Research Solutions Reports Fiscal Fourth Quarter and Full Year 2022 Results

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Sep 22, 2022, 16:05 ET

Company Reports 35% Increase in Platform ARR to $7.9M and 180 Net New Platform Deployments for Fiscal Year 2022

HENDERSON, Nev., Sept. 22, 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 fourth quarter and full year ended June 30, 2022.

Fiscal Fourth Quarter 2022 Summary

Total revenue increased 4% to $8.6 million
Platform revenue up 32% to $1.9 million; Annual recurring revenue ("ARR") up 35% to $7.9 million
Gross profit up 20% to prior-year quarter. Total gross margin improved approximately 500 basis points to 38.3%. The fourth quarter marks the first in the Company's history where Platform gross profit exceed gross profit from Transactions.
Net loss of ($438,000) or two cents per share, compared to nil on a per-share basis in the prior-year quarter. Adjusted EBITDA was ($121,000), compared to $134,000 same period a year ago. The result was inclusive of $275,000 in severance related charges in the period which are also discussed below.
Platform incremental ARR generated in the quarter was a record high of $573,000. There were 53 net new platform deployments in the quarter, compared to 41 in the prior year.

Full-Year Fiscal 2022 Summary

Total revenue increased 4% to $32.9 million
Platform revenue of $6.8 million, a 32% increase, with a 33% increase in total deployments to 733
Total gross margin increased 410 basis points to 36.5%
Loss of $1.6 million, or ($0.06) per share, compared to ($285,000) or ($0.01) per share in the prior year. Adjusted EBITDA was ($374,000) compared to $700,000 in the previous year.
Platform incremental ARR generated in the fiscal year exceeded $2.0 million and there were 180 net new deployments

"Our fourth quarter and fiscal 2022 results reflect the continued momentum across our organization, particularly with the strategic focus on our Platforms segment, which added a net new 53 deployments in the fourth quarter and 180 for the year," said Roy W. Olivier, President and CEO of Research Solutions. "The ongoing additions of new product features, add-ons, and partnerships continues to enhance the value proposition of our Article Galaxy platform, allowing customers to work more efficiently while recognizing meaningful cost savings. We anticipate that our continued focus on product development and the repositioning of our sales force should result in a return to positive cash flow and Adjusted EBITDA in fiscal 2023."

Fiscal Fourth Quarter 2022 Results

Total revenue increased 4% to $8.6 million, compared to $8.2 million in the same year-ago quarter.

Platform subscription revenue increased 32% to $1.9 million compared to approximately $1.4 million in the year-ago quarter. The increase was primarily due to an increase in the total number of paid Platform deployments, including 53 added in the quarter. The quarter ended with annual recurring revenue of $7.9 million, up 8% sequentially and 35% year-over-year (see the company's definition of annual recurring revenue below).

Transaction revenue was $6.7 million, compared to $6.8 million in the fourth quarter of fiscal 2021. Transaction customers count for the quarter was 1,213, compared to 1,132 customers in the prior year quarter (see the company's definition of active customer accounts and transactions below).

Total gross margin improved approximately 500 basis points from the prior-year quarter to 38.3%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $3.7 million, compared to $2.8 million in the fourth quarter of 2021. The increase was primarily due to higher technology and product development costs and approximately $275,000 in severance charges related to the Company's repositioning strategy for fiscal 2023.

Net loss in the fourth quarter was ($438,000), or two cents per share, compared to a net loss of ($89,000), or nil per share, in the prior-year quarter. Adjusted EBITDA was ($121,000), compared to $134,000 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 were relatively flat in the quarter and ended at $10.6 million.

Full-Year Fiscal 2022 Results

Total revenue increased 4% to $32.9 million, compared to $31.8 million in fiscal 2021.

Platform subscription revenue was $6.8 million, a 32% increase over the prior year. The increase was primarily due an increase in the total number of paid Platform deployments and upselling current platform customers.

Transaction revenue was $26.1 million, a 2% decrease compared to the previous year. The decrease is primarily due to a lower paid transaction count due to the savings our customers experience through their ongoing use of the Platform.

