was another step forward as we continued to grow our SaaS-based Platform business, provide exceptional value through our innovative research tools, and test various sales and marketing strategies,” said Peter Derycz, president and CEO of Research Solutions. “In fact, during the fourth quarter our Platform revenue grew 52% over the year-ago quarter and we continued to maintain a customer churn rate far better than the industry standard, which speaks volumes to the value our Platform provides. We remain committed to driving new user growth and are currently optimizing our marketing strategies to further align with this strategy.

“Each day we get smarter about the ways in which to expand our Platform customer base. We have launched various digital marketing campaigns specifically targeting organizations that we know can significantly benefit from our enterprise offering, and we continue to measure the effectiveness of each campaign and strive for lower costs and better efficiency. We are also intensely focused on nurturing leads through better follow-up practices, which we believe will improve conversion rates.

“As we move into fiscal 2020, we are shifting our marketing efforts to focus on business-to-business campaigns, rather than individual customer campaigns. While individual customers provide a great starting point for enterprise leads, we believe a more focused and direct outreach to potential enterprise customers will be more efficient and accelerate revenue growth. We will also continue to focus on upgrading and enhancing our Platform to ensure we are consistently providing the most innovative and valuable research tools for our customers.”

Fiscal Fourth Quarter 2019 Financial Results

Total revenue increased 4% to $7.5 million compared to $7.2 million in the same year-ago quarter.

Platform subscription revenue increased 52% to $804,000 compared to $529,000 in the same year-ago quarter. The increase was due to upselling current platform customers and to a 33% increase in the total number of paid Platform deployments from 227 to 301. The quarter ended with annual recurring revenue up 43% to $3.2 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased slightly to $6.7 million compared to $6.6 million in the same year-ago quarter. Total active customers also increased slightly from 1,081 to 1,090 as well as transaction count from 213,000 to 215,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 260 basis points to 29.8% from 27.2% in the same year-ago quarter. The increase was primarily driven by a 150 basis point increase in Platform gross margin and the continued revenue mix shift to the higher-margin Platform business. 

Total operating expenses were $2.4 million compared to $2.1 million in the same year-ago quarter. The increase was primarily due to greater spending on sales and marketing related to expanding the Platform business.

Net loss from continuing operations was $0.2 million, or nil per share, compared to a net loss of $0.1 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(41,000) compared to $(27,000) in the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents at June 30, 2019, amounted to $5.4 million compared to $4.9 million at June 30, 2018. There were no outstanding borrowings under the company’s $2.5 million revolving line of credit. Apart from a $0.1 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Full Year 2019 Financial Results

Total revenue increased 3% to $28.8 million compared to $28.0 million in 2018.

Platform subscription revenue increased 54% to $2.8 million compared to $1.8 million in 2018. The increase was due to the previously mentioned increase in total paid Platform deployments to 301 and strong growth in annual recurring revenue to $3.2 million.

Transaction revenue was $26.0 million compared to $26.2 million in 2018. Total active customers increased 3% from 1,052 to 1,081, and transaction count was 831,000 compared to 843,000.

Total gross margin increased 280 basis points to 29.0% from 26.2% in 2018. The increase was driven by the continued revenue mix shift to the higher-margin Platform business. 

Total operating expenses were $9.6 million compared to $9.3 million in 2018. The increase was primarily driven by the company’s continued investment in technology and product development.

Net loss from continuing operations in fiscal 2019 improved to $1.2 million, or $(0.05) per share, compared to a net loss of $1.9 million, or $(0.08) per share, in 2018. Adjusted EBITDA improved to $(0.4) million compared to $(1.0) million in 2018.

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: Thursday, September 19, 2019
  • 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: 10007580

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 Gateway Investor Relations 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 3, 2019.

  • Toll-free replay number: 1-844-512-2921
  • International replay number: 1-412-317-6671
  • Replay ID: 10007580

Fiscal Fourth Quarter and Full Year 2019 Financial and Operational Summary Tables vs. Year-Ago Quarter

 

 

Quarter Ended June 30,

 

Year Ended June 30,

 

 

2019

2018

Change$

Change%

 

2019

2018

Change$

Change%

Revenue:

       

 

       

 

Platforms

 $      803,917

 $      528,581

 $      275,336

52.1%

 

 $   2,809,201

 $1,819,149

 $990,052

54.4%

 

Transactions

      6,670,685

      6,637,292

          33,393

0.5%

 

    25,984,721

 26,199,292

  (214,571)

-0.8%

Total Revenue

      7,474,602

      7,165,873

         308,729

4.3%

 

    28,793,922

 28,018,441

   775,481

2.8%

Gross Profit:

 

 

 

 

 

 

 

 

 

 

Platforms

         661,549

         427,211

        234,338

54.9%

 

      2,301,826

   1,440,245

   861,581

59.8%

 

Transactions

      1,566,056

      1,518,441

          47,615

3.1%

 

      6,041,635

   5,909,080

  132,555

2.2%

Total Gross Profit

      2,227,605

      1,945,652

        281,953

14.5%

 

