Research Solutions Reports Third Quarter 2020 Financial Results

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May 14, 2020, 16:05 ET

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.

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