Research Solutions Reports Fiscal First Quarter 2023 Results

Rhea-AI Summary

Research Solutions, Inc. (NASDAQ: RSSS) reported total revenue of $8.7 million for Q1 2023, representing a 12% increase year-over-year. The company saw platform revenue surge 34% to $2.0 million and Annual Recurring Revenue (ARR) rise 33% to $8.3 million. Net income reached $215,000 or $0.01 per diluted share, reversing a loss of ($372,000) from the prior year. The gross profit increased 26%, with a gross margin improvement to 38.6%. The company recorded positive cash flow from operations of $109,000.

Positive

• Total revenue increased 12% to $8.7 million.
• Platform revenue surged 34% to $2.0 million.
• Annual Recurring Revenue (ARR) rose 33% to $8.3 million.
• Net income of $215,000, a significant turnaround from prior loss of $372,000.
• Gross profit up 26% with improved gross margin of 38.6%.

Negative

• Total operating expenses increased to $3.2 million from $3.0 million in the prior year.
• Transaction revenue growth was modest at 6.9%.
• Incremental deployments in the platform decreased by 37.8%.

Reports 12% Total Revenue Growth, Positive EPS, and 33 Percent Increase in ARR to $8.3 Million

HENDERSON, Nev., Nov. 10, 2022 /PRNewswire/ -- Research Solutions, Inc. (NASDAQ: RSSS), a pioneer in providing cloud-based workflow solutions for R&D driven organizations, today reported financial results for its fiscal first quarter ended September 30, 2022.

Fiscal First Quarter 2023 Summary

• Total revenue of $8.7 million, a 12% increase from the prior-year quarter
• Platform revenue up 34% to $2.0 million. Annual Recurring Revenue ("ARR") up 33% to $8.3 million
• Gross profit up 26% from prior-year quarter. Total gross margin improved 420 basis points to 38.6%
• Net income of $215,000,or $0.01 per diluted share, compared to loss of ($372,000) or ($0.01) per share
• Adjusted EBITDA of $433,000, a quarterly record for the Company.  Positive cash flow from operations of $109,000
• Platform incremental ARR generated in the quarter was $0.4M, and a total of over $2 million in the past twelve months

"It is exciting to see the impacts on our top and bottom line as our Platforms segment continues to grow and become a larger component of our business," said Roy W. Olivier, President and CEO of Research Solutions. "We are also encouraged by the performance of our Transactions segment, which grew almost 7% in the quarter. This does not reflect the recently announced opportunity regarding onboarding FIZ Karlsruhe's AutoDoc customers which will also provide new upsell leads for our Article Galaxy Platform.  We also continue to evaluate additional M&A opportunities to increase our recurring revenues and generate additional profitability in the future."

Fiscal First Quarter 2023 Results

Total revenue was $8.7 million, a 12% increase from $7.7 million in the year-ago quarter as both platform and transaction revenue increased versus the prior-year period.

Platform subscription revenue increased 34% to $2.0 million compared to approximately $1.5 million in the year-ago quarter. The increase was due to increases in ARR associated with customer upsells and increases in the total number of paid Platform deployments, including 23 net deployments added in the quarter. The quarter ended with annual recurring revenue of $8.3 million, up 33% year-over-year (see the company's definition of annual recurring revenue below).

Transaction revenue was $6.7 million, compared to $6.2 million in the first quarter of fiscal 2022. This represents the first increase in transaction revenue since the second quarter of fiscal 2022 and the largest percentage increase since the second quarter of fiscal 2018. Transaction customer count for the quarter was 1,220, compared to 1,153 customers in the prior-year quarter (see the company's definition of active customer accounts and transactions below).

Total gross margin improved 420 basis points from the prior-year quarter to 38.6%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platform business as well as lower operating costs associated with the Platform business.   

Total operating expenses were $3.2 million, compared to $3.0 million in the first quarter of fiscal 2022 and $3.7 million in the fourth quarter of fiscal 2022. The sequential decrease was primarily due to lower technology and product development costs and approximately $275,000 in in severance expenses related to the company's repositioning for fiscal 2023.

