Research Solutions Reports Fiscal Third Quarter 2022 Results

Published: May. 12, 2022 at 4:05 PM EDT

Reports Record Quarterly Revenue and 32 Percent Increase in ARR to $7.3 Million

HENDERSON, Nev., May 12, 2022 /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 third quarter ended March 31, 2022.

(PRNewsfoto/Research Solutions, Inc.)
(PRNewsfoto/Research Solutions, Inc.)(PRNewswire)

Fiscal Third Quarter 2022 Summary

  • Total revenue of $8.8 million, a quarterly record for the Company and a 5% increase from the prior-year quarter
  • Platform revenue up 33% to $1.8 million. Annual Recurring Revenue ("ARR") up 32% to $7.3 million
  • Gross profit up 20% from prior-year quarter. Total gross margin improved 460 basis points to 37.0%
  • Loss of $0.01 per share, compared to breakeven in the prior-year quarter, positive Adjusted EBITDA of $0.1 million compared to $0.2M in the prior-year quarter
  • Platform incremental ARR generated in the quarter was $0.5M and a total of $1.8M in the past twelve months.
  • 34 net new platform deployments in the quarter, 168 net new on a trailing twelve months basis

"Our third quarter results reflect the continued growth within our Platforms segment, as we posted our highest quarterly total revenue in company history and second consecutive quarter of at least $500,000 of incremental ARR," said Roy W. Olivier, President and CEO of Research Solutions. "In addition, Q3 is seasonally a strong renewal period for us and this quarter we experienced our highest ever upsell bookings from existing customers as they continue to see the value in our Article Galaxy platform."

Fiscal Third Quarter 2022 Results

Total revenue was $8.8 million, a 5% increase from $8.3 million in the year-ago quarter as platform revenue increased and transaction revenue was essentially unchanged from the prior period.

Platform subscription revenue increased 33% to $1.8 million compared to approximately $1.3 million in the year-ago quarter. The growth was due to an increase in ARR associated with renewals over the last twelve months as well as an increase in the total number of paid Platform deployments, including 34 net deployments added in the quarter. The quarter ended with annual recurring revenue of $7.3 million, up 32% year-over-year (see the company's definition of annual recurring revenue below).

Transaction revenue was $7.0 million, relatively flat compared to the third quarter of fiscal 2021. Transaction customer count for the quarter was 1,193, compared to 1,108 customers in the prior-year quarter (see the company's definition of active customer accounts and transactions below).

Total gross margin improved 460 basis points from the prior-year quarter to 37.0%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business as well as lower copyright costs in the quarter.

Total operating expenses were $3.6 million, compared to $2.7 million in the third quarter of 2021. The increase was primarily due to higher technology and product development and general and administrative costs related to strategic growth initiatives in the business.

Net loss in the third quarter was ($341,000), or ($0.01) per share, compared to net income of $50,000, or breakeven  on a diluted share basis, in the prior-year quarter. Adjusted EBITDA was $94,000, compared to $238,000 in the year-ago quarter (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, May 12, 2022
Time: 5:00 p.m. ET (2:00 p.m. PT)
Toll-free dial-in number: 1-800-892-9785
International dial-in number: 1-212-231-2907
Conference ID: 22018555

The conference call will be broadcast live and available for replay until June 12, 2022 by dialing 1-844-512-2921 and using the replay ID 22018555, 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,



2022

2021

Change

% Change


2022

2021

Change

% Change

Revenue:











Platforms

$   1,786,224

$   1,344,183

$      442,041

32.9%


$     4,900,927

$     3,706,406

$   1,194,521

32.2%


Transactions

$   6,971,128

$   6,996,349

(25,221)

-0.4%


$   19,471,216

$   19,832,286

(361,070)

-1.8%

Total Revenue

8,757,352

8,340,532

416,820

5.0%


24,372,143

23,538,692

833,451

3.5%











Gross Profit:











Platforms

1,567,173

1,110,487

456,686

41.1%


4,204,552

3,051,755

1,152,797

37.8%


Transactions

1,671,324

1,592,153

79,171

5.0%


4,531,980

4,492,043

39,937

0.9%

Total Gross Profit

3,238,497

2,702,640

535,857

19.8%


8,736,532

7,543,798

1,192,734

15.8%











Gross profit as a % of revenue:











Platforms

87.7%

82.6%

5.1%



85.8%

82.3%

3.5%



Transactions

24.0%

22.8%

1.2%



23.3%

22.7%

0.6%


Total Gross Profit

37.0%

32.4%

4.6%



35.8%

32.0%

3.8%












Operating Expenses:











Sales and marketing

543,496

566,713

(23,217)