Total gross margin improved 410 basis points over the prior year to 36.5%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $13.6 million compared to $10.5 million in the prior year. The increase was primarily due to higher technology and product development costs as well as higher general and administrative expenses, including approximately $450,000 in cash severance costs and $150,000 in accelerated stock compensation for the full fiscal year.

Net loss for fiscal year 2022 was $1.6 million, or ($0.06) per share. Net loss in fiscal 2021 was ($207,000), or ($0.01) per share. Adjusted EBITDA for fiscal 2022 was a negative $374,000, compared to a positive $700,000 in the prior year (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents on June 30, 2022, amounted to $10.6 million compared to $11.0 million as of June 30, 2021. There were no outstanding borrowings under the company's $2.5 million revolving line of credit and the company had no long-term liabilities or other debt.

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, September 22, 2022
Time: 5:00 p.m. ET (2:00 p.m. PT)
Dial-in number: 1-631-891-4304
Conference ID: 10020199

The conference call will be broadcast live and available for replay until October 22, 2022, by dialing 1-412-317-6671 and using the replay ID 10020199, and via the investor relations section of the company's website at http://researchsolutions.investorroom.com/.

Fiscal Fourth Quarter Financial and Operational Summary Tables vs. Prior-Year Quarter

		Quarter Ended June 30,
		2022	2021	Change	% Change
Revenue:
	Platforms	$ 1,886,845	$ 1,429,160	$ 457,685	32.0 %
	Transactions	$ 6,675,164	$ 6,788,494	(113,330)	-1.7 %
Total Revenue		8,562,009	8,217,654	344,355	4.2 %

Gross Profit:
	Platforms	1,646,631	1,171,840	474,791	40.5 %
	Transactions	1,636,511	1,570,376	66,135	4.2 %
Total Gross Profit		3,283,142	2,742,216	540,926	19.7 %

Gross profit as a % of revenue:
	Platforms	87.3 %	82.0 %	5.3 %
	Transactions	24.5 %	23.1 %	1.4 %
Total Gross Profit		38.3 %	33.4 %	5.0 %

Operating Expenses:
	Sales and marketing	691,368	521,220	170,148	32.6 %
	Technology and product development	1,049,430	732,371	317,059	43.3 %
	General and administrative	1,663,671	1,354,244	309,427	22.8 %
	Depreciation and amortization	5,507	2,694	2,813	104.4 %
	Stock-based compensation	225,501	221,589	3,912	1.8 %
	Foreign currency translation loss	91,279	(890)	92,169	NM
Total Operating Expenses		3,726,756	2,831,228	895,528	31.6 %
Income (loss) from operations		(443,614)	(89,012)	(354,602)	NM

Other Income (Expenses):
	Other income (expense)	6,377	263	6,114	2324.7 %
	Provision for income taxes	(1,030)	(127)	(903)	NM
	Gain on sale of disc'd operations	-	-	-
Total Other Income (Expenses):		5,347	136	5,211	3831.6 %
Net income (loss)		$ (438,267)	$ (88,876)	(349,391)	NM
Adjusted EBITDA		$ (121,327)	$ 134,381	$ (255,708)	NM

		Quarter Ended June 30,
		2022	2021	Change	% Change
Platforms:
	ARR (Annual recurring revenue):
	Beginning of Period	$ 7,348,847	$ 5,554,595	$ 1,794,252	32.3 %
	Incremental ARR	573,341	325,584	247,757	76.1 %
	End of Period	$ 7,922,188	$ 5,880,179	$ 2,042,009	34.7 %

	Deployments:
	Beginning of Period	680	512	168	32.8 %
	Incremental Deployments	53	41	12	29.3 %
	End of Period	733	553	180	32.5 %

	ASP (Average sales price):
	Beginning of Period	$ 10,807	$ 10,849	$ (42)	-0.4 %
	End of Period	$ 10,808	$ 10,633	$ 175	1.6 %

Transaction Customers:
	Corporate customers	920	845	75	8.9 %
	Academic customers	293	287	6	2.1 %
	Total customers	1,213	1,132	81	7.2 %

