Research Solutions Reports Fiscal Third Quarter 2019 Financial Results
ENCINO, Calif., May 15, 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 third quarter ended March 31, 2019.
Fiscal Third Quarter 2019 Highlights vs. Year-Ago Quarter
-- Platform revenue up 53% to $749,000, with a 35% increase in total
Platform deployments to 281. Annual recurring revenue up 51% to $3.0
million.
-- Transaction revenue was $6.6 million versus $6.8 million, with customer
count up 2% to 1,078.
-- Total gross margin up 320 basis points to 29.5%.
-- Net loss from continuing operations improved to $0.2 million, or nil per
share, compared to a net loss of $0.3 million, or $(0.01) per share.
Management Commentary
"The third quarter marked continued progress in our SaaS-based Platform business with strong revenue growth and additional margin expansion," said Peter Derycz, president and CEO of Research Solutions. "Driving these results was continued Platform 'upsells,' which confirms our current users find value in the offering and seek greater access to its functionality. Behind these upsell results is our Customer Happiness group, which provides both customer support and advanced account management. They have done an excellent job helping our customers take the best advantage of what our Platform has to offer.
"We also completed two major internal initiatives during the quarter that we believe will further bolster new Platform deployments. First, we completed the migration of our Platform from internal servers and are now entirely cloud-based, which provides near unlimited scalability. We also completed the build-out of our sales team, along with implementing more targeted marketing strategies to better articulate the value proposition of the Platform to potential new users.
"In addition, we made incremental upgrades to the Platform, including enhancements to the Reference Manager gadget and launching marketing campaigns to promote the unique functionality of this core gadget. The combination of consistently improving the Platform, excellent customer support and fair pricing has resulted in a customer churn rate far better than industry benchmarks.
"Looking forward to the remainder of the year, we will be very focused on introducing new users to the Platform, but also converting those users to our premium subscription plans. While still testing and evaluating what is most effective and efficient, we have begun ramping up our marketing campaigns to generate more leads through our self-registration option, while further optimizing our selling tactics to increase our lead conversion rate. We believe we have the necessary people and infrastructure in place to further accelerate Platform growth and deliver an invaluable research tool to the many thousands of R&D organizations worldwide."
Fiscal Third Quarter 2019 Financial Results
Total revenue increased to $7.4 million compared to $7.3 million in the same year-ago quarter.
Platform subscription revenue increased 53% to $749,000 compared to $489,000 in the same year-ago quarter. The increase was due to upselling current platform customers and to a 35% increase in the total number of paid Platform deployments from 208 to 281. The quarter ended with annual recurring revenue up 51% to $3.0 million (see the company's definition of annual recurring revenue below).
Transaction revenue was $6.6 million compared to $6.8 million in the same year-ago quarter. Total active customers increased 2% from 1,059 to 1,078 and transaction count declined from 220,000 to 212,000 (see the company's definition of active customer accounts and transactions below).
Total gross margin increased 320 basis points to 29.5% from 26.3% in the same year-ago quarter. The increase was primarily driven by a 310 basis point increase in Platform gross margin and the continued revenue mix shift to the higher-margin Platform business.
Total operating expenses were $2.4 million compared to $2.2 million in the same year-ago quarter. The increase was primarily due to increased spending on technology and product development related to the Platform business.
Net loss from continuing operations improved to $0.2 million, or nil per share, compared to a net loss of $0.3 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.0) million compared to $(0.1) 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 March 31, 2019, amounted to $5.3 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: Wednesday, May 15, 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: 10006630
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 www.researchsolutions.com.
