Research Solutions Inc.

11/14/2024 | Press release | Distributed by Public on 11/14/2024 15:06

Research Solutions Reports Fiscal First Quarter 2025 Results

Reports 60% Increase in ARR to $17.6 Million, Positive Net Income and Cash Flow, Adjusted EBITDA of $1.3 Million

HENDERSON, Nev. , Nov. 14, 2024/PRNewswire / -- Research Solutions, Inc. (NASDAQ: RSSS), the leading AI-powered research workflow platform, reported financial results for its fiscal first quarter ended September 30, 2024.

Fiscal First Quarter 2025 Summary

  • Total revenue of $12.0 million, a 20% increase from the prior-year quarter
  • Platform revenue up 67% to $4.3 million. Platform revenue accounted for 36% of the revenue as compared to 26% in the prior year.
  • Annual Recurring Revenue ("ARR") up 60% to $17.6 million, which includes approximately $12.2 millionof B2B recurring revenue and $5.4 millionof B2C recurring revenue.
  • Gross profit up 43% from the prior-year quarter. Total gross margin improved 780 basis points to 47.9%, a new Company record, representative of the Company's continued mix shift towards Platform revenue.
  • Net income of $669,000or $0.02per diluted share, compared to a net loss of ($988,000)or ($0.04)per share in the prior-year quarter.
  • Adjusted EBITDA of $1.3 million, an 11% margin, compared to ($441,000)in the prior-year quarter. On a trailing twelve-months ("TTM") basis the Company has now generated Adjusted EBITDA of almost $4 million, which represents a 8.5% margin.
  • Cash flow from operations of positive $0.8 millioncompared to a burn of $0.8 millionin the prior-year quarter. On a TTM basis, the Company has now generated over $5.1 millionin cash flow from operations, which is approximately 1.3x the Company's TTM Adjusted EBITDA.

"Our first quarter results reflect our continued ability to expand the profitability and cash flow of the business as our Platform offering continues to represent a larger percentage of total revenue. Our margins improved significantly, and we generated strong year-over-year net income and Adjusted EBITDA growth," said Roy W. Olivier, President and CEO of Research Solutions. "Our sequential ARR growth was impacted by seasonality, primarily in our B2C platform business. From a B2B perspective, we continue to develop additional features that improve the value proposition to our end users that lead to better efficiency and cost savings as budgetary constraints continue to present some challenges to our legacy Platform growth. I remain confident that our products continue to serve as a critical piece to the research process and look forward to growth in both our B2B and B2C user bases."

Fiscal First Quarter 2025 Results

Total revenue was $12 million, a 20% increase from $10.1 millionin the year-ago quarter as both Platform and Transaction revenue increased from the prior period.

Platform subscription revenue increased 67% to $4.3 millioncompared to $2.6 millionin the year-ago quarter. The increase was primarily due to the Scite acquisition as well as to an increase in the total number of paid Platform deployments and upsells to existing customers. The quarter ended with annual recurring revenue of $17.6 million, up 60% year-over-year (see the Company's definition of annual recurring revenue below).

Transaction revenue was $7.7 million, compared to $7.5 millionin the first quarter of fiscal 2024. The increase was due to organic growth in copyright revenues. The Transaction customer count for the quarter was 1,390, compared to 1,395 customers in the prior-year quarter (see the Company's definition of active customer accounts and transactions below).

Total gross margin improved 780 basis points from the prior-year quarter to 47.9%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platforms business as well as increased margins in both the Platforms and the Transactions business.

Total operating expenses were $5.1 million, unchanged compared to the first quarter of 2024.

Net income in the first quarter was $669,000, or $0.02per diluted share, compared to net loss of ($988,000), or ($0.04)per share, in the prior-year quarter. Adjusted EBITDA was $1.3 million, compared to ($441,000)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. Olivierand CFO Bill Nurthenwill host the conference call, followed by a question-and-answer period.

Date: Thursday, November 14, 2024
Time: 5:00 p.m. ET(2:00 p.m. PT)
Dial-in number: 1-203-518-9708
Conference ID: RESEARCH

The conference call will be broadcast live and available for replay until December 14, 2024by dialing 1-412-317-6671 and using the replay ID 11157176, and via the investor relations section of the Company's website at http://researchsolutions.investorroom.com/.

