Research Solutions Reports Fiscal Second Quarter 2018 Financial Results
ENCINO, Calif., Feb. 14, 2018 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal second quarter ended December 31, 2017.
Fiscal Second Quarter 2018 Summary vs. Year-Ago Quarter
-- Total revenue increased 12% to $6.8 million.
-- Platform revenue up 89% to $413,000, with a 92% increase in total
Platform deployments to 184. Annual recurring revenue was up 89% to $1.7
million.
-- Transaction revenue up 9% to $6.4 million, with customer count up 12% to
1,044. Transaction count up 6% to 205,019.
-- Total gross margin up 280 basis points to 25.4%.
-- Net loss from continuing operations was $0.7 million, or $(0.03) per
share, compared to a net loss of $1.1 million, or $(0.05) per share.
Management Commentary
"Our second quarter showed continued robust growth in our SaaS-based Platforms offering, which helped support a strong quarter in our Transactions business," said Peter Derycz, president and CEO of Research Solutions. "Version 2.0 of our Article Galaxy Platform went live in December and the early feedback on user experience has been quite positive. We look forward to completing the migration by March and implementing other major framework additions, like self-registration, in the next several months.
"We began the calendar year with a particularly strong month in our Platforms business, and look forward to building upon this momentum as the year unfolds. We expect this will be driven not only by the framework additions, but weekly improvements produced by our gadget factory, and a sales & marketing department we are refining to drive optimum efficiency and investment returns."
Fiscal Second Quarter 2018 Financial Results
Total revenue increased 12% to $6.8 million compared to $6.1 million in the same year-ago quarter.
Platform subscription revenue increased 89% to $413,000 compared to $219,000 in the year-ago quarter. The increase was due to a 92% increase in the total number of paid Platform deployments to 184. The quarter ended with annual recurring revenue up 89% to $1.7 million (see the company's definition of annual recurring revenue below).
Transaction revenue increased 9% to $6.4 million compared to $5.9 million in the same year-ago quarter. Total active customers increased 12% from 936 to 1,044, and transaction count increased 6% from 193,000 to 205,000 (see the company's definition of active customer accounts and transactions below).
Total gross margin increased 280 basis points to 25.4% from 22.6% in the same year-ago quarter. The increase was driven by a 150 basis point increase in Transactions gross margin and a revenue mix shift to the higher-margin Platforms business.
Total operating expenses were unchanged at $2.4 million compared to the year-ago quarter, aligned with the company's strategy to optimize its sales resources, including the reallocation of expenses and more efficient ways of acquiring customers through content generation and digital and inbound marketing.
Net loss from continuing operations was $0.7 million, or $(0.03) per share, compared to a net loss of $1.1 million, or $(0.05) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.3) million compared to $(0.7) 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 December 31, 2017 were $4.9 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 $0.3 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, February 14, 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: 10004236
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 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 February 28, 2018.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10004236
Fiscal Second Quarter 2018 Financial and Operational Summary Tables vs. Year-Ago Quarter
Quarter Ended December 31, Six Months Ended December 31,
2017 2016 Change % Change 2017 2016 Change % Change
---- ---- ------ -------- ---- ---- ------ --------
Revenue:
Platforms $413,404 $219,137 $194,267 88.7% $801,349 $391,209 $410,140 104.8%
Transactions 6,409,816 5,866,562 543,254 9.3% 12,769,711 11,872,961 896,750 7.6%