A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through May 29, 2019.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10006630
Fiscal Third Quarter 2019 Financial and Operational Summary Tables vs. Year-Ago Quarter
Quarter Ended Mar. 31,
Nine Months Ended Mar. 31,
2019 2018
Change
% 2019 2018
Change
%
Change Change
Revenue:
Platforms $748,726 $489,219 $259,507 53.0% $2,005,284 $1,290,568 $714,716 55.4%
Transactions 6,629,231 6,792,289 (163,058) -2.4% 19,314,036 19,562,000 (247,964) -1.3%
Total Revenue 7,377,957 7,281,508 96,449 1.3% 21,319,320 20,852,568 466,752 2.2%
Gross Profit:
Platforms 614,054 386,034 228,020 59.1% 1,640,277 1,013,034 627,243 61.9%
Transactions 1,565,607 1,532,330 33,277 2.2% 4,475,579 4,390,639 84,940 1.9%
Total Gross Profit 2,179,661 1,918,364 261,297 13.6% 6,115,856 5,403,673 712,183 13.2%
Gross profit as a
% of revenue:
Platforms 82.0% 78.9% 3.1% 81.8% 78.5% 3.3%
Transactions 23.6% 22.6% 1.1% 23.2% 22.4% 0.7%
Total Gross Profit 29.5% 26.3% 3.2% 28.7% 25.9% 2.8%
Operating
Expenses:
Sales and marketing 542,641 522,894 19,747 3.8% 1,419,937 1,726,443 (306,506) -17.8%
Technology and prod. dev. 537,685 436,672 101,013 23.1% 1,590,752 1,343,995 246,757 18.4%
General and administrative 1,129,462 1,091,930 37,532 3.4% 3,428,672 3,322,127 106,545 3.2%
Depreciation and amortization 9,617 32,768 (23,151) -70.7% 30,465 119,666 (89,201) -74.5%
Stock-based compensation 131,072 114,340 16,732 14.6% 700,269 715,147 (14,878) -2.1%
Foreign currency trans. loss 2,302 (9,737) 12,039 123.6% 17,307 (22,609) 39,916 176.5%
Total Operating
Expenses 2,352,779 2,188,866 163,913 7.5% 7,187,402 7,204,769 (17,367) -0.2%
Income (loss) from
operations (173,117) (270,502) 97,385 36.0% (1,071,546) (1,801,096) 729,550 40.5%
Other Income
(Expenses):
Interest expense 2,000 (2,000) 100.0% (4,000) 4,000 100.0%
Other income (expense) 27,875 13,769 14,106 102.4% 75,124 37,883 37,241 98.3%
Provision for income taxes (5,482) (10,531) 5,049 47.9% (22,145) (32,098) 9,953 31.0%
Gain on sale of disc'd ops. 33,044 69,277 (36,233) -52.3% 130,462 205,779 (75,317) -36.6%
Total Other Income
(Expenses): 55,437 74,515 (19,078) -25.6% 183,441 207,564 (24,123) -11.6%
Net income (loss) $(117,680) $(195,987) 78,307 40.0% $(888,105) $(1,593,532) 705,427 44.3%
Adjusted EBITDA $(30,126) $(133,131) $103,005 77.4% $(323,505) $(988,892) $665,387 67.3%
Platforms:
ARR (Annual recurring revenue) $2,987,647 $1,982,867 $1,004,780 50.7% $2,987,647 $1,982,867 $1,004,780 50.7%
Deployments 281 208 73 35.1% 281 208 73 35.1%
ASP (Average sales price) $10,632 $9,533 $1,099 11.5% $10,632 $9,533 $1,099 11.5%
Transactions:
Transaction count 211,520 219,607 (8,087) -3.7% 615,944 629,739 (13,795) -2.2%
Corporate customers 835 848 (13) -1.5% 842 820 22 2.6%
Academic customers 243 211 32 15.2% 240 214 26 12.1%
Total customers 1,078 1,059 19 1.8% 1,081 1,041 41 3.9%
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 Mar. 31, Nine Months Ended Mar. 31,
2019 2018
Change 2019 2018
Change
Net Income (loss) $(117,680) $(195,987) $78,307 $(888,105) $(1,593,532) $705,427
Add (deduct): -
Interest expense (2,000) 2,000 4,000 (4,000)
Other income (expense) (27,875) (13,769) (14,106) (75,124) (37,883) (37,241)
Foreign currency translation loss 2,302 (9,737) 12,039 17,307 (22,609) 39,916
Provision for income taxes 5,482 10,531 (5,049) 22,145 32,098 (9,953)
Depreciation and amortization 9,617 32,768 (23,151) 30,465 119,666 (89,201)
Stock-based compensation 131,072 114,340 16,732 700,269 715,147 (14,878)
Gain on sale of discontinued