-4.1%


1,584,804

1,552,658

32,146

2.1%


Technology and product development

971,959

664,195

307,764

46.3%


2,661,655

1,911,903

749,752

39.2%


General and administrative

1,629,371

1,233,603

395,768

32.1%


4,742,729

3,513,415

1,229,314

35.0%


Depreciation and amortization

4,988

2,066

2,922

141.4%


12,144

8,828

3,316

37.6%


Stock-based compensation

399,234

179,345

219,889

122.6%


870,883

786,084

84,799

10.8%


Foreign currency translation loss

29,394

6,648

22,746

342.1%


52,619

(35,070)

87,689

NM

Total Operating Expenses

3,578,442

2,652,570

925,872

34.9%


9,924,834

7,737,818

2,187,016

28.3%

Income (loss) from operations

(339,945)

50,070

(390,015)

NM


(1,188,302)

(194,020)

(994,282)

NM











Other Income (Expenses):











Other income (expense)

237

250

(13)



777

884

(107)

-12.1%


Provision for income taxes

(822)

(572)

(250)

0.0%


(6,592)

(3,077)

(3,515)

NM


Gain on sale of disc'd operations

-

-

-



-

-

-


Total Other Income (Expenses):

(585)

(322)

(263)

81.7%


(5,815)

(2,193)

(3,622)

NM

Net income (loss)

$    (340,530)

$        49,748

(390,278)

NM


$   (1,194,117)

$      (196,213)

(997,904)

NM





NM





NM

Adjusted EBITDA

$        93,671

$      238,129

$    (144,458)

NM


$      (252,656)

$        565,822

$    (818,478)

NM














Quarter Ended March 31,


Nine Months Ended March 31,



2022

2021

Change

% Change


2022

2021

Change

% Change

Platforms:











ARR (Annual recurring revenue):











  Beginning of Period

$   6,848,613

$   5,021,053

$   1,827,560

36.4%


$     5,880,179

$     4,446,088

$   1,434,091

32.3%


   Incremental ARR

500,233

533,542

(33,309)

-6.2%


1,468,668

1,108,507

360,161

32.5%


  End of Period

$   7,348,847

$   5,554,595

$   1,794,252

32.3%


$     7,348,847

$     5,554,595

$   1,794,252

32.3%












Deployments:











  Beginning of Period

646

461

185

40.1%


553

401

152

37.9%


   Incremental Deployments

34

51

(17)

-33.3%


127

111

16

14.4%


  End of Period

680

512

168

32.8%


680

512

168

32.8%












ASP (Average sales price):











  Beginning of Period

$        10,602

$        10,892

$           (290)

-2.7%


$          10,633

$          11,088

$           (454)

-4.1%


  End of Period

$        10,807

$        10,849

$             (42)

-0.4%


$          10,807

$          10,849

$             (42)

-0.4%











Transaction Customers:











Corporate customers

904

841

63

7.5%


875

818

56

6.9%


Academic customers

289

267

22

8.2%


300

284

16

5.8%


Total customers

1,193

1,108

85

7.7%


1,175

1,102

73

6.6%


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.

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,



2022

2021

Change

% Change


2022

2021

Change

% Change

Net Income (loss)

$    (340,530)

$        49,748

$    (390,278)

NM


$   (1,194,117)

$      (196,213)

$    (997,904)

NM

 Add (deduct):








-



Other income (expense)

(237)

(250)

13

5.2%


(777)

(884)

107

12.1%


Foreign currency translation loss

29,394

6,648

22,746

342.1%


52,619

(35,070)

87,689

NM


Provision for income taxes

822

572

250

43.7%


6,592

3,077

3,515

114.2%


Depreciation and amortization

4,988

2,066

2,922

141.4%


12,144

8,828

3,316

37.6%


Stock-based compensation

399,234

179,345

219,889

122.6%


870,883

786,084

84,799

10.8%


Gain on sale of disc. ops.

-

-

-



-

-

-


 Adjusted EBITDA

$        93,671

$      238,129

$    (144,458)

-60.7%


$      (252,656)

$        565,822

$    (818,478)

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 visitwww.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 additional customers, potential acquisitions 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




March 31, 







2022


June 30, 




(unaudited)


2021


Assets








Current assets:








     Cash and cash equivalents


$

10,640,521


$

11,004,337


     Accounts receivable, net of allowance of $80,655 and $51,495, respectively



5,622,368



4,717,453


     Prepaid expenses and other current assets



338,236



270,252


     Prepaid royalties



959,208



904,921


          Total current assets



17,560,333



16,896,963










Other assets:








     Property and equipment, net of accumulated depreciation of $836,339
     and $824,123, respectively



43,671



20,755


     Deposits and other assets



905



906


Total assets


$

17,604,909


$

16,918,624










Liabilities and Stockholders' Equity








Current liabilities:








     Accounts payable and accrued expenses


$

7,084,276


$

6,687,188


     Deferred revenue



5,342,828



4,804,351


          Total current liabilities



12,427,104



11,491,539










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; 27,000,844 and
     26,498,215 shares issued and outstanding, respectively



27,001



26,498


     Additional paid-in capital



27,927,567



26,982,052


     Accumulated deficit



(22,656,005)



(21,461,888)


     Accumulated other comprehensive loss



(120,758)



(119,577)


          Total stockholders' equity



5,177,805



5,427,085


Total liabilities and stockholders' equity


$

17,604,909


$

16,918,624


Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)




Three Months Ended


Nine Months Ended




March 31, 


March 31, 




2022


2021


2022


2021
















Revenue:














     Platforms


$

1,786,224


$

1,344,183


$

4,900,927


$

3,706,406


     Transactions



6,971,128



6,996,349



19,471,216



19,832,286


          Total revenue



8,757,352



8,340,532



24,372,143



23,538,692
















Cost of revenue:














     Platforms



219,051



233,696



696,375



654,651


     Transactions



5,299,804



5,404,196



14,939,236



15,340,243


          Total cost of revenue



5,518,855



5,637,892



15,635,611



15,994,894


Gross profit



3,238,497



2,702,640



8,736,532



7,543,798
















Operating expenses:














     Selling, general and administrative



3,573,454



2,650,504



9,912,690



7,728,990


     Depreciation and amortization



4,988



2,066



12,144



8,828


          Total operating expenses



3,578,442



2,652,570



9,924,834



7,737,818
















Income (loss) from operations



(339,945)



50,070



(1,188,302)



(194,020)
















Other income



237



250



777



884
















Income (loss) from operations before provision for
income taxes



(339,708)



50,320



(1,187,525)



(193,136)


Provision for income taxes



(822)



(572)



(6,592)



(3,077)
















Net income (loss)



(340,530)



49,748



(1,194,117)



(196,213)
















Other comprehensive income (loss):














     Foreign currency translation



1,609



(3,333)



(1,181)



3,348


Comprehensive income (loss)


$

(338,921)


$

46,415


$

(1,195,298)


$

(192,865)
















Basic income (loss) per common share:














     Net income (loss) per share


$

(0.01)


$


$

(0.05)


$

(0.01)


     Weighted average common shares outstanding



26,512,195



26,027,665



26,392,949



25,966,072
















Diluted income (loss) per common share:














     Net income (loss) per share


$

(0.01)


$


$

(0.05)


$

(0.01)


     Weighted average common shares outstanding



26,512,195



26,565,892



26,392,949



25,966,072


Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)




Nine Months Ended




March 31, 




2022


2021










Cash flow from operating activities:








     Net loss


$

(1,194,117)


$

(196,213)


     Adjustment to reconcile net loss to net cash provided by (used in) operating
     activities:








     Depreciation and amortization



12,144



8,828


     Amortization of lease right





72,331


     Fair value of vested stock options



424,450



504,936


     Fair value of vested restricted common stock



446,433



281,148


     Changes in operating assets and liabilities:








          Accounts receivable



(904,915)



(563,829)


          Prepaid expenses and other current assets



(67,984)



(75,473)


          Prepaid royalties



(54,287)



(23,146)


          Deposits and other assets





5,360


          Accounts payable and accrued expenses



397,088



1,208,474


          Deferred revenue



538,477



1,076,966


          Lease liability





(79,326)


               Net cash provided by (used in) operating activities



(402,711)



2,220,056










Cash flow from investing activities:








     Purchase of property and equipment



(34,251)



(11,853)


          Net cash used in investing activities



(34,251)



(11,853)










Cash flow from financing activities:








     Proceeds from the exercise of stock options



97,688



88,850


     Proceeds from the exercise of warrants



59,500



81,251


     Common stock repurchase



(82,053)



(150,386)


     Repurchase of stock options and warrants





(308,313)


          Net cash provided by (used in) financing activities



75,135



(288,598)










Effect of exchange rate changes



(1,989)



2,401


Net increase (decrease) in cash and cash equivalents



(363,816)



1,922,006


Cash and cash equivalents, beginning of period



11,004,337



9,311,556


Cash and cash equivalents, end of period


$

10,640,521


$

11,233,562










Supplemental disclosures of cash flow information:








     Cash paid for income taxes


$

6,592


$

3,077


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