Research Solutions Reports Fiscal Second Quarter 2019 Financial Results
ENCINO, Calif., Feb. 14, 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 second quarter ended December 31, 2018.
Fiscal Second Quarter 2019 Highlights vs. Year-Ago Quarter
-- Platform revenue up 62% to $668,000, with a 45% increase in total
Platform deployments to 267. Annual recurring revenue up 58% to $2.7
million.
-- Transaction revenue was $6.3 million versus $6.4 million, with customer
count up 4% to 1,083.
-- Total gross margin up 300 basis points to 28.4%.
-- Net loss from continuing operations was $0.6 million, or $(0.03) per
share, compared to a net loss of $0.7 million, or $(0.03) per share.
Management Commentary
"Our SaaS-based Platform business continued its momentum in the second quarter with strong growth in revenue and gross margin," said Peter Derycz, president and CEO of Research Solutions. "This was primarily driven by our continued execution of new Platform deployments and continued Platform 'upsells,' which confirms that many of our users find significant value from our Platform and seek greater access to all of its functionality.
"During the quarter, we also launched a Platform version update with self-registration capabilities, allowing for more efficient lead generation and frictionless sign-ups, which we believe will drive more deployments. The new release also included the introduction of our Reference Manager gadget. This is a powerful tool that provides key stand-alone capabilities in the arena of literature data accumulation and management, along with full interplay with our gadget ecosystem and integration with standard writing tools, such as Microsoft Word.
"At the end of the second quarter, we successfully launched version 2.4 of the Platform, which contained major improvements to the Reference Manager function, an expanded Gadget Factory, and enhanced self-registration features, including the ability to sign up using a LinkedIn account. Additionally, we expanded our sales team and launched new test marketing campaigns, all of which contributed to the continued Platform acceleration.
"In fact, we've had a strong start to our fiscal third quarter, and as of the end of January, we reached 277 Platform customers and an annual recurring revenue run-rate of $2.9 million. Given our momentum, we are in a strong position for the second half of fiscal 2019, especially as we continue our pace of regular Platform technology enrichment and officially launch a new, more efficient marketing strategy."
Fiscal Second Quarter 2019 Financial Results
Total revenue increased 2% to $7.0 million compared to $6.8 million in the same year-ago quarter.
Platform subscription revenue increased 62% to $668,000 compared to $413,000 in the same year-ago quarter. The increase was due to a 45% increase in the total number of paid Platform deployments to 267. The quarter ended with annual recurring revenue up 58% to $2.7 million (see the company's definition of annual recurring revenue below).
Transaction revenue was $6.3 million compared to $6.4 million in the same year-ago quarter. Total active customers increased 4% from 1,044 to 1,083 and transaction count declined slightly from 205,000 to 203,000 (see the company's definition of active customer accounts and transactions below).
Total gross margin increased 300 basis points to 28.4% from 25.4% in the same year-ago quarter. The increase was primarily driven by a 360 basis point increase in Platform gross margin and the continued revenue mix shift to the higher-margin Platform business.
Total operating expenses were $2.7 million compared to $2.4 million in the same year-ago quarter. The increase was primarily due to higher non-cash stock-based compensation, and increased spending on technology and product development related to the Platform business.