Net income in the first quarter was $215,000, or $0.01 per diluted share, compared to net loss of ($372,000), or ($0.01) per share, in the prior-year quarter. Adjusted EBITDA was $433,000, compared to ($181,000) 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, November 10, 2022
Time: 5:00 p.m. ET (2:00 p.m. PT)
Dial-in number: 1-631-891-4304
Conference ID: 10020201

The conference call will be broadcast live and available for replay until December 10, 2022 by dialing 1-412-317-6671 and using the replay ID 10020201, 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,
		2022	2021	Change	% Change
Revenue:
	Platforms	$ 2,019,967	$ 1,509,874	$     510,093	33.8 %
	Transactions	$ 6,664,676	$ 6,232,630	432,046	6.9 %
Total Revenue		8,684,643	7,742,504	942,139	12.2 %
Gross Profit:
	Platforms	1,789,494	1,264,218	525,276	41.5 %
	Transactions	1,559,754	1,396,157	163,597	11.7 %
Total Gross Profit		3,349,248	2,660,375	688,873	25.9 %
Gross profit as a % of revenue:
	Platforms	88.6 %	83.7 %	4.9 %
	Transactions	23.4 %	22.4 %	1.0 %
Total Gross Profit		38.6 %	34.4 %	4.2 %
Operating Expenses:
	Sales and marketing	521,216	522,951	(1,735)	-0.3 %
	Technology and product development	875,290	821,460	53,830	6.6 %
	General and administrative	1,519,424	1,497,223	22,201	1.5 %
	Depreciation and amortization	5,812	2,896	2,916	100.7 %
	Stock-based compensation	175,361	171,110	4,251	2.5 %
	Foreign currency translation loss	72,516	11,243	61,273	545.0 %
Total Operating Expenses		3,169,619	3,026,883	142,736	4.7 %
Income (loss) from operations		179,629	(366,508)	546,138	NM
Other Income (Expenses):
	Other income (expense)	39,069	276	38,793	NM
	Provision for income taxes	(4,133)	(5,770)	1,637	0.0 %
	Gain on sale of disc'd operations	-	-	-
Total Other Income (Expenses):		34,936	(5,494)	40,430	NM
Net income (loss)		$     214,565	$   (372,002)	586,568	NM
Adjusted EBITDA		$     433,318	$   (181,259)	$     614,578	NM
		Quarter Ended September 30,
		2022	2021	Change	% Change
Platforms:
	ARR (Annual recurring revenue):
	Beginning of Period	$ 7,922,188	$ 5,880,179	$ 2,042,009	34.7 %
	Incremental ARR	409,582	402,748	6,834	1.7 %
	End of Period	$ 8,331,770	$ 6,282,927	$ 2,048,843	32.6 %
	Deployments:
	Beginning of Period	733	553	180	32.5 %
	Incremental Deployments	23	37	(14)	-37.8 %
	End of Period	756	590	166	28.1 %
	ASP (Average sales price):
	Beginning of Period	$       10,808	$       10,633	$             175	1.6 %
	End of Period	$       11,021	$       10,649	$             372	3.5 %
Transaction Customers:
	Corporate customers	922	853	69	8.1 %
	Academic customers	298	300	(2)	-0.7 %
	Total customers	1,220	1,153	67	5.8 %

 

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 September 30,
		2022	2021	Change	% Change
Net Income (loss)		$     214,565	$   (372,002)	$     586,568	NM
Add (deduct):
	Other income (expense)	(39,069)	(276)	(38,793)	NM
	Foreign currency translation loss	72,516	11,243	61,273	545.0 %
	Provision for income taxes	4,133	5,770	(1,637)	-28.4 %
	Depreciation and amortization	5,812	2,896	2,916	100.7 %
	Stock-based compensation	175,361	171,110	4,251	2.5 %
	Gain on sale of disc. ops.	-	-	-
Adjusted EBITDA		$     433,318	$   (181,259)	$     614,578	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 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
		September 30,
		2022			June 30,
		(unaudited)			2022
Assets
Current assets:
Cash and cash equivalents		$	10,387,689		$	10,603,175
Accounts receivable, net of allowance of $71,122 and $94,144, respectively			5,169,789			5,251,545
Prepaid expenses and other current assets			205,118			276,026
Prepaid royalties			136,012			846,652
Total current assets			15,898,608			16,977,398
Other assets:
Property and equipment, net of accumulated depreciation of $846,894 and $840,996, respectively			45,849			47,985
Non-refundable deposit for asset acquisition			297,450			—
Deposits and other assets			894			893
Total assets		$	16,242,801		$	17,026,276
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses		$	5,566,975		$	6,604,032
Deferred revenue			5,357,148			5,538,526
Total current liabilities			10,924,123			12,142,558
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; 27,330,878 and 27,075,648 shares issued and outstanding, respectively			27,331			27,076
Additional paid-in capital			28,298,171			28,072,855
Accumulated deficit			(22,879,707)			(23,094,272)
Accumulated other comprehensive loss			(127,117)			(121,941)
Total stockholders' equity			5,318,678			4,883,718
Total liabilities and stockholders' equity		$	16,242,801		$	17,026,276

