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Research Solutions Reports Third Quarter 2020 Financial Results

ENCINO, Calif., May 14, 2020 /PRNewswire/ -- Research Solutions, Inc. (NASDAQ: RSSS), a SaaS provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal third quarter ended March 31, 2020.

(PRNewsfoto/Research Solutions, Inc.)

Fiscal Third Quarter 2020 Highlights vs. Year-Ago Quarter

  • Platform revenue up 36% to $1.0 million, with a 33% increase in total Platform deployments to 374. Annual recurring revenue up 39% to $4.1 million.
  • Transaction revenue increased 6% to $7.0 million compared to $6.6 million, with customer count up to 1,115 compared to 1,078.
  • Total gross margin up 210 basis points to 31.6%.
  • Net income from continuing operations increased to $12,000, or nil per share, compared to a net loss of $0.2 million, or nil per share.

Management Commentary

"As initially announced in our Q3 pre-release, the momentum in our business has accelerated, even amidst these unprecedented times," said Peter Derycz, president and CEO of Research Solutions. "During the quarter, we experienced our highest level of annual recurring revenue for our Platforms business due to another strong period of new client wins and existing customer 'upsells.' In addition, we achieved an important milestone by completing the up-listing process to Nasdaq, which we believe will improve liquidity, expand our investor base and continue to drive long-term shareholder value.

"Subsequent to the quarter end, we launched Article Galaxy+ through a ground-breaking partnership with Springer Nature to significantly expand content available to our customers by providing full access to research from one of the world's largest publishers. Additionally, we continue to be a valuable resource to our customers during the height of the pandemic. We have tailored specific tools to help our clients research the virus, including the launch of a COVID-19 research viewer gadget and providing copyright free articles pertaining to the virus, when applicable. We have received excellent feedback from our customers who are working tirelessly in the fight against this pandemic and we are proud to be of help.

"Going forward, we have the utmost confidence in our ability to meet our customers' evolving needs in this current market environment. In fact, we experienced another strong month for April and, while we remain vigilant, we do not anticipate any near-term challenges that would dampen our momentum. We ended the quarter with the highest cash balance in our history and continue to carry zero debt, which further supports our strong outlook."

Fiscal Third Quarter 2020 Financial Results

Total revenue increased 9% to $8.0 million compared to $7.4 million in the same year-ago quarter.

Platform subscription revenue increased 36% to $1.0 million compared to $749,000 in the same year-ago quarter. The increase was primarily due to a 33% increase in the total number of paid Platform deployments from 281 to 374 and upselling current platform customers. The quarter ended with annual recurring revenue up 39% to $4.1 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 6% to $7.0 million compared to $6.6 million in the same year-ago quarter. Total active customers increased 3% from 1,078 to 1,115 and transaction count increased 8% from 212,000 to 228,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 210 basis points to 31.6% from 29.5% in the same year-ago quarter. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business. 

Total operating expenses were $2.6 million compared to $2.4 million in the same year-ago quarter. The increase was primarily due to greater personnel costs as well as fees associated with the Nasdaq up-listing.

Net income from continuing operations increased to $12,000, or nil per share, compared to a net loss of $0.2 million, or nil per share, in the year-ago quarter. Adjusted EBITDA increased significantly to $145,000 compared to $(30,000) 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 March 31, 2020, amounted to $8.2 million compared to $5.4 million at June 30, 2019. There were no outstanding borrowings under the company's $2.5 million revolving line of credit and 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 http://researchsolutions.investorroom.com/.

Conference Call

Research Solutions President and CEO Peter Derycz and CFO Alan Urban will host the conference call, followed by a question and answer period.

Date: Thursday, May 14, 2020
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: 10009445

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 http://researchsolutions.investorroom.com/.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through June 4, 2020.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10009445

Fiscal Third Quarter 2020 Financial and Operational Summary Tables vs. Year-Ago Quarter



Quarter Ended March 31,


Nine Months Ended March 31,



2020

2019

Change

% Change


2020

2019

Change

% Change

Revenue:











Platforms

$1,017,789

$      748,726

$      269,063

35.9%


$2,824,059

$2,005,284

$     818,775

40.8%


Transactions

7,029,617

6,629,231

400,386

6.0%


20,348,898

19,314,036

1,034,862

5.4%

Total Revenue

8,047,406

7,377,957

669,449

9.1%


23,172,957

21,319,320

1,853,637

8.7%

Gross Profit:











Platforms

839,870

614,054

225,815

36.8%


2,333,162

1,640,277

692,885

42.2%


Transactions

1,699,144

1,565,607

133,537

8.5%


4,796,187

4,475,579

320,608

7.2%

Total Gross Profit

2,539,014

2,179,661

359,352

16.5%


7,129,349

6,115,856

1,013,493

16.6%

Gross profit as a % of revenue:











Platforms

82.5%

82.0%

0.5%



82.6%

81.8%

0.8%



Transactions

24.2%

23.6%

0.6%



23.6%

23.2%

0.4%


Total Gross Profit

31.6%

29.5%

2.0%



30.8%

28.7%

2.1%


Operating Expenses:











Sales and marketing

626,956

542,641

84,315

15.5%


1,816,142

1,419,937

396,205

27.9%


Technology and product development

536,238

537,685

(1,447)

-0.3%


1,584,148

1,590,752

(6,604)

-0.4%


General and administrative

1,230,580

1,129,462

101,118

9.0%


3,732,300

3,428,672

303,628

8.9%


Depreciation and amortization

5,510

9,617

(4,107)

-42.7%


19,908

30,465

(10,557)

-34.7%


Stock-based compensation

142,237

131,072

11,165

8.5%


808,541

700,269

108,272

15.5%


Foreign currency translation loss

8,648

2,302

6,346

275.7%


15,315

17,307

(1,992)

-11.5%

Total Operating Expenses

2,550,169

2,352,779

197,390

8.4%


7,976,354

7,187,402

788,952

11.0%

Income (loss) from operations

(11,155)

(173,117)

161,962

93.6%


(847,005)

(1,071,546)

224,541

21.0%

Other Income (Expenses):











Other income (expense)

23,662

27,875

(4,213)

-15.1%


75,738

75,124

614

0.8%


Provision for income taxes

(561)

(5,482)

4,921

89.8%


(7,861)

(22,145)

14,284

64.5%


Gain on sale of disc'd operations

-

33,044

(33,044)

-100.0%


117,445

130,462

(13,017)

-10.0%

Total Other Income (Expenses):

23,101

55,437

(32,336)

-58.3%


185,322

183,441

1,881

1.0%

Net income (loss)

$      11,946

$    (117,680)

129,626

110.2%


$  (661,683)

$  (888,105)

226,422

25.5%

Adjusted EBITDA

$   145,240

$       (30,126)

$      175,366

582.1%


$       (3,241)

$  (323,505)

$     320,264

99.0%














Quarter Ended March 31,


Nine Months Ended March 31,



2020

2019

Change

% Change


2020

2019

Change

% Change

Platforms:











ARR (Annual recurring revenue):











  Beginning of Period

$3,717,800

$   2,702,137

$  1,015,663

37.6%


$3,224,672

$2,252,956

$     971,716

43.1%


   Incremental ARR

432,030

285,510

146,520

51.3%


925,158

734,691

190,467

25.9%


  End of Period

$4,149,830

$   2,987,647

$  1,162,183

38.9%


$4,149,830

$2,987,647

$  1,162,183

38.9%


Deployments:











  Beginning of Period

338

267

71

26.6%


301

227

74

32.6%


   Incremental Deployments

36

14

22

157.1%


73

54

19

35.2%


  End of Period

374

281

93

33.1%


374

281

93

33.1%


ASP (Average sales price):











  Beginning of Period

$      10,999

$         10,120

$              879

8.7%


$      10,713

$         9,925

$              788

7.9%


  End of Period

$      11,096

$         10,632

$              464

4.4%


$      11,096

$      10,632

$              464

4.4%

Transactions:











Transaction count

228,106

211,520

16,586

7.8%


656,645

616,413

40,232

6.5%


Corporate customers

845

835

10

1.2%


851

839

12

1.4%


Academic customers

270

243

27

11.1%


278

242

36

14.7%


Total customers

1,115

1,078

37

3.4%


1,129

1,082

48

4.4%

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 March 31,


Nine Months Ended March 31,



2020

2019

Change

% Change


2020

2019

Change

% Change

Net Income (loss)

$       11,946

$   (117,680)

$     129,626

110.2%


$   (661,683)

$   (888,105)

$     226,422

25.5%

 Add (deduct):








-



Interest expense

-

-

-



-

-

-



Other income (expense)

(23,662)

(27,875)

4,213

15.1%


(75,738)

(75,124)

(614)

-0.8%


Foreign currency translation loss

8,648

2,302

6,346

275.7%


15,315

17,307

(1,992)

-11.5%


Provision for income taxes

561

5,482

(4,921)

-89.8%


7,861

22,145

(14,284)

-64.5%


Depreciation and amortization

5,510

9,617

(4,107)

-42.7%


19,908

30,465

(10,557)

-34.7%


Stock-based compensation

142,237

131,072

11,165

8.5%


808,541

700,269

108,272

15.5%


Gain on sale of disc. ops.

