Research Solutions Reports Fiscal Second Quarter 2024 Results
Reports 18.3% Revenue Increase and ARR of $15.6 Million
HENDERSON, Nev., Feb. 8, 2024 /PRNewswire/ --Research Solutions, Inc. (NASDAQ: RSSS), a trusted partner providing cloud-based workflow solutions to accelerate research for R&D-driven organizations, reported financial results for its fiscal second quarter ended December 31, 2023.
Fiscal Second Quarter 2024 Summary
-- Total revenue of $10.3 million, an 18.3% increase from the prior-year
quarter
-- Platform revenue up 48% to $3.1 million. Annual Recurring Revenue
("ARR") up 77% to $15.6 million, which includes approximately $4.0
million of B2C recurring revenue and $0.4M of B2B recurring revenue from
the Scite, Inc. ("Scite") acquisition. B2C ARR is broken out on a
separate line in the Company's Financial and Operational Summary Tables
and for the purposes of calculating B2C ARR, the value of any monthly
recurring subscriptions has been multiplied by twelve (see the Financial
and Operational Summary Tables and associated notes below).
-- Gross profit up 31.7% from the prior-year quarter. Total gross margin
improved 450 basis points to 43.5%.
-- Net loss of $54,000 or ($0.00) on a per share basis, compared to a net
loss of ($256,000) or ($0.01) per share in the prior-year quarter. The
quarter's loss includes $307,000 in expenses related to M&A activities,
most of which were legal expenses.
-- Adjusted EBITDA of $318,000 compared to $201,000 in the prior-year
quarter. The Adjusted EBITDA result is inclusive of the expenses
related to M&A activities noted above. Without these costs, Adjusted
EBITDA would have been approximately $625,000.
-- The company closed its acquisition of Scite on December 1, 2023. The
quarter's numbers include approximately one month of activity from
Scite.
"Our second quarter results reflect the continued execution of our plan and with the acquisition of Scite our ARR is now approximately $15.6 million. We also experienced continued organic growth across our platform and transaction offerings, with net incremental ARR on the Article Galaxy platform being our best result in the last four quarters," said Roy W. Olivier, President and CEO of Research Solutions. "In addition, we have greatly enhanced the offerings available within our Article Galaxy platform over the past six months with the addition of ResoluteAI and Scite. When combined with our existing products, these acquisitions add multiple new workflow and advanced search and discovery solutions that can be sold to new or existing customers. These new solutions materially increase our Total Addressable Market ("TAM") and as we further integrate the products together, we will be able to deliver unique value to our customers. Overall, we remain a critical piece of the research process and believe we are well-positioned to expand our user base as macroeconomic conditions improve."
Fiscal Second Quarter 2024 Results
Total revenue was $10.3 million, an 18% increase from $8.7 million in the year-ago quarter as both platform and transaction revenue increased from the prior-year period.
Platform subscription revenue increased 48% to $3.1 million compared to $2.1 million in the year-ago quarter. The increase was primarily due to the acquisitions of ResoluteAI and Scite, as well as organic growth in the core Article Galaxy platform. The quarter ended with annual recurring revenue of $15.569 million, up 77% year-over-year, including approximately $4.355 million of ARR from Scite (see the company's definition of annual recurring revenue below).
Transaction revenue was $7.2 million, compared to $6.6 million in the second quarter of fiscal 2023. The increase was primarily due to organic growth, which was also enhanced by higher transaction volumes related to contracts transferred from FIZ Karlsruhe effective on January 1, 2023. The transaction customer count for the quarter was 1,398, compared to 1,223 customers in the prior-year quarter (see the company's definition of active customer accounts and transactions below).
Total gross margin improved 450 basis points from the prior-year quarter to 43.5%. The increase was primarily driven by the continued revenue mix shift to the higher-margin Platforms business, as well as increased margins in the transactions business.
Total operating expenses were $4.9 million, compared to $3.7 million in the second quarter of 2023. The increase was primarily related to the additional expense base associated with the acquisitions of ResoluteAI and Scite. Additionally, this quarter's results include $307,000 in expenses related to M&A activities, the vast majority of which were legal expenses.