Fiscal Full Year Financial and Operational Summary Tables vs. Prior-Year

		Fiscal Year Ended June 30,
		2022	2021	Change	% Change
Revenue:
	Platforms	$ 6,787,772	$ 5,135,565	$ 1,652,207	32.2 %
	Transactions	$ 26,146,380	$ 26,620,780	(474,400)	-1.8 %
Total Revenue		32,934,152	31,756,345	1,177,807	3.7 %

Gross Profit:
	Platforms	5,851,183	4,223,595	1,627,588	38.5 %
	Transactions	6,168,491	6,062,419	106,072	1.7 %
Total Gross Profit		12,019,674	10,286,014	1,733,660	16.9 %

Gross profit as a % of revenue:
	Platforms	86.2 %	82.2 %	4.0 %
	Transactions	23.6 %	22.8 %	0.8 %
Total Gross Profit		36.5 %	32.4 %	4.1 %

Operating Expenses:
	Sales and marketing	2,276,172	2,073,878	202,294	9.8 %
	Technology and product development	3,711,085	2,644,274	1,066,811	40.3 %
	General and administrative	6,406,400	4,867,659	1,538,741	31.6 %
	Depreciation and amortization	17,651	11,522	6,129	53.2 %
	Stock-based compensation	1,096,384	1,007,673	88,711	8.8 %
	Foreign currency translation loss	143,898	(35,960)	179,858	NM
Total Operating Expenses		13,651,590	10,569,046	3,082,544	29.2 %
Income (loss) from operations		(1,631,916)	(283,032)	(1,348,884)	NM

Other Income (Expenses):
	Other income (expense)	7,154	1,147	6,007	523.7 %
	Provision for income taxes	(7,622)	(3,204)	(4,418)	NM
	Gain on sale of disc'd operations	-	-	-
Total Other Income (Expenses):		(468)	(2,057)	1,589	NM
Net income (loss)		$ (1,632,384)	$ (285,089)	(1,347,295)	NM
Adjusted EBITDA		$ (373,983)	$ 700,203	$ (1,074,186)	NM

		Fiscal Year Ended June 30,
		2022	2021	Change	% Change
Platforms:
	ARR (Annual recurring revenue):
	Beginning of Period	$ 5,880,179	$ 4,446,088	$ 1,434,091	32.3 %
	Incremental ARR	2,042,009	1,434,091	607,918	42.4 %
	End of Period	$ 7,922,188	$ 5,880,179	$ 2,042,009	34.7 %

	Deployments:
	Beginning of Period	553	401	152	37.9 %
	Incremental Deployments	180	152	28	18.4 %
	End of Period	733	553	180	32.5 %

	ASP (Average sales price):
	Beginning of Period	$ 10,633	$ 11,088	$ (454)	-4.1 %
	End of Period	$ 10,808	$ 10,633	$ 175	1.6 %

Transaction Customers:
	Corporate customers	886	825	61	7.4 %
	Academic customers	299	285	14	4.8 %
	Total customers	1,185	1,110	75	6.7 %

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 June 30,
		2022	2021	Change	% Change
Net Income (loss)		$ (438,267)	$ (88,876)	$ (349,391)	NM
Add (deduct):
	Other income (expense)	(6,377)	(263)	(6,114)	-2324.7 %
	Foreign currency translation loss	91,279	(890)	92,169	NM
	Provision for income taxes	1,030	127	903	711.0 %
	Depreciation and amortization	5,507	2,694	2,813	104.4 %
	Stock-based compensation	225,501	221,589	3,912	1.8 %
	Gain on sale of disc. ops.	-	-	-
Adjusted EBITDA		$ (121,327)	$ 134,381	$ (255,708)	-190.3 %

		Fiscal Year Ended June 30,
		2022	2021	Change	% Change
Net Income (loss)		$ (1,632,384)	$ (285,089)	$ (1,347,295)	NM
Add (deduct):				-
	Other income (expense)	(7,154)	(1,147)	(6,007)	-523.7 %
	Foreign currency translation loss	143,898	(35,960)	179,858	NM
	Provision for income taxes	7,622	3,204	4,418	137.9 %
	Depreciation and amortization	17,651	11,522	6,129	53.2 %
	Stock-based compensation	1,096,384	1,007,673	88,711	8.8 %
	Gain on sale of disc. ops.	-	-	-
Adjusted EBITDA		$ (373,983)	$ 700,203	$ (1,074,186)	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 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, profitability, and cash flow. 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

