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May 15, 2018

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Research Solutions Reports Fiscal Third Quarter 2018 Financial Results

ENCINO, Calif. – May 15, 2018 –Research Solutions, Inc. (OTCQB: RSSS), a provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal third quarter ended March 31, 2018.

Fiscal Third Quarter 2018 Highlightsvs. Year-Ago Quarter

  • Total revenue increased 10% to $7.3 million.
  • Platform revenue up 81% to $489,000, with a 79% increase in total Platform deployments to 208. Annual recurring revenue was up 76% to $2.0 million.
  • Transaction revenue up 7% to $6.8 million, with customer count up 8% to 1,059. Transaction count up 3% to 219,607.
  • Total gross margin up 240 basis points to 26.3%.
  • Net loss from continuing operations was $0.3 million, or $(0.01) per share, compared to a net loss of $0.8 million, or $(0.03) per share.

Management Commentary

“Our third quarter demonstrates the continued momentum in our strategy to deliver unique workflow efficiency solutions to research-driven organizations in life sciences, technology and academia,” said Peter Derycz, president and CEO of Research Solutions. “This can be seen in our fourth consecutive quarter of approximately 10% total revenue growth and annual recurring revenue in our SaaS Platforms business that has surpassed $2 million.

“We expect our momentum to continue in the remainder of 2018 as we launch version 2.1 and 2.2 of our Platform framework, supported by powerful weekly releases or improvements to smart applications we develop called ‘gadgets.’ This will be supported by a sales and marketing team that we are reconstructing to drive optimum efficiency and investment returns.”

Fiscal Third Quarter 2018 Financial Results

Total revenue increased 10% to $7.3 million compared to $6.6 million in the same year-ago quarter.

Platform subscription revenue increased 81% to $489,000 compared to $271,000 in the year-ago quarter. The increase was due to a 79% increase in the total number of paid Platform deployments to 208. The quarter ended with annual recurring revenue up 76% to $2.0 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 7% to $6.8 million compared to $6.4 million in the same year-ago quarter. Total active customers increased 8% from 985 to 1,059, and transaction count increased 3% from 213,000 to 220,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 240 basis points to 26.3% from 23.9% in the same year-ago quarter. The increase was driven by a 100 basis point increase in Transactions gross margin and a revenue mix shift to the higher-margin Platforms business. 

Total operating expenses decreased to $2.2 million compared to $2.4 million in the same year-ago quarter. The decrease was primarily due to the continued optimization of sales and marketing resources and open positions.

Net loss from continuing operations improved to $0.3 million, or $(0.01) per share, compared to a net loss of $0.8 million, or $(0.03) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.1) million compared to $(0.6) million 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 March 31, 2018 were $4.8 million compared to $5.8 million at June 30, 2017. There were no outstanding borrowings under the company’s $2.5 million revolving line of credit. Apart from a $0.2 million 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, May 15, 2018

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: 10004686

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 hereand 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, 2018.

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

International replay number: 1-412-317-6671

Replay ID: 10004686 

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

 

 

Quarter Ended March 31 (US$)

 

Nine Months Ended March 31 (US$)

 

 

2018

2017

Change

%

 

2018

2017

Change

%

Revenue:

 

 

 

 

 

       

 

Platforms

  489,219

  270,920

  218,299

80.6%

 

  1,290,568

     662,129

  628,439

94.9%

 

Transactions

6,792,289

6,372,679

  419,610

6.6%

 

19,562,000

18,245,640

1,316,360

7.2%

Total Revenue

7,281,508

6,643,599

 637,909

9.6%

 

20,852,568

18,907,769

1,944,799

10.3%

                   

Gross Profit:

 

 

 

 

 

 

 

 

 

 

Platforms

 386,034

  212,553

  173,481

81.6%

 

 1,013,034

  528,175

484,859

91.8%

 

Transactions

1,532,330

1,374,837

157,493

11.5%

 

 4,390,639

 3,868,109

  522,530

13.5%

Total Gross Profit

1,918,364

1,587,390

 330,974

20.9%

 

5,403,673

 4,396,284

1,007,389

22.9%

Gross profit as a % of revenue:

 

 

 

 

 

 

 

 

 

 

Platforms

78.9%

78.5%

0.5%

 

 

78.5%

79.8%

-1.3%

 

 

Transactions

22.6%

21.6%

1.0%

 

 

22.4%

21.2%

1.2%

 