Net loss in the second quarter was $54,000, or roughly breakeven on a per share basis, compared to a net loss of ($256,000), or ($0.01) per share, in the prior-year quarter. Adjusted EBITDA was $318,000, compared to $201,000 in the year-ago quarter. The Adjusted EBITDA result is inclusive of the $307,000 in M&A activity related costs noted above (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).
Conference Call
Research Solutions President and CEO Roy W. Olivier and CFO Bill Nurthen will host the conference call, followed by a question and answer period.
Date: Thursday, February 8, 2024
Time: 5:00 p.m. ET (2:00 p.m. PT)
Dial-in number: 1-412-317-5180
Conference ID: 10185927
The conference call will be broadcast live and available for replay until March 8, 2024 by dialing 1-412-317-6671 and using the replay ID 10185927, and via the investor relations section of the company's website at http://researchsolutions.investorroom.com/.
Fiscal Second Quarter Financial and Operational Summary Tables vs. Prior-Year Quarter
Quarter Ended December 31, Fiscal Year Ended December 31,
2023 2022 Change % Change 2023 2022 Change % Change
Revenue:
Platforms $3,125,584 $2,110,272 $1,015,312 48.1 % $5,725,776 $4,130,239 $1,595,537 38.6 %
Transactions $7,188,158 $6,606,394 581,764 8.8 % $14,648,937 $13,271,070 1,377,867 10.4 %
Total Revenue 10,313,742 8,716,666 1,597,076 18.3 % 20,374,713 17,401,309 2,973,404 17.1 %
Gross Profit:
Platforms 2,639,399 1,857,199 782,200 42.1 % 4,856,977 3,646,693 1,210,284 33.2 %
Transactions 1,844,403 1,546,628 297,775 19.3 % 3,658,391 3,106,382 552,009 17.8 %
Total Gross Profit 4,483,802 3,403,827 1,079,975 31.7 % 8,515,368 6,753,075 1,762,293 26.1 %
Gross profit as a % of revenue:
Platforms 84.4 % 88.0 % -3.6 % 84.8 % 88.3 % -3.5 %
Transactions 25.7 % 23.4 % 2.2 % 25.0 % 23.4 % 1.6 %
Total Gross Profit 43.5 % 39.0 % 4.4 % 41.8 % 38.8 % 3.0 %
Operating Expenses:
Sales and marketing 804,927 666,608 138,319 20.7 % 1,489,943 1,187,824 302,119 25.4 %
Technology and product development 1,336,558 922,132 414,426 44.9 % 2,581,137 1,797,422 783,715 43.6 %
General and administrative 2,023,848 1,613,664 410,184 25.4 % 4,566,717 3,133,088 1,433,629 45.8 %
Depreciation and amortization 155,749 6,342 149,407 2355.8 % 215,369 12,154 203,215 1672.0 %
Stock-based compensation 596,455 608,703 (12,248) -2.0 % 1,188,269 784,064 404,205 51.6 %
Foreign currency translation loss (13,738) (84,179) 70,441 83.7 % (7,118) (11,663) 4,545 39.0 %
Total Operating Expenses 4,903,799 3,733,270 1,170,529 31.4 % 10,034,317 6,902,889 3,131,428 45.4 %
Income (loss) from operations (419,997) (329,443) (90,554) -27.5 % (1,518,949) (149,814) (1,369,135) -913.9 %
Other Income (Expenses):
Other income 376,426 74,695 301,731 404.0 % 516,737 113,764 402,973 354.2 %
Provision for income taxes (10,057) (782) (9,275) 1186.1 % (39,459) (4,915) (34,544) 702.8 %
Total Other Income (Expenses): 366,369 73,913 292,456 395.7 % 477,278 108,849 368,429 338.5 %
Net income (loss) $(53,628) $(255,530) 201,902 79.0 % $(1,041,671) $(40,965) (1,000,706) -2442.8 %
NM
Adjusted EBITDA $318,469 $201,423 $117,046 58.1 % $(122,429) $634,741 $(757,170) NM
Quarter Ended December 31, Fiscal Year Ended December 31,
2023 2022 Change % Change 2023 2022 Change % Change
Platforms:
B2B ARR (Annual recurring
revenue):
Beginning of Period $11,020,241 $8,331,770 $2,688,471 32.3 % $9,444,130 $7,922,188 $1,521,942 19.2 %
Incremental ARR 594,507 445,207 149,300 33.5 % 2,170,618 854,789 1,315,829 153.9 %
End of Period $11,614,748 $8,776,977 $2,837,771 32.3 % $11,614,748 $8,776,977 $2,837,771 32.3 %
Deployments:
Beginning of Period 880 756 124 16.4 % 835 733 102 13.9 %