	June 30,		June 30,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	10,603,175	$	11,004,337
Accounts receivable, net of allowance of $94,144 and $51,495, respectively		5,251,545		4,717,453
Prepaid expenses and other current assets		276,026		270,252
Prepaid royalties		846,652		904,921
Total current assets		16,977,398		16,896,963

Other assets:
Property and equipment, net of accumulated depreciation of $840,996 and $824,123, respectively		47,985		20,755
Deposits and other assets		893		906
Total assets	$	17,026,276	$	16,918,624

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	6,604,032	$	6,687,188
Deferred revenue		5,538,526		4,804,351
Total current liabilities		12,142,558		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; 27,075,648 and 26,498,215 shares issued and outstanding, respectively		27,076		26,498
Additional paid-in capital		28,072,855		26,982,052
Accumulated deficit		(23,094,272)		(21,461,888)
Accumulated other comprehensive loss		(121,941)		(119,577)
Total stockholders' equity		4,883,718		5,427,085
Total liabilities and stockholders' equity	$	17,026,276	$	16,918,624

Research Solutions, Inc. and Subsidiaries Consolidated Statements of Operations and Other Comprehensive Loss

	Years Ended
	June 30,
	2022		2021

Revenue:
Platforms	$	6,787,772	$	5,135,565
Transactions		26,146,380		26,620,780
Total revenue		32,934,152		31,756,345

Cost of revenue:
Platforms		936,589		911,970
Transactions		19,977,889		20,558,361
Total cost of revenue		20,914,478		21,470,331
Gross profit		12,019,674		10,286,014

Operating expenses:
Selling, general and administrative		13,633,939		10,557,524
Depreciation and amortization		17,651		11,522
Total operating expenses		13,651,590		10,569,046

Loss from operations		(1,631,916)		(283,032)

Other income		7,154		1,147

Loss from operations before provision for income taxes		(1,624,762)		(281,885)
Provision for income taxes		(7,622)		(3,204)

Net loss		(1,632,384)		(285,089)

Other comprehensive income (loss):
Foreign currency translation		(2,364)		5,461
Comprehensive loss	$	(1,634,748)	$	(279,628)

Loss per common share:
Loss per share, basic and diluted	$	(0.06)	$	(0.01)
Weighted average common shares outstanding, basic and diluted		26,422,295		26,008,368

Research Solutions, Inc. and Subsidiaries Consolidated Statements of Cash Flows

	Years Ended
	June 30,
	2022		2021

Cash flow from operating activities:
Net loss	$	(1,632,384)	$	(285,089)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		17,651		11,522
Amortization of lease right		—		72,331
Fair value of vested stock options		470,615		631,335
Fair value of vested restricted common stock		557,496		376,338
Changes in operating assets and liabilities:
Accounts receivable		(534,092)		(268,193)
Prepaid expenses and other current assets		(5,774)		(28,505)
Prepaid royalties		58,269		(184,554)
Deposits and other assets		—		5,360
Accounts payable and accrued expenses		(83,156)		337,343
Deferred revenue		734,175		1,279,844
Lease liability		—		(79,326)
Net cash provided by (used in) operating activities		(417,200)		1,868,406

Cash flow from investing activities:
Purchase of property and equipment		(44,288)		(19,854)
Net cash used in investing activities		(44,288)		(19,854)

Cash flow from financing activities:
Proceeds from the exercise of stock options		97,688		88,850
Proceeds from the exercise of warrants		59,500		237,501
Common stock repurchase		(93,918)		(178,012)
Repurchase of stock options and warrants		—		(308,313)
Net cash provided by (used in) financing activities		63,270		(159,974)

Effect of exchange rate changes		(2,944)		4,203
Net increase (decrease) in cash and cash equivalents		(401,162)		1,692,781
Cash and cash equivalents, beginning of period		11,004,337		9,311,556
Cash and cash equivalents, end of period	$	10,603,175	$	11,004,337

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	7,622	$	3,204