Total Gross Profit

26.3%

23.9%

2.5%

 

 

25.9%

23.3%

2.7%

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

Sales and marketing

522,894

 698,346

(175,452)

-25.1%

 

1,726,443

1,683,704

42,739

2.5%

 

Technology and product development

436,672

396,765

39,907

10.1%

 

1,343,995

1,062,790

281,204

26.5%

 

General and administrative

1,091,930

1,120,481

(28,551)

-2.5%

 

3,322,127

3,341,788

(19,660)

-0.6%

 

Depreciation and amortization

32,768

33,906

(1,138)

-3.4%

 

119,666

96,801

22,865

23.6%

 

Stock-based compensation

114,340

112,326

2,014

1.8%

 

715,147

518,012

197,135

38.1%

 

Foreign currency translation loss

(9,737)

6,272

(16,009)

-255.2%

 

(22,609)

27,227

(49,836)

-183.0%

Total Operating Expenses

2,188,866

2,368,095

(179,229)

-7.6%

 

7,204,769

6,730,322

474,447

7.0%

Income (loss) from operations

(270,502)

(780,705)

510,203

65.4%

 

(1,801,096)

(2,334,038)

532,942

22.8%

Other Income (Expenses):

 

 

 

 

 

 

 

 

 

 

Interest expense

 2,000

 (3,000)

5,000

166.7%

 

 (4,000)

 (9,000)

5,000

55.6%

 

Other income (expense)

 13,769

 10,143

 3,626

35.7%

 

  37,883

  20,277

 17,606

86.8%

 

Provision for income taxes

(10,531)

 (5,544)

(4,987)

-90.0%

 

(32,098)

(28,486)

 (3,612)

-12.7%

 

Income from discontinued operations

                 -  

141,616

(141,616)

-100.0%

 

                     -  

 460,131

(460,131)

-100.0%

 

Gain on sale of discontinued operations

         69,277

                 -  

        69,277

 

 

           205,779

                     -  

           205,779

 

Total Other Income (Expenses):

 74,515

  143,215

(68,700)

-48.0%

 

207,564

 442,922

(235,358)

-53.1%

Net income (loss)

(195,987)

(637,490)

441,503

69.3%

 

(1,593,532)

(1,891,116)

 297,584

15.7%

 

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 March 31 $

 

Nine Months Ended March 31 $

 

 

 

2018 

2017 

Change

 

2018 

2017 

Change 

Net Income (loss)

(195,987)

(637,490)

441,503

 

(1,593,532)

(1,891,116)

297,584

 

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense

            (2,000)

              3,000

            (5,000)

 

                4,000

                9,000

               (5,000)

 

 

Other income (expense)

           (13,769)

           (10,143)

            (3,626)

 

             (37,883)

             (20,277)

             (17,606)

 

 

Foreign currency translation loss

            (9,737)

              6,272

           (16,009)

 

             (22,609)

              27,227

             (49,836)

 

 

Provision for income taxes

             10,531

              5,544

              4,987

 

              32,098

              28,486

                 3,612

 

 

Depreciation and amortization

            32,768

            33,906

             (1,138)

 

              119,666

               96,801

              22,865

 

 

Stock-based compensation

           114,340

           112,326

              2,014

 

              715,147

              518,012

              197,135

 

 

Income from discontinued operations

                   -  

          (141,616)

            141,616

 

                      -  

            (460,131)

              460,131

 

 

Gain on sale of discontinued operations

          (69,277)

                   -  

          (69,277)

 

           (205,779)

                      -  

           (205,779)

 

Adjusted EBITDA

(133,131)

(628,201)

495,070

 

 (988,892)

(1,691,998)

 703,106

 

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+% 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 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,

 

 

2018

 

2017

 

 

(unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

4,801,305

 

$

5,773,950

Accounts receivable, net of allowance of $119,462 and $119,536, respectively

 

 

4,336,057  

 

 

5,465,299

Prepaid expenses and other current assets

 

 

302,811

 

 

196,820

Prepaid royalties

 

 

127,906

 

 

566,282

Total current assets

 

 

9,568,079

 

 

12,002,351

             

Other assets:

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $741,398 and $699,421, respectively

 

 

72,434

 

 

85,737

Intangible assets, net of accumulated amortization of $701,436 and $623,714, respectively

  

 

21,600  

 

 

41,870

Deposits and other assets

 

 

14,459

 

 

14,466

Right of use asset, net of accumulated amortization of $99,864 and $45,105, respectively