      8,343,461

   7,349,325

   994,136

13.5%

Gross profit as a % of revenue:

 

 

 

 

 

 

 

 

 

 

Platforms

82.3%

80.8%

1.5%

 

 

81.9%

79.2%

2.8%

 

 

Transactions

23.5%

22.9%

0.6%

 

 

23.3%

22.6%

0.7%

 

Total Gross Profit

29.8%

27.2%

2.7%

 

 

29.0%

26.2%

2.7%

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

Sales and marketing

         659,108

         455,250

         203,858

44.8%

 

      2,079,045

   2,181,693

 (102,648)

-4.7%

 

Technology and product development

         549,198

         454,053

          95,145

21.0%

 

      2,139,950

   1,798,048

 341,902

19.0%

 

General and administrative

      1,060,268

      1,062,980

          (2,712)

-0.3%

 

      4,488,940

   4,385,107

 103,833

2.4%

 

Depreciation and amortization

             8,351

           32,731

        (24,380)

-74.5%

 

           38,816

      152,397

 (113,581)

-74.5%

 

Stock-based compensation

         126,903

           75,089

         51,814

69.0%

 

         827,172

      790,236

     36,936

4.7%

 

Foreign currency translation loss

             7,193

           14,589

        (7,396)

-50.7%

 

           24,500

        (8,020)

    32,520

405.5%

Total Operating Expenses

      2,411,021

      2,094,692

         316,329

15.1%

 

      9,598,423

   9,299,461

  298,962

3.2%

Income (loss) from operations

       (183,416)

       (149,040)

      (34,376)

-23.1%

 

    (1,254,962)

 (1,950,136)

  695,174

35.6%

Other Income (Expenses):

 

 

 

 

 

 

 

 

 

 

Interest expense

                        -  

                        -  

                        -  

 

 

                        -  

        (4,000)

     4,000

100.0%

 

Other income (expense)

           32,184

           20,296

       11,888

58.6%

 

         107,308

        58,179

    49,129

84.4%

 

Provision for income taxes

           (4,895)

           (7,681)

         2,786

36.3%

 

         (27,040)

      (39,779)

   12,739

32.0%

 

Gain on sale of disc'd operations

           84,275

           51,216

       33,059

64.5%

 

          14,737

      256,995

   42,258)

-16.4%

Total Other Income (Expenses):

         111,564

           63,831

        47,733

74.8%

 

         295,005

      271,395

    23,610

8.7%

Net income (loss)

 $      (71,852)

 $      (85,209)

       13,357

15.7%

 

 $    (959,957)

 $(1,678,741)

   718,784

42.8%

Adjusted EBITDA

 $  (40,969)

 $  (26,631)

 $  (14,338)

-53.8%

 

 $  (364,474)

 $(1,015,523)

 $651,049

64.1%

Platforms:

 

 

 

 

 

 

 

 

 

 

ARR (Annual recurring revenue)

 $   3,224,672

 $   2,252,956

 $    971,716

43.1%

 

 $   3,224,672

 $  2,252,956

 $971,716

43.1%

 

Deployments

          301

            227

              74

32.6%

 

           301

             227

         74

32.6%

 

ASP (Average sales price)

 $     10,713

 $      9,925

 $         788

7.9%

 

 $    10,713

 $       9,925

 $    788

7.9%

Transactions:

           

 

   

 

Transaction count

         214,686

         231,247

         (16,561)

-7.2%

 

         831,099

        842,939

   (11,840)

-1.4%

 

Corporate customers

                832

                851

                (19)

-2.2%

 

                835

               830

              5

0.6%

 

Academic customers

                258

                230

                   28

12.2%

 

                246

               222

            24

10.8%

 

Total customers

             1,090

             1,081

                     9

0.8%

 

             1,081

            1,052

            29

2.8%

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, 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,

 

 

 

2019

2018

Change

 

2019

2018

Change

Net Income (loss)

 $         (71,852)

 $         (85,209)

 $           13,357

 

 $      (959,957)

 $   (1,678,741)

 $        718,784

 

Add (deduct):

 

 

                        -  

 

 

 

                        -  

 

 

Interest expense

                        -  

                        -  

                        -  

 

                        -  

                 4,000

               (4,000)

 

 

Other income (expense)

            (32,184)

            (20,296)

            (11,888)

 

          (107,308)

            (58,179)

            (49,129)

 

 

Foreign currency translation loss

                 7,193

              14,589

               (7,396)

 

              24,500

               (8,020)

              32,520

 

 

Provision for income taxes

                 4,895

                 7,681

               (2,786)

 

              27,040

              39,779

            (12,739)

 

 

Depreciation and amortization

                 8,351

              32,731

            (24,380)

 

              38,816

            152,397

          (113,581)

 

 

Stock-based compensation

            126,903

              75,089

              51,814

 

            827,172

            790,236

              36,936

 

 

Gain on sale of discontinued operations

            (84,275)