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




Quarter Ended September 30



2024

2023

Change

% Change

Revenue:






Platforms

$ 4,329,645

$ 2,600,192

$ 1,729,453

66.5 %


Transactions

$ 7,714,837

$ 7,460,779

254,058

3.4 %

Total Revenue

12,044,482

10,060,971

1,983,511

19.7 %






Gross Profit:






Platforms

3,782,478

2,217,577

1,564,901

70.6 %


Transactions

1,983,398

1,813,988

169,410

9.3 %

Total Gross Profit

5,765,876

4,031,565

1,734,311

43.0 %






Gross profit as a % of revenue:






Platforms

87.4 %

85.3 %

2.1 %



Transactions

25.7 %

24.3 %

1.4 %


Total Gross Profit

47.9 %

40.1 %

7.8 %







Operating Expenses:






Sales and marketing

1,190,407

685,016

505,391

73.8 %


Technology and product development

1,372,758

1,244,579

128,179

10.3 %


General and administrative

1,930,176

2,542,869

(612,692)

-24.1 %


Depreciation and amortization

312,095

59,620

252,475

423.5 %


Stock-based compensation

417,989

591,814

(173,825)

-29.4 %


Foreign currency translation loss

(104,240)

6,620

(110,860)

NM

Total Operating Expenses

5,119,185

5,130,518

(11,332)

-0.2 %

Income (loss) from operations

646,691

(1,098,952)

1,745,643

158.8 %






Other Income (Expenses):






Other income

68,525

140,311

(71,786)

-51.2 %


Provision for income taxes

(46,212)

(29,402)

(16,810)

57.2 %

Total Other Income (Expenses):

22,313

110,909

(88,596)

-79.9 %

Net income (loss)

$ 669,004

$ (988,043)

1,657,047

167.7 %






Adjusted EBITDA

$ 1,272,535

$ (440,898)

$ 1,713,433

388.6 %









Quarter Ended September 30



2024

2023

Change

% Change

Platforms:






B2B ARR (Annual recurring revenue*):






Beginning of Period

$ 12,060,201

$ 9,444,130

$ 2,616,071

27.7 %


Incremental ARR

127,633

1,576,111

(1,448,478)

-91.9 %


End of Period

$ 12,187,834

$ 11,020,241

$ 1,167,593

10.6 %







Deployments:






Beginning of Period

1,021

835

186

22.3 %


Incremental Deployments

8

45

(37)

-82.2 %


End of Period

1,029

880

149

16.9 %







ASP (Average sales price):






Beginning of Period

$ 11,812

$ 11,310

$ 502

4.4 %


End of Period

$ 11,844

$ 12,523

$ (679)

-5.4 %








B2C ARR (Annual recurring revenue*):






Beginning of Period

$ 5,363,129

$ -

$ 5,363,129



Incremental ARR

67,666

-

67,666

NM


End of Period

$ 5,430,795

$ -

$ 5,430,795

NM








Total ARR (Annualized recurring revenue):

$ 17,618,629

$ 11,020,241

$ 6,598,388

59.9 %







Transaction Customers:






Corporate customers

1,074

1,090

(16)

-1.5 %


Academic customers

316

305

11

3.6 %


Total customers

1,390

1,395

(5)

-0.4 %

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. Deployments represent total product deployments across our customer base.

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) including any change in fair value of contingent earnout liability, 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 September 30,



2024

2023

Change

% Change

Net Income (loss)

$ 669,004

$ (988,043)

$ 1,657,047

167.7 %

Add (deduct):






Other income (expense)

(68,525)

(140,311)

71,786

-51.2 %


Foreign currency translation loss

(104,240)

6,620

(110,860)

NM


Provision for income taxes

46,212

29,402

16,810

57.2 %


Depreciation and amortization

312,095

59,620

252,475

423.5 %


Stock-based compensation

417,989

591,814

(173,825)

-29.4 %

Adjusted EBITDA

$ 1,272,535

$ (440,898)

$ 1,713,433

388.6 %

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




September 30,






2024


June 30,




(unaudited)


2024


Assets








Current assets:








Cash and cash equivalents


$

6,924,773


$

6,100,031


Accounts receivable, net of allowance of $101,949 and $68,579, respectively



6,298,606



6,879,800


Prepaid expenses and other current assets



649,497



643,553


Prepaid royalties



572,524



1,067,237


Total current assets



14,445,400



14,690,621










Non-current assets:








Property and equipment, net of accumulated depreciation of $927,386 and $922,558, respectively



71,659



88,011


Intangible assets, net of accumulated amortization of $1,834,897 and $1,535,310, respectively

($8,117,222 provisional)



10,497,023



10,764,261


Goodwill ($13,171,486 provisional)



16,345,888



16,315,888


Deposits and other assets



915



981


Total assets


$

41,360,885


$

41,859,762










Liabilities and Stockholders' Equity








Current liabilities:








Accounts payable and accrued expenses


$

8,257,821


$

8,843,612


Deferred revenue



8,046,056



9,023,848


Total current liabilities



16,303,877



17,867,460










Non-current liabilities:








Contingent earnout liability



12,298,114



12,298,114


Total liabilities



28,601,991



30,165,574










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; 32,513,172 and 32,295,373 shares

issued and outstanding, respectively



32,513



32,295


Additional paid-in capital



38,491,610



38,089,958


Accumulated deficit



(25,640,242)



(26,309,246)


Accumulated other comprehensive loss



(124,987)



(118,819)


Total stockholders' equity



12,758,894



11,694,188


Total liabilities and stockholders' equity


$

41,360,885


$

41,859,762


Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)




Three Months Ended




September 30,




2024


2023










Revenue:








Platforms


$

4,329,645


$

2,600,192


Transactions



7,714,837



7,460,779


Total revenue



12,044,482



10,060,971










Cost of revenue:








Platforms



547,167



382,615


Transactions



5,731,439



5,646,791


Total cost of revenue



6,278,606



6,029,406


Gross profit



5,765,876



4,031,565










Operating expenses:








Selling, general and administrative



4,807,090



5,070,897


Depreciation and amortization



312,095



59,620


Total operating expenses



5,119,185



5,130,517










Income (loss) from operations



646,691



(1,098,952)










Other income



68,525



140,311










Income (loss) from operations before provision for income taxes



715,216



(958,641)


Provision for income taxes



(46,212)



(29,402)










Net income (loss)



669,004



(988,043)










Other comprehensive income (loss):








Foreign currency translation



(6,168)



(946)


Comprehensive income (loss)


$

662,836


$

(988,989)










Basic income (loss) per common share:








Net income (loss) per share


$

0.02


$

(0.04)


Weighted average common shares outstanding



30,346,871



27,052,445










Diluted income (loss) per common share:








Net income (loss) per share


$

0.02


$

(0.04)


Weighted average common shares outstanding



33,234,858



27,052,445


Research Solutions, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)




Three Months Ended




September 30,




2024


2023










Cash flow from operating activities:








Net income (loss)


$

669,004


$

(988,043)


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








Depreciation and amortization



312,095



59,620


Fair value of vested stock options



28,856



17,471


Fair value of vested restricted common stock



389,133



574,343


Changes in operating assets and liabilities:








Accounts receivable



566,194



(112,965)


Prepaid expenses and other current assets



(5,944)



109,946


Prepaid royalties



494,713



35,140


Accounts payable and accrued expenses



(618,140)



195,747


Deferred revenue



(992,792)



(646,830)


Net cash provided by (used in) operating activities



843,119



(755,571)










Cash flow from investing activities:








Purchase of property and equipment



-



(33,825)


Payment for acquisition of Resolute, net of cash acquired



-



(2,718,253)


Net cash used in investing activities



-



(2,752,078)










Cash flow from financing activities:








Common stock repurchase



(16,119)



(46,135)


Payment of contingent acquisition consideration



-



(110,190)


Net cash used in financing activities



(16,119)



(156,325)










Effect of exchange rate changes



(2,258)



705


Net increase (decrease) in cash and cash equivalents



824,742



(3,663,269)


Cash and cash equivalents, beginning of period



6,100,031



13,545,333


Cash and cash equivalents, end of period


$

6,924,773


$

9,882,064










Supplemental disclosures of cash flow information:








Cash paid for income taxes


$

46,212


$

29,402










Non-cash investing and financing activities:








Contingent consideration accrual on asset acquisition


$

33,353


$

42,989


SOURCE Research Solutions, Inc.

For further information: Steven Hooser or John Beisler, Three Part Advisor, (214) 872-2710, [email protected]; [email protected]