 

Research Solutions, Inc. and Subsidiaries Consolidated Statements of Operations and Other Comprehensive Loss (Unaudited)
		Three Months Ended
		September 30,
		2022			2021
Revenue:
Platforms		$	2,019,967		$	1,509,874
Transactions			6,664,676			6,232,630
Total revenue			8,684,643			7,742,504
Cost of revenue:
Platforms			230,473			245,656
Transactions			5,104,922			4,836,473
Total cost of revenue			5,335,395			5,082,129
Gross profit			3,349,248			2,660,375
Operating expenses:
Selling, general and administrative			3,163,807			3,023,987
Depreciation and amortization			5,812			2,896
Total operating expenses			3,169,619			3,026,883
Income (loss) from operations			179,629			(366,508)
Other income			39,069			276
Income (loss) from operations before provision for income taxes			218,698			(366,232)
Provision for income taxes			(4,133)			(5,770)
Net income (loss)			214,565			(372,002)
Other comprehensive income (loss):
Foreign currency translation			(5,176)			(2,975)
Comprehensive income (loss)		$	209,389		$	(374,977)
Basic income (loss) per common share:
Net income (loss) per share		$	0.01		$	(0.01)
Basic weighted average common shares outstanding			26,718,171			26,277,116
Diluted income (loss) per common share:
Net income (loss) per share		$	0.01		$	(0.01)
Diluted weighted average common shares outstanding			27,779,841			26,277,116

 

Research Solutions, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
		Three Months Ended
		September 30,
		2022			2021
Cash flow from operating activities:
Net income (loss)		$	214,565		$	(372,002)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			5,812			2,896
Fair value of vested stock options			40,706			71,999
Fair value of vested restricted common stock			134,655			99,111
Fair value of vested unrestricted common stock			68,272			—
Changes in operating assets and liabilities:
Accounts receivable			81,756			14,767
Prepaid expenses and other current assets			70,908			62,439
Prepaid royalties			710,640			639,765
Accounts payable and accrued expenses			(1,037,057)			(225,462)
Deferred revenue			(181,378)			(365,760)
Net cash provided by (used in) operating activities			108,879			(72,247)
Cash flow from investing activities:
Purchase of property and equipment			(3,681)			(3,643)
Payment for non-refundable deposit for asset acquisition			(297,450)			—
Net cash used in investing activities			(301,131)			(3,643)
Cash flow from financing activities:
Common stock repurchase			(18,062)			(54,481)
Net cash used in financing activities			(18,062)			(54,481)
Effect of exchange rate changes			(5,172)			(2,630)
Net increase (decrease) in cash and cash equivalents			(215,486)			(133,001)
Cash and cash equivalents, beginning of period			10,603,175			11,004,337
Cash and cash equivalents, end of period		$	10,387,689		$	10,871,336
Supplemental disclosures of cash flow information:
Cash paid for income taxes		$	4,133		$	5,770

 

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SOURCE Research Solutions, Inc.

FAQ

What were Research Solutions' revenue results for Q1 2023?

Research Solutions reported total revenue of $8.7 million for Q1 2023, a 12% increase compared to the previous year.

How did the Annual Recurring Revenue (ARR) change for Research Solutions?

The Annual Recurring Revenue (ARR) for Research Solutions increased by 33% to $8.3 million in Q1 2023.

What was the net income for Research Solutions in Q1 2023?

Research Solutions reported a net income of $215,000, equating to $0.01 per diluted share, compared to a loss of $372,000 in Q1 2022.

What improvements were seen in gross profit for Research Solutions?

Gross profit increased by 26% year-over-year, with gross margin improving to 38.6%.

How did operating expenses change for Research Solutions in Q1 2023?

Total operating expenses rose to $3.2 million in Q1 2023, compared to $3.0 million in the prior year.