-

(33,044)

33,044

100.0%


(117,445)

(130,462)

13,017

10.0%

 Adjusted EBITDA

$     145,240

$     (30,126)

$     175,366

582.1%


$        (3,241)

$   (323,505)

$     320,264

99.0%

About Research Solutions

Research Solutions, Inc. (NASDAQ: 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. Examples of forward-looking statements in this release include statements regarding improved liquidity, an expanded investor base and driving long-term shareholder value as a result of listing on Nasdaq, continued momentum in the Company's business and financial performance, and the Company's strong outlook. 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,



2020


2019



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

8,249,260


$

5,353,090

Accounts receivable, net of allowance of $88,698 and $100,175, respectively



5,111,493



4,493,169

Prepaid expenses and other current assets



307,165



323,591

Prepaid royalties



566,379



-

Total current assets



14,234,297



10,169,850








Other assets:







Property and equipment, net of accumulated depreciation of $799,935 and $789,788, respectively



14,822



36,828

Deposits and other assets



6,132



14,406

Right of use asset, net of accumulated amortization of $360,239 and $270,777, respectively



102,783



192,245

Total assets


$

14,358,034


$

10,413,329








Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable and accrued expenses


$

6,174,737


$

4,862,895

Deferred revenue



3,302,187



2,310,206

Lease liability, current portion



112,775



129,187

Total current liabilities



9,589,699



7,302,288








Long-term liabilities:







Lease liability, long-term portion



-



79,326

Total liabilities



9,589,699



7,381,614








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; 26,034,572 and 24,375,948  shares issued and outstanding, respectively



26,035



24,376

Additional paid-in capital



26,044,827



23,631,481

Accumulated deficit



(21,176,240)



(20,514,557)

Accumulated other comprehensive loss



(126,287)



(109,585)

Total stockholders' equity



4,768,335



3,031,715

Total liabilities and stockholders' equity


$

14,358,034


$

10,413,329

 

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,



2020


2019


2020


2019

Revenue:













Platforms


$

1,017,789


$

748,726


$

2,824,059


$

2,005,284

Transactions



7,029,617



6,629,231



20,348,898



19,314,036

Total revenue



8,047,406



7,377,957



23,172,957



21,319,320














Cost of revenue:













Platforms



177,919



134,672



490,897



365,007

Transactions



5,330,473



5,063,624



15,552,711



14,838,457

Total cost of revenue



5,508,392



5,198,296



16,043,608



15,203,464

Gross profit



2,539,014



2,179,661



7,129,349



6,115,856














Operating expenses:













Selling, general and administrative



2,544,659



2,343,161



7,956,446



7,156,937

Depreciation and amortization



5,510



9,617



19,908



30,465

Total operating expenses



2,550,169



2,352,778



7,976,354



7,187,402

Loss from operations



(11,155)



(173,117)



(847,005)



(1,071,546)














Other income (expenses):













Interest expense



-



-



-



-

Other income



23,662



27,875



75,738



75,124

Total other income



23,662



27,875



75,738



75,124














Income (loss) from operations before provision for income taxes



12,507



(145,242)



(771,267)



(996,422)

Provision for income taxes



(561)



(5,482)



(7,861)



(22,145)














Loss from continuing operations



11,946



(150,724)



(779,128)



(1,018,567)














Gain from sale of discontinued operations



-



33,044



117,445



130,462














Net income (loss)



11,946



(117,680)



(661,683)



(888,105)














Other comprehensive income (loss):

Foreign currency translation



(14,677)



(5,216)



(16,702)



(11,254)

Comprehensive loss


$

(2,731)


$

(122,896)


$

(678,385)


$

(899,359)

Basic income (loss) per common share:













Income (loss) per share from continuing operations


$

-


$

-


$

(0.03)


$

(0.04)

Income per share from discontinued operations


$

-


$

-


$

-


$

-

Net income (loss) per share


$

-


$

-


$

(0.03)


$

(0.04)

Basic weighted average common shares outstanding



24,960,394



23,845,798



24,411,888



23,758,844














Diluted income (loss) per common share:













Income (loss) per share from continuing operations


$

-


$

-


$

(0.03)


$

(0.04)

Income per share from discontinued operations


$

-


$

-


$

-


$

-

Net income (loss) per share


$

-


$

-


$

(0.03)


$

(0.04)

Diluted weighted average common shares outstanding



25,717,403



23,845,798



24,411,888



23,758,844














 

Cision

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SOURCE Research Solutions, Inc.