operations (33,044) (69,277) 36,233 (130,462) (205,779) 75,317
Adjusted EBITDA $(30,126) $(133,131) $103,005 $(323,505) $(988,892) $665,387
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 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. 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,
2019 2018
(unaudited)
Assets
Current assets:
Cash and cash equivalents $
5,303,084 $
4,908,180
Accounts receivable, net of allowance of $100,175 and
$115,040, respectively 4,366,975 4,251,251
Prepaid expenses and other current assets 279,376 326,887
Prepaid royalties 740,723 93,336
Total current assets 10,690,158 9,579,654
Other assets:
Property and equipment, net of accumulated depreciation
of $781,042 and $749,923, respectively 38,327 59,043
Deposits and other assets 14,397 14,372
Right of use asset, net of accumulated amortization of
$241,568 and $155,698, respectively 221,454 307,324
Total assets $
10,964,336 $
9,960,393
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $
5,734,212 $
4,686,946
Deferred revenue 2,069,455 1,665,746
Lease liability, current portion 126,780 119,786
Total current liabilities 7,930,447 6,472,478
Long-term liabilities:
Lease liability, long-term portion 112,775 208,513
Total liabilities 8,043,222 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; 24,230,661 and 24,016,999 shares issued and
outstanding, respectively 24,231 24,017
Additional paid-in capital 23,445,548 22,904,691
Accumulated deficit (20,442,704) (19,554,599)
Accumulated other comprehensive loss (105,961) (94,707)
Total stockholders' equity 2,921,114 3,279,402
Total liabilities and stockholders' equity $
10,964,336 $
9,960,393
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
Three Months Ended Nine Months Ended
March 31
, March 31
,
2019 2018 2019 2018
Revenue:
Platforms $
748,726 $
489,219 $
2,005,284 $
1,290,568
Transactions 6,629,231 6,792,289 19,314,036 19,562,000
Total revenue 7,377,957 7,281,508 21,319,320 20,852,568
Cost of revenue:
Platforms 134,672 103,185 365,007 277,534
Transactions 5,063,624 5,259,959 14,838,457 15,171,361
Total cost of revenue 5,198,296 5,363,144 15,203,464 15,448,895
Gross profit 2,179,661 1,918,364 6,115,856 5,403,673
Operating expenses:
Selling, general and administrative 2,343,161 2,156,097 7,156,937 7,085,102
Depreciation and amortization 9,617 32,768 30,465 119,666
Total operating expenses 2,352,778 2,188,865 7,187,402 7,204,768
Loss from operations (173,117) (270,501) (1,071,546) (1,801,095)
Other income (expenses):
Interest expense 2,000 (4,000)
Other income 27,875 13,769 75,124 37,883
Total other income 27,875 15,769 75,124 33,883
Loss from operations before provision for
income taxes (145,242) (254,732) (996,422) (1,767,212)
Provision for income taxes (5,482) (10,531) (22,145) (32,098)
Loss from continuing operations (150,724) (265,263) (1,018,567) (1,799,310)
Gain from sale of discontinued operations 33,044 69,277 130,462 205,779
Net loss (117,680) (195,986) (888,105) (1,593,531)
Other comprehensive income (loss):
Foreign currency translation (5,216) (7,385) (11,254) (23,051)
Comprehensive loss $
(122,896) $
(203,371) $
(899,359) $
(1,616,582)
Loss per common share:
Loss per share from continuing operations,
basic and diluted
$ $
(0.01) $
(0.04) $
(0.08)
Income per share from discontinued operations,
basic and diluted
$
$
$ $
0.01
Net loss per share, basic and diluted
$ $
(0.01) $
(0.04) $
(0.07)
Weighted average common shares outstanding,
basic and diluted 23,845,798 23,498,796 23,758,844 23,445,569
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SOURCE Research Solutions, Inc.
