Research Solutions Reports Fiscal Third Quarter 2021 Results

Reports 51 Net New Platform Deployments and 34 Percent Year-over-Year Increase in Platform Annual Recurring Revenue to $5.6 Million

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Research Solutions, Inc.

May 13, 2021, 16:05 ET

HENDERSON, Nev., May 13, 2021 /PRNewswire/ -- Research Solutions, Inc. (NASDAQ: RSSS), a pioneer in providing cloud-based workflow solutions for R&D driven organizations, reported financial results for its fiscal 2021 third quarter ended March 31, 2021.

Fiscal Third Quarter 2021 Highlights Compared to Prior Year Quarter:

Platform revenue increased 32% to $1.3 million, Annual recurring revenue increased 34% to $5.6 million
Total gross margin improved 80 basis points to 32.4%
Net income of $50,000, compared to net income of $12,000 in the prior-year quarter
Adjusted EBITDA of $238,000, an improvement of $93,000

"Our third quarter results include a pair of records within our Platforms business. We achieved 51 net new deployments for the quarter, and Annual Recurring Revenue increased by $534,000, bringing ARR to $5.6 million at the end of the quarter," said Roy W. Olivier, Interim President and CEO of Research Solutions. "This quarter's strong performance within platform deployments reflects the beginning of the payoff of our sales initatives implemented last year."

Fiscal Third Quarter 2021 Results

Total revenue increased 4% to $8.3 million, compared to $8.0 million in the same year-ago quarter.

Platform subscription revenue increased 32% to approximately $1.3 million compared to $1.0 million in the year-ago quarter. The increase was primarily due to an increase in the total number of paid Platform deployments, including 51 net deployments added in the quarter, with upselling existing cutomer accounts also adding to the increase. The quarter ended with annual recurring revenue of $5.6 million, up 11% sequentially and 34% year-over-year (see the company's definition of annual recurring revenue below).

Transaction revenue was $7.0 million, virtually unchanged from the prior-year quarter. Transaction customers count for the quarter was 1,108, compared to 1,115 customers in the third quarter of fiscal year 2020 (see the company's definition of active customer accounts below).

Total gross margin improved 80 basis points from the prior-year quarter to 32.4%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $2.7 million, a $102,000 increase from the year-ago quarter, primarily driven by greater technology and product development expenses.

Net income in the third quarter was $50,000, or $0.00 per diluted share, compared to net income of $12,000, or $0.00 per diluted share, in the prior-year quarter. Adjusted EBITDA was $238,000, a new record and a $93,000 improvement from the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents on March 31, 2021 amounted to $11.2 million, compared to $10.2 million as of December 31, 2020. 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.

Conference Call
Research Solutions Interim President and CEO Roy W. Olivier, Executive Chairman of the Board Peter Derycz and CFO Alan Urban will host the conference call, followed by a question and answer period.

Date: Thursday, May 13, 2021
Time: 5:00 p.m. ET (2:00 p.m. PT)
Toll-free dial-in number: 1-855-327-6837
International dial-in number: 1-631-891-4304
Conference ID: 10014529

The conference call will be broadcast live and available for replay until June 3, 2021, by dialing 1-844-512-2921 and using the replay ID 10014529, and via the investor relations section of the company's website at http://researchsolutions.investorroom.com/.

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

					Quarter Ended March 31,								Nine Months Ended March 31,
					2021		2020		Change		% Change		2021		2020		Change	% Change
Revenue:
		Platforms			$1,344,183		$1,017,789		$326,394		32.1%		$3,706,406		$2,824,059		$882,347	31.2%
		Transactions			6,996,349		7,029,617		(33,268)		-0.5%		19,832,286		20,348,898		(516,612)	-2.5%
Total Revenue					8,340,532		8,047,406		293,126		3.6%		23,538,692		23,172,957		365,735	1.6%