--------- --------- ------- ---- ---------- ------- ----
Total Revenue 6,823,220 6,085,699 737,521 12.1% 13,571,060 12,264,170 1,306,890 10.7%
Gross Profit:
Platforms 323,042 173,514 149,528 86.2% 627,000 315,622 311,378 98.7%
Transactions 1,412,828 1,201,872 210,956 17.6% 2,858,309 2,493,272 365,037 14.6%
--------- --------- ------- ----- --------- ------- -----
Total Gross Profit 1,735,870 1,375,386 360,484 26.2% 3,485,309 2,808,894 676,415 24.1%
Gross profit as a % of revenue:
Platforms 78.1% 79.2% -1.0% 78.2% 80.7% -2.4%
Transactions 22.0% 20.5% 1.6% 22.4% 21.0% 1.4%
Total Gross Profit 25.4% 22.6% 2.8% 25.7% 22.9% 2.8%
Operating Expenses:
Sales and marketing 769,406 854,724 85,318 10.0% 1,669,101 1,435,502 (233,599) -16.3%
General and administrative 1,308,483 1,226,181 (82,302) -6.7% 2,671,969 2,437,189 (234,780) -9.6%
Depreciation and amortization 46,330 32,426 (13,904) -42.9% 86,898 62,895 (24,003) -38.2%
Stock-based compensation 314,565 303,097 (11,468) -3.8% 600,807 405,686 (195,121) -48.1%
Foreign currency translation loss (485) 17,631 18,116 102.8% (12,872) 20,955 33,827 161.4%
------ ------ ------ ------
Total Operating Expenses 2,438,299 2,434,059 (4,240) -0.2% 5,015,903 4,362,227 (653,676) -15.0%
--------- --------- ------ ---- --------- --------- -------- -----
Income (loss) from operations (702,429) (1,058,673) 356,244 33.7% (1,530,594) (1,553,333) 22,739 1.5%
Other Income (Expenses):
Interest expense (3,000) (3,000) - 0.0% (6,000) (6,000) - 0.0%
Other income (expense) 11,312 5,424 5,888 108.6% 24,114 10,134 13,980 138.0%
Provision for income taxes (9,816) (9,337) (479) -5.1% (21,567) (22,942) 1,375 6.0%
Income from discontinued operations - 222,626 (222,626) -100.0% - 318,515 (318,515) -100.0%
Gain on sale of discontinued
operations 79,353 - 79,353 136,502 - 136,502
Total Other Income (Expenses): 77,849 215,713 (137,864) -63.9% 133,049 299,707 (166,658) -55.6%
------ ------- -------- ----- ------- ------- -------- -----
Net income (loss) $(624,580) $(842,960) $218,380 25.9% $(1,397,545) $(1,253,626) $(143,919) -11.5%
Adjusted EBITDA $(342,019) $(705,519) $363,500 51.5% $(855,761) $(1,063,797) $208,036 19.6%
Platforms:
ARR (Annual recurring revenue) $1,708,547 $905,157 $803,390 88.8%
Deployments 184 96 88 91.7%
ASP (Average sales price) $9,286 $9,429 $(143) -1.5%
Transactions:
Transaction count 205,019 193,490 11,529 6.0% 410,085 384,870 25,215 6.6%
Corporate customers 816 754 62 8.2% 811 759 52 6.9%
Academic customers 228 182 46 25.3% 222 178 45 25.1%
Total customers 1,044 936 108 11.5% 1,033 936 97 10.3%
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 December 31, Six Months Ended December 31,
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Net Income (loss) $(624,580) $(842,960) $218,380 $(1,397,545) $(1,253,626) $(143,919)
Add (deduct):
Interest expense 3,000 3,000 - 6,000 6,000 -
Other income (expense) (11,312) (5,424) (5,888) (24,114) (10,134) (13,980)
Foreign currency translation loss (485) 17,631 (18,116) (12,872) 20,955 (33,827)
Provision for income taxes 9,816 9,337 479 21,567 22,942 (1,375)
Depreciation and amortization 46,330 32,426 13,904 86,898 62,895 24,003
Stock-based compensation 314,565 303,097 11,468 600,807 405,686 195,121
Income from discontinued operations - (222,626) 222,626 - (318,515) 318,515
Gain on sale of discontinued
operations (79,353) - (79,353) (136,502) - (136,502)
------- --- ------- -------- --- --------
Adjusted EBITDA $(342,019) $(705,519) $363,500 $(855,761) $(1,063,797) $208,036
About Research Solutions
Research Solutions, Inc. (OTCQB: RSSS) is a pioneer in cloud-based research intelligence and retrieval solutions for R&D-driven organizations. More than 70 percent of the top 25 pharmaceutical companies in the world rely on services delivered by Research Solutions' wholly owned subsidiary Reprints Desk. The company's Software-as-a-Service (SaaS) Platform provides customers with on-demand access to, and augmented data from, tens of millions of scientific, medical, and technical (STM) documents, helping them to accelerate acquisition at the point of discovery, save time and money, and remain copyright-compliant. 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
