RESEARCH SOLUTIONS
RESEARCH SOLUTIONS
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Research Solutions Reports Fiscal Third Quarter 2019 Financial Results

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Research Solutions Reports Fiscal Third Quarter 2019 Financial Results
- SaaS-Based Platform Revenue up 53%, Total Gross Margin Improves 320 Basis Points to 29.5% -

PR Newswire

ENCINO, Calif., May 15, 2019 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a SaaS provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal third quarter ended March 31, 2019.

Research Solutions, Inc. (RSSS) Logo

Fiscal Third Quarter 2019 Highlights vs. Year-Ago Quarter

  • Platform revenue up 53% to $749,000, with a 35% increase in total Platform deployments to 281. Annual recurring revenue up 51% to $3.0 million.
  • Transaction revenue was $6.6 million versus $6.8 million, with customer count up 2% to 1,078.
  • Total gross margin up 320 basis points to 29.5%.
  • Net loss from continuing operations improved to $0.2 million, or nil per share, compared to a net loss of $0.3 million, or $(0.01) per share.

Management Commentary

"The third quarter marked continued progress in our SaaS-based Platform business with strong revenue growth and additional margin expansion," said Peter Derycz, president and CEO of Research Solutions. "Driving these results was continued Platform 'upsells,' which confirms our current users find value in the offering and seek greater access to its functionality. Behind these upsell results is our Customer Happiness group, which provides both customer support and advanced account management. They have done an excellent job helping our customers take the best advantage of what our Platform has to offer.

"We also completed two major internal initiatives during the quarter that we believe will further bolster new Platform deployments. First, we completed the migration of our Platform from internal servers and are now entirely cloud-based, which provides near unlimited scalability. We also completed the build-out of our sales team, along with implementing more targeted marketing strategies to better articulate the value proposition of the Platform to potential new users.

"In addition, we made incremental upgrades to the Platform, including enhancements to the Reference Manager gadget and launching marketing campaigns to promote the unique functionality of this core gadget. The combination of consistently improving the Platform, excellent customer support and fair pricing has resulted in a customer churn rate far better than industry benchmarks.

"Looking forward to the remainder of the year, we will be very focused on introducing new users to the Platform, but also converting those users to our premium subscription plans. While still testing and evaluating what is most effective and efficient, we have begun ramping up our marketing campaigns to generate more leads through our self-registration option, while further optimizing our selling tactics to increase our lead conversion rate. We believe we have the necessary people and infrastructure in place to further accelerate Platform growth and deliver an invaluable research tool to the many thousands of R&D organizations worldwide."

Fiscal Third Quarter 2019 Financial Results

Total revenue increased to $7.4 million compared to $7.3 million in the same year-ago quarter.

Platform subscription revenue increased 53% to $749,000 compared to $489,000 in the same year-ago quarter. The increase was due to upselling current platform customers and to a 35% increase in the total number of paid Platform deployments from 208 to 281. The quarter ended with annual recurring revenue up 51% to $3.0 million (see the company's definition of annual recurring revenue below).

Transaction revenue was $6.6 million compared to $6.8 million in the same year-ago quarter. Total active customers increased 2% from 1,059 to 1,078 and transaction count declined from 220,000 to 212,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 320 basis points to 29.5% from 26.3% in the same year-ago quarter. The increase was primarily driven by a 310 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 $2.2 million in the same year-ago quarter. The increase was primarily due to increased spending on technology and product development related to the Platform business.

Net loss from continuing operations improved to $0.2 million, or nil per share, compared to a net loss of $0.3 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.0) million compared to $(0.1) 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, 2019, amounted to $5.3 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.