 

 

335,380

 

 

417,917

Total assets

 

$

10,011,952

 

$

12,562,341

             

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

4,687,974

 

$

6,443,056

Deferred revenue

 

 

1,652,160

 

 

1,335,475

Lease liability, current portion

 

 

117,507

 

 

110,888

Total current liabilities

 

 

6,457,641

 

 

7,889,419

             

Long-term liabilities:

 

 

 

 

 

 

Lease liability, long-term portion

 

 

239,555

 

 

328,299

Total liabilities

 

 

6,697,196

 

 

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; 23,980,383 and 23,883,145  shares issued and outstanding, respectively

 

 

23,980

 

 

23,883

Additional paid-in capital

 

 

22,853,945

 

 

22,267,327

Accumulated deficit

 

 

(19,469,389)

 

 

(17,875,858)

Accumulated other comprehensive loss

 

 

(93,780)

 

 

(70,729)

Total stockholders’ equity

 

 

3,314,756  

 

 

4,344,623

Total liabilities and stockholders’ equity

 

$

10,011,952

 

$

12,562,341

  

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31,

 

March 31,

 

 

2018

 

2017

 

2018

 

2017

                 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Platforms

 

$

489,219 

 

$

270,920

 

$

1,290,568

 

$

662,129

Transactions

 

 

6,792,289 

 

 

6,372,679

 

 

19,562,000

 

 

18,245,640

Total revenue

 

 

7,281,508 

 

 

6,643,599

 

 

20,852,568

 

 

18,907,769

                         

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Platforms

 

 

103,185

 

 

58,367

 

 

277,534

 

 

133,954

Transactions

 

 

5,259,959

 

 

4,997,842

 

 

15,171,361

 

 

14,377,531

Total cost of revenue

 

 

5,363,144

 

 

5,056,209

 

 

15,448,895

 

 

14,511,485

Gross profit

 

 

1,918,364

 

 

1,587,390

 

 

5,403,673

 

 

4,396,284

                         

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,156,097  

 

 

2,334,189

 

 

7,085,102

 

 

6,633,521

Depreciation and amortization

 

 

32,768  

 

 

33,906

 

 

119,666

 

 

96,801

Total operating expenses

 

 

2,188,865

 

 

2,368,095

 

 

7,204,768

 

 

6,730,322

Loss from operations

 

 

(270,501)

 

 

(780,705)

 

 

(1,801,095)

 

 

(2,334,038)

                         

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

2,000

 

 

(3,000)

 

 

(4,000)

 

 

(9,000)

Other income

 

 

13,769

 

 

10,143

 

 

37,883

 

 

20,277

Total other income

 

 

15,769

 

 

7,143

 

 

33,883

 

 

11,277

                         

Loss from operations before provision for income taxes

 

 

(254,732)

 

 

(773,562)

 

 

(1,767,212)

 

 

(2,322,761)

Provision for income taxes

 

 

(10,531)

 

 

(5,544)

 

 

(32,098)

 

 

(28,486)

                         

Loss from continuing operations

 

 

(265,263)

 

 

(779,106)

 

 

(1,799,310)

 

 

(2,351,247)

                         

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

-

 

 

141,616

 

 

-

 

 

460,131

Gain from sale of discontinued operations

 

 

69,277

 

 

-

 

 

205,779

 

 

-

Income from discontinued operations

 

 

69,277

 

 

141,616

 

 

205,779

 

 

460,131

                         

Net loss

 

 

(195,986)

 

 

(637,490)

 

 

(1,593,531)

 

 

(1,891,116)

                         

Other comprehensive income (loss):

Foreign currency translation

 

 

(7,385)

 

 

(18,090)

 

 

(23,051)

 

 

(16,178)

Comprehensive loss

 

$

(203,371)

 

$

(655,580)

 

$

(1,616,582)

 

$

(1,907,294)

                         

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share from continuing operations, basic and diluted

 

$

(0.01)

 

$

(0.03)

 

$

(0.08)

 

$

(0.10)

Income per share from discontinued operations, basic and diluted

 

$

-

 

$

-

 

$

0.01

 

$

0.02

Net loss per share, basic and diluted

 

$

(0.01)

 

$

(0.03)

 

$

(0.07)

 

$

(0.08)

Weighted average common shares outstanding, basic and diluted

 

 

23,498,796

 

 

23,265,939

 

 

23,444,569

 

 

23,199,010