            (51,216)

            (33,059)

 

          (214,737)

          (256,995)

              42,258

 

Adjusted EBITDA

 $         (40,969)

 $         (26,631)

 $         (14,338)

 

 $      (364,474)

 $   (1,015,523)

 $        651,049

About Research Solutions

Research Solutions, Inc. (OTCQB: RSSS) provides workflow efficiency solutions for R&D-driven organizations in life sciences, technology and academia worldwide. Our Software-as-a-Service platform provides tools or “Gadgets” that allow users to discover, access, manage and collaborate around science, technology and medical (STM) content and data. Our customers range from 70 percent of the top 25 global pharmaceutical companies to emerging small and medium-sized businesses. We generate recurring revenue from subscriptions to our SaaS platform and transactional revenue from the sale of STM content. For more information, 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. 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. 

Investor Relations:

Gateway Investor Relations
Cody Slach
Tel 1-949-574-3860
RSSS@gatewayir.com

Media Contact:

Research Solutions, Inc.
Mitja Alexander Linss
Tel 1-617-763-2312
mlinss@reprintsdesk.com

 

Research Solutions, Inc. and Subsidiaries - Consolidated Balance Sheets

 

 

June 30,

 

June 30,

 

 

2019

 

2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

5,353,090

 

$

4,908,180

Accounts receivable, net of allowance of $100,175 and $115,040, respectively

 

 

4,493,169  

 

 

4,251,251  

Prepaid expenses and other current assets

 

 

323,591

 

 

326,887

Prepaid royalties

 

 

-

 

 

93,336

Total current assets

 

 

10,169,850

 

 

9,579,654

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $789,788 and $749,923, respectively

 

 

36,828

 

 

59,043

Deposits and other assets

 

 

14,406

 

 

14,372

Right of use asset, net of accumulated amortization of $270,777 and $155,698, respectively

 

 

192,245

 

 

307,324

Total assets

 

$

10,413,329

 

$

9,960,393

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

4,862,895

 

$

4,686,946

Deferred revenue

 

 

2,310,206

 

 

1,665,746

Lease liability, current portion

 

 

129,187

 

 

119,786

Total current liabilities

 

 

7,302,288

 

 

6,472,478

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

Lease liability, long-term portion

 

 

79,326

 

 

208,513

Total liabilities

 

 

7,381,614

 

 

6,680,991

 

 

 

 

 

 

 

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; 24,375,948 and 24,016,999  shares issued and outstanding, respectively

 

 

24,376

 

 

24,017

Additional paid-in capital

 

 

23,631,481

 

 

22,904,691

Accumulated deficit

 

 

(20,514,557)

 

 

(19,554,599)

Accumulated other comprehensive loss

 

 

(109,585)

 

 

(94,707)

Total stockholders’ equity

 

 

3,031,715  

 

 

3,279,402  

Total liabilities and stockholders’ equity

 

$

10,413,329

 

$

9,960,393

 

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

 

 

Years Ended

 

 

June 30,

 

 

2019

 

2018

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Platforms

 

$

2,809,201

 

$

1,819,149

Transactions

 

 

25,984,721

 

 

26,199,292

Total revenue

 

 

28,793,922

 

 

28,018,441

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 Platforms

 

 

507,375

 

 

378,904

Transactions

 

 

19,943,086

 

 

20,290,212

Total cost of revenue

 

 

20,450,461

 

 

20,669,116

Gross profit

 

 

8,343,461  

 

 

7,349,325

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

 

 

9,559,608  

 

 

9,147,064

Depreciation and amortization

 

 

38,816  

 

 

152,397

Total operating expenses

 

 

9,598,424  

 

 

9,299,461

Loss from operations

 

 

(1,254,963)

 

 

(1,950,136)

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

Interest expense

 

 

-

 

 

(4,000)

Other income

 

 

107,308

 

 

58,179

Total other income

 

 

107,308  

 

 

54,179

 

 

 

 

 

 

 

Loss from operations before provision for income taxes

 

 

(1,147,655)

 

 

(1,895,957)

Provision for income taxes

 

 

(27,040)

 

 

(39,779)

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(1,174,695)

 

 

(1,935,736)

 

 

 

 

 

 

 

Gain from sale of discontinued operations

 

 

214,737

 

 

256,995

 

 

 

 

 

 

 

Net loss

 

 

(959,958)

 

 

(1,678,741)

 

 

 

 

 

 

 

Other comprehensive loss:

Foreign currency translation

 

 

(14,878)

 

 

(23,978)

Comprehensive loss

 

$

(974,836)

 

$

(1,702,719)

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

Loss per share from continuing operations, basic and diluted

 

$

(0.05)

 

$

(0.08)

Income per share from discontinued operations, basic and diluted

 

$

0.01

 

$

0.01

Net loss per share, basic and diluted

 

$

(0.04)

 

$

(0.07)

Weighted average common shares outstanding, basic and diluted

 

 

23,815,761

 

 

23,473,105

 

 

 

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