Incremental Deployments 62 34 28 82.4 % 107 57 50 87.7 %
End of Period 942 790 152 19.2 % 942 790 152 19.2 %
ASP (Average sales price):
Beginning of Period $12,523 $11,021 $1,502 13.6 % $11,310 $10,808 $502 4.6 %
End of Period $12,330 $11,110 $1,220 11.0 % $12,330 $11,110 $1,220 11.0 %
B2C ARR (Annual recurring
revenue):
Beginning of Period
$ -
$ -
$ -
$ -
$ -
$ -
Incremental ARR 3,954,090 3,954,090 NM 3,954,090 3,954,090 NM
End of Period $3,954,090
$ - $3,954,090 NM $3,954,090
$ - $3,954,090 NM
Total ARR (Annualized recurring
revenue): $15,568,838 $8,776,977 $6,791,861 77.4 % $15,568,838 $8,776,977 $6,791,861 77.4 %
Transaction Customers:
Corporate customers 1,065 921 144 15.6 % 1,078 922 157 17.0 %
Academic customers 333 302 31 10.3 % 319 300 19 6.3 %
Total customers 1,398 1,223 175 14.3 % 1,397 1,222 176 14.4 %
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 ("ARR") as the value of contracted Platform subscription recurring revenue normalized to a one-year period. For B2C ARR, this includes the annualized value of monthly subscriptions, meaning their monthly value multiplied by twelve.
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 December 31, Fiscal Year Ended December 31,
2023 2022 Change % Change 2023 2022 Change % Change
Net Income (loss) $(53,628) $(255,530) $201,902 79.0 % $(1,041,671) $(40,965) $(1,000,706) -2442.8 %
Add (deduct):
Other income (expense) (376,426) (74,695) (301,731) 404.0 % (516,737) (113,764) (402,973) 354.2 %
Foreign currency
translation loss (13,738) (84,179) 70,441 83.7 % (7,118) (11,663) 4,545 39.0 %
Provision for income taxes 10,057 782 9,275 1186.1 % 39,459 4,915 34,544 702.8 %
Depreciation and
amortization 155,749 6,342 149,407 2355.8 % 215,369 12,154 203,215 1672.0 %
Stock-based compensation 596,455 608,703 (12,248) -2.0 % 1,188,269 784,064 404,205 51.6 %
Gain on sale of disc. ops.
Adjusted EBITDA $318,469 $201,423 $117,046 58.1 % $(122,429) $634,741 $(757,170) NM
About Research Solutions
Research Solutions, Inc. (NASDAQ: RSSS) provides cloud-based technologies to streamline the process of obtaining, managing, and creating intellectual property. Founded in 2006 as Reprints Desk, the company was a pioneer in developing solutions to serve researchers. Today, more than 70 percent of the top pharmaceutical companies, prestigious universities, and emerging businesses rely on Article Galaxy, the company's SaaS research platform, to streamline access to the latest scientific research and data with 24/7 customer support. For more information and details, please 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 enhanced product offerings, additional customers, and the Company's prospects for growth. 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
Consolidated Balance Sheets
December 31,
2023 June 30,
(unaudited) 2023
Assets
Current assets:
Cash and cash equivalents $
2,697,659 $
13,545,333
Accounts receivable, net of allowance of $94,991 and $85,015, respectively 7,289,248 6,153,063
Prepaid expenses and other current assets 547,786 400,340
Prepaid royalties 1,081,578 1,202,678
Total current assets 11,616,271 21,301,414
Goodwill (provisional) 16,451,937
Other assets:
Property and equipment, net of accumulated depreciation of $905,411 and $881,908, respectively 103,195 70,193
Intangible assets, net of accumulated amortization of $940,234 and $747,355, respectively 11,290,225 462,068
($10,806,487 provisional)
Deposits and other assets 1,060 1,052
Total assets $
39,462,688 $
21,834,727
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $
8,862,829 $
8,079,516
Deferred revenue 7,843,674 6,424,724
Total current liabilities 16,706,503 14,504,240
Long-term liabilities:
Contingent earnout liability 8,792,811