Net loss from continuing operations improved to $0.6 million, or $(0.03) per share, compared to a net loss of $0.7 million, or $(0.03) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.2) million compared to $(0.3) 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, 2018, amounted to $4.8 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: Thursday, February 14, 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: 10006085
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 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, 2019.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10006085
Fiscal Second Quarter 2019 Financial and Operational Summary Tables vs. Year-Ago Quarter
Quarter Ended Dec. 31,
Six Months Ended Dec. 31,
2018 2017
Change
% 2018 2017
Change
%
Revenue:
Platforms $667,545 $413,404 $254,141 61.5% $1,256,558 $801,349 $455,209 56.8%
Transactions 6,321,297 6,409,816 (88,519) -1.4% 12,684,805 12,769,711 (84,906) -0.7%
Total Revenue 6,988,842 6,823,220 165,622 2.4% 13,941,363 13,571,060 370,303 2.7%
Gross Profit:
Platforms 545,468 323,042 222,426 68.9% 1,026,222 627,000 399,222 63.7%
Transactions 1,442,771 1,412,828 29,943 2.1% 2,909,972 2,858,309 51,663 1.8%
Total Gross Profit 1,988,239 1,735,870 252,369 14.5% 3,936,194 3,485,309 450,885 12.9%
Gross profit as a % of revenue:
Platforms 81.7% 78.1% 3.6% 81.7% 78.2% 3.4%
Transactions 22.8% 22.0% 0.8% 22.9% 22.4% 0.6%
Total Gross Profit as a % of
revenue 28.4% 25.4% 3.0% 28.2% 25.7% 2.6%
Operating Expenses:
Sales and marketing 445,879 524,587 (78,708) -15.0% 877,296 1,203,550 (326,254) -27.1%
Technology and product dev. 553,272 454,507 98,765 21.7% 1,053,067 907,323 145,744 16.1%
General and administrative 1,180,599 1,098,795 81,804 7.4% 2,299,210 2,230,198 69,012 3.1%
Depreciation and amortization 9,733 46,330 (36,597) -79.0% 20,848 86,898 (66,050) -76.0%
Stock-based compensation 453,288 314,565 138,723 44.1% 569,197 600,807 (31,610) -5.3%
Foreign currency translation loss 10,025 (485) 10,510 2167.0% 15,005 (12,872) 27,877 216.6%
Total Operating Expenses 2,652,796 2,438,299 214,497 8.8% 4,834,623 5,015,903 (181,280) -3.6%
Income (loss) from operations (664,557) (702,429) 37,872 5.4% (898,429) (1,530,594) 632,165 41.3%
Other Income (Expenses):
Interest expense (3,000) 3,000 100.0% (6,000) 6,000 100.0%
Other income (expense) 23,764 11,312 12,452 110.1% 47,249 24,114 23,135 95.9%
Provision for income taxes (7,442) (9,816) 2,374 24.2% (16,663) (21,567) 4,904 22.7%
Gain on sale of discontinued
operations 55,698 79,353 (23,655) -29.8% 97,418 136,502 (39,084) -28.6%
Total Other Income
(Expenses): 72,020 77,849 (5,829) -7.5% 128,004 133,049 (5,045) -3.8%
Net income (loss) $(592,537) $(624,580) 32,043 5.1% $(770,425) $(1,397,545) 627,120 44.9%
===
Adjusted EBITDA $(191,511) $(342,019) $150,508 44.0% $(293,379) $(855,761) $562,382 65.7%
Platforms:
ARR (Annual recurring revenue) $2,702,137 $1,708,547 $993,590 58.2% $2,702,137 $1,708,547 $993,590 58.2%
Deployments 267 184 83 45.1% 267 184 83 45.1%
ASP (Average sales price) $10,120 $9,286 $835 9.0% $10,120 $9,286 $835 9.0%
Transactions:
Transaction count 202,681 205,019 (2,338) -1.1% 404,893 410,085 (5,192) -1.3%
Corporate customers 838 816 22 2.7% 842 811 31 3.8%
Academic customers 245 228 17 7.5% 242 222 20 9.0%
Total customers 1,083 1,044 39 3.7% 1,084 1,033 51 4.9%
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 Dec. 31, Six Months Ended Dec. 31,
2018 2017
Change 2018 2017
Change
Net Income (loss) $(592,537) $(624,580) $32,043 $(770,425) $(1,397,545) $627,120
Add (deduct):
Interest expense 3,000 (3,000) 6,000 (6,000)
Other income (expense) (23,764) (11,312) (12,452) (47,249) (24,114) (23,135)
Foreign currency translation loss 10,025 (485) 10,510 15,005 (12,872) 27,877
Provision for income taxes 7,442 9,816 (2,374) 16,663 21,567 (4,904)