Gross Profit:
		Platforms			1,110,487		839,870		270,618		32.2%		3,051,755		2,333,162		718,594	30.8%
		Transactions			1,592,153		1,699,144		(106,991)		-6.3%		4,492,043		4,796,187		(304,144)	-6.3%
Total Gross Profit					2,702,640		2,539,014		163,627		6.4%		7,543,798		7,129,349		414,450	5.8%
Gross profit as a % of revenue:
		Platforms			82.6%		82.5%		0.1%				82.3%		82.6%		-0.3%
		Transactions			22.8%		24.2%		-1.4%				22.7%		23.6%		-0.9%
Total Gross Profit					32.4%		31.6%		0.9%				32.0%		30.8%		1.3%
Operating Expenses:
		Sales and marketing			566,713		626,956		(60,243)		-9.6%		1,552,658		1,816,142		(263,484)	-14.5%
		Technology and product development			664,195		536,238		127,957		23.9%		1,911,903		1,584,148		327,755	20.7%
		General and administrative			1,233,604		1,230,580		3,024		0.2%		3,513,416		3,732,300		(218,884)	-5.9%
		Depreciation and amortization			2,066		5,510		(3,444)		-62.5%		8,828		19,908		(11,080)	-55.7%
		Stock-based compensation			179,345		142,237		37,108		26.1%		786,084		808,541		(22,457)	-2.8%
		Foreign currency translation loss			6,648		8,648		(2,000)		-23.1%		(35,070)		15,315		(50,385)	-329.0%
Total Operating Expenses					2,652,571		2,550,169		102,402		4.0%		7,737,819		7,976,354		(238,535)	-3.0%
Income (loss) from operations					50,069		(11,155)		61,225		548.8%		(194,020)		(847,005)		652,985	77.1%

Other Income (Expenses):
		Other income (expense)			250		23,662		(23,412)		-98.9%		884		75,738		(74,854)	-98.8%
		Provision for income taxes			(572)		(561)		(11)		-2.0%		(3,077)		(7,861)		4,784	60.9%
		Gain on sale of disc'd operations			-		-		-				-		117,445		(117,445)	-100.0%
Total Other Income (Expenses):					(322)		23,101		(23,423)		-101.4%		(2,193)		185,322		(187,515)	-101.2%
Net income (loss)					$ 49,747		$ 11,946		37,802		-316.5%		$ (196,213)		$ (661,683)		465,470	70.3%



				Quarter Ended March 31,								Nine Months Ended March 31,
				2021		2020		Change		% Change		2021		2020		Change			% Change
	Platforms:
			ARR (Annual recurring revenue):
			Beginning of Period	$5,021,054		$3,717,800		$ 1,303,254		35.1%		$4,446,088		$3,224,672		$ 1,221,416			37.9%
			Incremental ARR	533,541		432,030		101,511		23.5%		1,108,507		925,158		183,349			19.8%
			End of Period	$5,554,595		$4,149,830		$ 1,404,765		33.9%		$5,554,595		$4,149,830		$ 1,404,765			33.9%

			Deployments:
			Beginning of Period	461		338		123		36.4%		401		301		100			33.2%
			Incremental Deployments	51		36		15		41.7%		111		73		38			52.1%
			End of Period	512		374		138		36.9%		512		374		138			36.9%

			ASP (Average sales price):
			Beginning of Period	$ 10,892		$ 10,999		$ (108)		-1.0%		$ 11,088		$ 10,713		$ 374			3.5%
			End of Period	$ 10,849		$ 11,096		$ (247)		-2.2%		$ 10,849		$ 11,096		$ (247)			-2.2%

	Transaction Customers:
			Corporate customers	841		845		(4)		-0.5%		818		851		(33)			-3.9%
			Academic customers	267		270		(3)		-1.1%		284		278		6			2.2%
			Total customers	1,108		1,115		(7)		-0.6%		1,102		1,129		(27)			-2.4%

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,
		2021	2020	Change	% Change	2021	2020	Change	% Change
Net Income (loss)		$ 49,747	$ 11,946	$ 37,802	316.5%	$ (196,213)	$ (661,683)	$ 465,470	70.3%
Add (deduct):								-
	Other income (expense)	(250)	(23,662)	23,412	98.9%	(884)	(75,738)	74,854	98.8%
	Foreign currency translation loss	6,648	8,648	(2,000)	-23.1%	(35,070)	15,315	(50,385)	-329.0%
	Provision for income taxes	572	561	11	2.0%	3,077	7,861	(4,784)	-60.9%
	Depreciation and amortization	2,066	5,510	(3,444)	-62.5%	8,828	19,908	(11,080)	-55.7%
	Stock-based compensation	179,345	142,237	37,108	26.1%	786,084	808,541	(22,457)	-2.8%
	Gain on sale of disc. ops.	-	-	-		-	(117,445)	117,445	100.0%
Adjusted EBITDA		$ 238,128	$ 145,240	$ 92,889	64.0%	$ 565,822	$ (3,241)	$ 569,063	17558.2%