Total liabilities 25,499,314 14,504,240
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; 32,619,598 and 32,620 29,487
29,487,508 shares issued and outstanding, respectively
Additional paid-in capital 37,607,895 29,941,873
Accumulated deficit (23,564,320) (22,522,649)
Accumulated other comprehensive loss (112,821) (118,224)
Total stockholders' equity 13,963,374 7,330,487
Total liabilities and stockholders' equity $
39,462,688 $
21,834,727
Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2023 2022 2023 2022
Revenue:
Platforms $
3,125,584 $
2,110,272 $
5,725,776 $
4,130,239
Transactions 7,188,158 6,606,394 14,648,937 13,271,070
Total revenue 10,313,742 8,716,666 20,374,713 17,401,309
Cost of revenue:
Platforms 486,185 253,073 868,799 483,546
Transactions 5,343,755 5,059,766 10,990,546 10,164,688
Total cost of revenue 5,829,940 5,312,839 11,859,345 10,648,234
Gross profit 4,483,802 3,403,827 8,515,368 6,753,075
Operating expenses:
Selling, general and administrative 4,748,050 3,726,928 9,818,948 6,890,735
Depreciation and amortization 155,749 6,342 215,369 12,154
Total operating expenses 4,903,799 3,733,270 10,034,317 6,902,889
Loss from operations (419,997) (329,443) (1,518,949) (149,814)
Other income 376,426 74,695 516,737 113,764
Loss from operations before provision for income taxes (43,571) (254,748) (1,002,212) (36,050)
Provision for income taxes (10,057) (782) (39,459) (4,915)
Net loss (53,628) (255,530) (1,041,671) (40,965)
Other comprehensive income (loss):
Foreign currency translation 6,349 6,524 5,403 1,348
Comprehensive loss $
(47,279) $
(249,006) $
(1,036,268) $
(39,617)
Loss per common share:
Net loss per share, basic and diluted
$ $
(0.01) $
(0.04)
$
Weighted average common shares outstanding, basic and diluted 28,092,945 26,816,550 27,564,404 26,767,360
Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
2023 2022
Cash flow from operating activities:
Net loss $
(1,041,671) $
(40,965)
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 215,369 12,154
Fair value of vested stock options 61,714 301,737
Fair value of vested restricted common stock 1,105,606 482,327
Fair value of vested unrestricted common stock 68,272
Modification cost of accelerated vesting of restricted common stock 20,949
Changes in operating assets and liabilities:
Accounts receivable (681,502) 8,159
Prepaid expenses and other current assets (67,986) (67,603)
Prepaid royalties 121,100 805,436
Accounts payable and accrued expenses 81,078 (974,931)
Deferred revenue (241,545) 428,999
Net cash provided by (used in) operating activities (426,888) 1,023,585
Cash flow from investing activities:
Purchase of property and equipment (55,763) (18,876)
Payment for acquisition of Resolute, net of cash acquired (2,718,253)
Payment for acquisition of Scite, net of cash acquired (7,305,493)
Payment for non-refundable deposit for asset acquisition (297,450)
Net cash used in investing activities (10,079,509) (316,326)
Cash flow from financing activities:
Common stock repurchase (68,748) (48,729)
Payment of contingent acquisition consideration (278,195)
Net cash used in financing activities (346,943) (48,729)
Effect of exchange rate changes 5,666 859
Net increase (decrease) in cash and cash equivalents (10,847,674) 659,389
Cash and cash equivalents, beginning of period 13,545,333 10,603,175
Cash and cash equivalents, end of period $
2,697,659 $
11,262,564
Supplemental disclosures of cash flow information:
Cash paid for income taxes $
39,459 $
4,915
Non-cash investing and financing activities:
Contingent consideration accrual on asset acquisition $
36,364
$
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SOURCE Research Solutions, Inc.