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: Wednesday, May 15, 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: 10006630

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 May 29, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10006630

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





Quarter Ended Mar. 31,


Nine Months Ended Mar. 31,










2019

2018

Change

%
Change


2019

2018

Change

%
Change


Revenue:












Platforms

$        748,726

$        489,219

$        259,507

53.0%


$    2,005,284

$    1,290,568

$        714,716

55.4%



Transactions

6,629,231

6,792,289

(163,058)

-2.4%


19,314,036

19,562,000

(247,964)

-1.3%


Total Revenue

7,377,957

7,281,508

96,449

1.3%


21,319,320

20,852,568

466,752

2.2%













Gross Profit:












Platforms

614,054

386,034

228,020

59.1%


1,640,277

1,013,034

627,243

61.9%



Transactions

1,565,607

1,532,330

33,277

2.2%


4,475,579

4,390,639

84,940

1.9%


Total Gross Profit

2,179,661

1,918,364

261,297

13.6%


6,115,856

5,403,673

712,183

13.2%













Gross profit as a % of revenue:












Platforms

82.0%

78.9%

3.1%



81.8%

78.5%

3.3%




Transactions

23.6%

22.6%

1.1%



23.2%

22.4%

0.7%



Total Gross Profit

29.5%

26.3%

3.2%



28.7%

25.9%

2.8%














Operating Expenses:












Sales and marketing

542,641

522,894

19,747

3.8%


1,419,937

1,726,443

(306,506)

-17.8%



Technology and prod. dev.

537,685

436,672

101,013

23.1%


1,590,752

1,343,995

246,757

18.4%



General and administrative

1,129,462

1,091,930

37,532

3.4%


3,428,672

3,322,127

106,545

3.2%



Depreciation and amortization

9,617

32,768

(23,151)

-70.7%


30,465

119,666

(89,201)

-74.5%



Stock-based compensation

131,072

114,340

16,732

14.6%


700,269

715,147

(14,878)

-2.1%



Foreign currency trans. loss

2,302

(9,737)

12,039

123.6%


17,307

(22,609)

39,916

176.5%


Total Operating Expenses

2,352,779

2,188,866

163,913

7.5%


7,187,402

7,204,769

(17,367)

-0.2%


Income (loss) from operations

(173,117)

(270,502)

97,385

36.0%


(1,071,546)

(1,801,096)

729,550

40.5%













Other Income (Expenses):












Interest expense

-

2,000

(2,000)

100.0%


-

(4,000)

4,000

100.0%



Other income (expense)

27,875

13,769

14,106

102.4%


75,124

37,883

37,241

98.3%



Provision for income taxes

(5,482)

(10,531)

5,049

47.9%


(22,145)

(32,098)

9,953

31.0%



Gain on sale of disc'd ops.

33,044

69,277

(36,233)

-52.3%


130,462

205,779

(75,317)

-36.6%


Total Other Income (Expenses):

55,437

74,515

(19,078)

-25.6%


183,441

207,564

(24,123)

-11.6%


Net income (loss)

$      (117,680)

$      (195,987)

78,307

40.0%


$      (888,105)

$   (1,593,532)

705,427

44.3%













Adjusted EBITDA

$         (30,126)

$      (133,131)

$        103,005

77.4%


$      (323,505)

$      (988,892)

$        665,387

67.3%













Platforms:












ARR (Annual recurring revenue)

$    2,987,647

$    1,982,867

$    1,004,780

50.7%


$    2,987,647

$    1,982,867

$    1,004,780

50.7%



Deployments

281

208

73

35.1%


281

208

73

35.1%



ASP (Average sales price)

$          10,632

$             9,533

$             1,099

11.5%


$          10,632

$             9,533

$             1,099

11.5%













Transactions:












Transaction count

211,520

219,607

(8,087)

-3.7%


615,944

629,739

(13,795)

-2.2%



Corporate customers

835

848

(13)

-1.5%


842

820

22

2.6%



Academic customers

243

211

32

15.2%


240

214

26

12.1%



Total customers

1,078

1,059

19

1.8%


1,081

1,041

41

3.9%

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 Mar. 31,


Nine Months Ended Mar. 31,




2019

2018

Change


2019

2018

Change

Net Income (loss)

$      (117,680)

$      (195,987)

$           78,307


$      (888,105)

$   (1,593,532)

$        705,427


Add (deduct):



-




-



Interest expense

-

(2,000)

2,000


-

4,000

(4,000)



Other income (expense)

(27,875)

(13,769)

(14,106)


(75,124)

(37,883)

(37,241)



Foreign currency translation loss

2,302

(9,737)