Consolidated Balance Sheets
December 31, June 30,
2017 2017
(unaudited)
----------
Assets
Current assets:
Cash and cash equivalents $4,924,620 $5,773,950
Accounts receivable, net of allowance of $119,462 and
$119,536, respectively 3,739,099 5,465,299
Prepaid expenses and other current assets 315,906 196,820
Prepaid royalties 736,145 566,282
Total current assets 9,715,770 12,002,351
Other assets:
Property and equipment, net of accumulated depreciation of
$728,271 and $699,421, respectively 81,340 85,737
Intangible assets, net of accumulated amortization of
$679,836 and $623,714, respectively - 41,870
Deposits and other assets 14,383 14,466
Right of use asset, net of accumulated amortization of
$99,864 and $45,105, respectively 363,158 417,917
------- -------
Total assets $10,174,651 $12,562,341
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $5,053,770 $6,443,056
Deferred revenue 1,306,429 1,335,475
Lease liability, current portion 115,263 110,888
Total current liabilities 6,475,462 7,889,419
Long-term liabilities:
Lease liability, long-term portion 269,924 328,299
Total liabilities 6,745,386 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; 24,147,582 and 23,883,145 shares issued and
outstanding, respectively 24,148 23,883
Additional paid-in capital 22,764,915 22,267,327
Accumulated deficit (19,273,403) (17,875,858)
Accumulated other comprehensive loss (86,395) (70,729)
------- -------
Total stockholders' equity 3,429,265 4,344,623
--------- ---------
Total liabilities and stockholders' equity $10,174,651 $12,562,341
=========== ===========
Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Loss
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Platforms $413,404 $219,137 $801,349 $391,209
Transactions 6,409,816 5,866,562 12,769,711 11,872,961
--------- --------- ---------- ----------
Total Revenue 6,823,220 6,085,699 13,571,060 12,264,170
--------- --------- ---------- ----------
Cost of revenue:
Platforms 90,362 45,623 174,349 75,587
Transactions 4,996,988 4,664,690 9,911,402 9,379,689
--------- --------- --------- ---------
Total cost of revenue 5,087,350 4,710,313 10,085,751 9,455,276
--------- --------- ---------- ---------
Gross Profit 1,735,870 1,375,386 3,485,309 2,808,894
--------- --------- --------- ---------
Operating expenses:
Selling, general and administrative 2,391,969 2,401,633 4,929,005 4,299,332
Depreciation and amortization 46,330 32,426 86,898 62,895
Total operating expenses 2,438,299 2,434,059 5,015,903 4,362,227
--------- --------- --------- ---------
Loss from operations (702,429) (1,058,673) (1,530,594) (1,553,333)
-------- ---------- ---------- ----------
Other income (expenses):
Interest expense (3,000) (3,000) (6,000) (6,000)
Other income 11,312 5,424 24,114 10,134
Total other income 8,312 2,424 18,114 4,134
-----
Loss from operations before provision for
income taxes (694,117) (1,056,249) (1,512,480) (1,549,199)
Provision for income taxes (9,816) (9,337) (21,567) (22,942)
------ ------ ------- -------
Loss from continuing operations (703,933) (1,065,586) (1,534,047) (1,572,141)
Discontinued operations:
Income from discontinued operations - 222,626 - 318,515
Gain from sale of discontinued operations 79,353 - 136,502 -
Income from discontinued operations 79,353 222,626 136,502 318,515
Net loss (624,580) (842,960) (1,397,545) (1,253,626)
Other comprehensive income (loss):
Foreign currency translation (6,715) 5,195 (15,666) 1.912
------ ----- ------- -----
Comprehensive loss $(631,295) $(837,765) $(1,413,211) $(1,251,714)
========= ========= =========== ===========
Loss per common share:
Loss per share from continuing
operations, basic and diluted $(0.03) $(0.05) $(0.07) $(0.06)
Income per share from
discontinued operations, basic
and diluted $ - $0.01 $0.01 $0.01
Net loss per share, basic and
diluted $(0.03) $(0.04) $(0.06) $(0.05)
Weighted average common shares
outstanding, basic and diluted 23,455,654 23,200,975 23,418,046 23,166,272
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SOURCE Research Solutions, Inc.