About Research Solutions and Reprints Desk

Research Solutions, Inc. (NASDAQ: RSSS) is a pioneer in providing seamless access and simplifies how organizations and individual researchers discover, acquire, and manage scholarly journal articles, book chapters and other content in scientific, technical, and medical (STM) research. More than 70 percent of the top pharmaceutical companies, prestigious universities, and emerging businesses rely on Article Galaxy, a cloud-based SaaS research platform, for simplified and lowest cost access to the latest scientific research and data. Featuring an ecosystem of app-like Gadgets for a personalized research experience, Article Galaxy offers individual as well as enterprise plans, coupled with unparalleled, 24/7 customer support. For more information and details, please visit www.researchsolutions.com and www.reprintsdesk.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 continued momentum in the Company's business andsales initiatives. 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,
	2021		June 30,
	(unaudited)		2020
Assets
Current assets:
Cash and cash equivalents	$	11,233,562	$	9,311,556
Accounts receivable, net of allowance of $56,042 and $88,485, respectively		5,013,089		4,449,260
Prepaid expenses and other current assets		317,220		241,747
Prepaid royalties		743,513		720,367
Total current assets		17,307,384		14,722,930

Other assets:
Property and equipment, net of accumulated depreciation of $819,607 and $804,999, respectively		15,165		11,276
Deposits and other assets		878		6,155
Right of use asset, net of accumulated amortization of $463,022 and $390,691, respectively		—		72,331
Total assets	$	17,323,427	$	14,812,692

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	7,558,319	$	6,349,845
Deferred revenue		4,601,473		3,524,507
Lease liability, current portion		—		79,326
Total current liabilities		12,159,792		9,953,678

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; 26,352,008 and 26,032,263 shares issued and outstanding, respectively		26,352		26,032
Additional paid-in capital		26,631,985		26,134,819
Accumulated deficit		(21,373,012)		(21,176,799)
Accumulated other comprehensive loss		(121,690)		(125,038)
Total stockholders' equity		5,163,635		4,859,014
Total liabilities and stockholders' equity	$	17,323,427	$	14,812,692

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,
	2021		2020		2021		2020

Revenue:
Platforms	$	1,344,183	$	1,017,789	$	3,706,406	$	2,824,059
Transactions		6,996,349		7,029,617		19,832,286		20,348,898
Total revenue		8,340,532		8,047,406		23,538,692		23,172,957

Cost of revenue:
Platforms		233,696		177,919		654,651		490,897
Transactions		5,404,196		5,330,473		15,340,243		15,552,711
Total cost of revenue		5,637,892		5,508,392		15,994,894		16,043,608
Gross profit		2,702,640		2,539,014		7,543,798		7,129,349

Operating expenses:
Selling, general and administrative		2,650,504		2,544,659		7,728,990		7,956,446
Depreciation and amortization		2,066		5,510		8,828		19,908
Total operating expenses		2,652,570		2,550,169		7,737,818		7,976,354

Income (loss) from operations		50,070		(11,155)		(194,020)		(847,005)

Other income		250		23,662		884		75,738

Income (loss) from operations before provision for income taxes		50,320		12,507		(193,136)		(771,267)
Provision for income taxes		(572)		(561)		(3,077)		(7,861)

Income (loss) from continuing operations		49,748		11,946		(196,213)		(779,128)

Gain from sale of discontinued operations		—		—		—		117,445

Net income (loss)		49,748		11,946		(196,213)		(661,683)

Other comprehensive income (loss):
Foreign currency translation		(3,333)		(14,677)		3,348		(16,702)
Comprehensive income (loss)	$	46,415	$	(2,731)	$	(192,865)	$	(678,385)

Basic income (loss) per common share:
Income (loss) per share from continuing operations	$	0.00	$	—	$	(0.01)	$	(0.03)
Income per share from discontinued operations	$	—	$	—	$	—	$	—
Net income (loss) per share	$	0.00	$	—	$	(0.01)	$	(0.03)
Basic weighted average common shares outstanding		26,027,665		24,960,394		25,966,072		24,411,888

Diluted income (loss) per common share:
Income (loss) per share from continuing operations	$	0.00	$	—	$	(0.01)	$	(0.03)
Income per share from discontinued operations	$	—	$	—	$	—	$	—
Net income (loss) per share	$	0.00	$	—	$	(0.01)	$	(0.03)
Diluted weighted average common shares outstanding		26,565,892		25,717,403		25,966,072		24,411,888