Depreciation and amortization 9,733 46,330 (36,597) 20,848 86,898 (66,050)
Stock-based compensation 453,288 314,565 138,723 569,197 600,807 (31,610)
Gain on sale of discontinued
operations (55,698) (79,353) 23,655 (97,418) (136,502) 39,084
Adjusted EBITDA $(191,511) $(342,019) $150,508 $(293,379) $(855,761) $562,382
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 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, 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
Condensed Consolidated Balance Sheets
December 31
, June 30,
2018 2018
(unaudited)
Assets
Current assets:
Cash and cash equivalents $
4,761,528 $
4,908,180
Accounts receivable, net of allowance of $99,706 and
$115,040, respectively 3,967,597 4,251,251
Prepaid expenses and other current assets 417,837 326,887
Prepaid royalties 461,128 93,336
Total current assets 9,608,090 9,579,654
Other assets:
Property and equipment, net of accumulated depreciation of
$771,038 and $749,923, respectively 42,798 59,043
Deposits and other assets 14,386 14,372
Right of use asset, net of accumulated amortization of
$212,658 and $155,698, respectively 250,364 307,324
Total assets $
9,915,638 $
9,960,393
===
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $
4,662,622 $
4,686,946
Deferred revenue 2,024,235 1,665,746
Lease liability, current portion 124,409 119,786
Total current liabilities 6,811,266 6,472,478
Long-term liabilities:
Lease liability, long-term portion 145,514 208,513
Total liabilities 6,956,780 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; 24,239,013 and 24,016,999 shares issued and
outstanding, respectively 24,239 24,017
Additional paid-in capital 23,360,388 22,904,691
Accumulated deficit (20,325,024) (19,554,599)
Accumulated other comprehensive loss (100,745) (94,707)
Total stockholders' equity 2,958,858 3,279,402
Total liabilities and stockholders' equity $
9,915,638 $
9,960,393
===
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
Three Months Ended Six Months Ended
December 31
, December 31
,
---
2018 2017 2018 2017
---
Revenue:
Platforms $
667,545 $
413,404 $
1,256,558 $
801,349
Transactions 6,321,297 6,409,816 12,684,805 12,769,711
Total revenue 6,988,842 6,823,220 13,941,363 13,571,060
Cost of revenue:
Platforms 122,077 90,362 230,336 174,349
Transactions 4,878,526 4,996,988 9,774,833 9,911,402
Total cost of revenue 5,000,603 5,087,350 10,005,169 10,085,751
Gross profit 1,988,239 1,735,870 3,936,194 3,485,309
Operating expenses:
Selling, general and administrative 2,643,063 2,391,969 4,813,775 4,929,005
Depreciation and amortization 9,733 46,330 20,848 86,898
Total operating expenses 2,652,796 2,438,299 4,834,623 5,015,903
Loss from operations (664,557) (702,429) (898,429) (1,530,594)
Other income (expenses):
Interest expense (3,000) (6,000)
Other income 23,764 11,312 47,249 24,114
Total other income 23,764 8,312 47,249 18,114
Loss from operations before provision for
income taxes (640,793) (694,117) (851,180) (1,512,480)
Provision for income taxes (7,442) (9,816) (16,663) (21,567)
Loss from continuing operations (648,235) (703,933) (867,843) (1,534,047)
Gain from sale of discontinued operations 55,698 79,353 97,418 136,502
Net loss (592,537) (624,580) (770,425) (1,397,545)
Other comprehensive income (loss):
Foreign currency translation (1,668) (6,715) (6,038) (15,666)
Comprehensive loss $
(594,205) $
(631,295) $
(776,463) $
(1,413,211)
===
Loss per common share:
Loss per share from continuing
operations, basic and diluted $
(0.03) $
(0.03) $
(0.04) $
(0.07)
Income per share from discontinued
operations, basic and diluted
$
$ $
0.01 $
0.01
Net loss per share, basic and diluted $
(0.03) $
(0.03) $
(0.03) $
(0.06)
Weighted average common shares outstanding,
basic and diluted 23,787,836 23,455,654 23,716,312 23,418,046
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SOURCE Research Solutions, Inc.