12,039


17,307

(22,609)

39,916



Provision for income taxes

5,482

10,531

(5,049)


22,145

32,098

(9,953)



Depreciation and amortization

9,617

32,768

(23,151)


30,465

119,666

(89,201)



Stock-based compensation

131,072

114,340

16,732


700,269

715,147

(14,878)



Gain on sale of discontinued operations

(33,044)

(69,277)

36,233


(130,462)

(205,779)

75,317


Adjusted EBITDA

$         (30,126)

$      (133,131)

$        103,005


$      (323,505)

$      (988,892)

$        665,387

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. 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets




March 31,


June 30,



2019


2018



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

5,303,084


$

4,908,180

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



4,366,975



4,251,251

Prepaid expenses and other current assets



279,376



326,887

Prepaid royalties



740,723



93,336

Total current assets



10,690,158



9,579,654








Other assets:







Property and equipment, net of accumulated depreciation of $781,042 and $749,923, respectively



38,327



59,043

Deposits and other assets



14,397



14,372

Right of use asset, net of accumulated amortization of $241,568 and $155,698, respectively



221,454



307,324

Total assets


$

10,964,336


$

9,960,393








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

5,734,212


$

4,686,946

Deferred revenue



2,069,455



1,665,746

Lease liability, current portion



126,780



119,786

Total current liabilities



7,930,447



6,472,478








Long-term liabilities:







Lease liability, long-term portion



112,775



208,513

Total liabilities



8,043,222



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; 24,230,661 and 24,016,999  shares issued and outstanding, respectively



24,231



24,017

Additional paid-in capital



23,445,548



22,904,691

Accumulated deficit



(20,442,704)



(19,554,599)

Accumulated other comprehensive loss



(105,961)



(94,707)

Total stockholders' equity



2,921,114



3,279,402

Total liabilities and stockholders' equity


$

10,964,336


$

9,960,393

 

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,



2019


2018


2019


2018










Revenue:













Platforms


$

748,726


$

489,219


$

2,005,284


$

1,290,568

Transactions



6,629,231



6,792,289



19,314,036



19,562,000

Total revenue



7,377,957



7,281,508



21,319,320



20,852,568














Cost of revenue:













Platforms



134,672



103,185



365,007



277,534

Transactions



5,063,624



5,259,959



14,838,457



15,171,361

Total cost of revenue



5,198,296



5,363,144



15,203,464



15,448,895

Gross profit



2,179,661



1,918,364



6,115,856



5,403,673














Operating expenses:













Selling, general and administrative



2,343,161



2,156,097



7,156,937



7,085,102

Depreciation and amortization



9,617



32,768



30,465



119,666

Total operating expenses



2,352,778



2,188,865



7,187,402



7,204,768

Loss from operations



(173,117)



(270,501)



(1,071,546)



(1,801,095)














Other income (expenses):













Interest expense



-



2,000



-



(4,000)

Other income



27,875



13,769



75,124



37,883

Total other income



27,875



15,769



75,124



33,883














Loss from operations before provision for income taxes



(145,242)



(254,732)



(996,422)



(1,767,212)

Provision for income taxes



(5,482)



(10,531)



(22,145)



(32,098)














Loss from continuing operations



(150,724)



(265,263)



(1,018,567)



(1,799,310)














Gain from sale of discontinued operations



33,044



69,277



130,462



205,779














Net loss



(117,680)



(195,986)



(888,105)



(1,593,531)














Other comprehensive income (loss):













                Foreign currency translation



(5,216)



(7,385)



(11,254)



(23,051)

Comprehensive loss


$

(122,896)


$

(203,371)


$

(899,359)


$

(1,616,582)














Loss per common share:













Loss per share from continuing operations, basic and diluted


$

-


$

(0.01)


$

(0.04)


$

(0.08)

Income per share from discontinued operations, basic and diluted


$

-


$

-


$

-


$

0.01

Net loss per share, basic and diluted


$

-


$

(0.01)


$

(0.04)


$

(0.07)

Weighted average common shares outstanding, basic and diluted



23,845,798



23,498,796



23,758,844



23,445,569




























 

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