Research Solutions Reports Fiscal Second Quarter 2024 Results
- Total revenue increased by 18.3% from the prior year
- Platform revenue saw a significant 48% increase to $3.1 million
- Annual Recurring Revenue (ARR) surged to $15.6 million, including $4.0 million of B2C recurring revenue and $0.4M of B2B recurring revenue from the Scite, Inc. acquisition
- Gross profit increased by 31.7% from the prior-year quarter
- Adjusted EBITDA reached $318,000 compared to $201,000 in the prior-year quarter
- The company closed its acquisition of Scite on December 1, 2023
- None.
Insights
The reported 18.3% increase in total revenue and a 77% increase in Annual Recurring Revenue (ARR) for Research Solutions, Inc. highlight a strong upward trend in the company's financial performance. The substantial growth in ARR, particularly from the Scite acquisition, indicates a strategic expansion in the company's product offerings and customer base. This performance is likely to be viewed positively by investors as ARR is a key metric for evaluating the stability and predictability of future revenue streams, especially for cloud-based service providers.
Furthermore, the improvement in gross margin by 450 basis points to 43.5% suggests operational efficiency and a successful shift towards higher-margin platform services. The net loss reduction from the prior-year quarter, despite the inclusion of M&A-related expenses, reflects prudent financial management. For stakeholders, the focus on organic growth and strategic acquisitions suggests potential for continued expansion and market penetration, which could lead to sustained long-term value creation.
Research Solutions' emphasis on enhancing their Article Galaxy platform and the integration of ResoluteAI and Scite point towards a deliberate effort to increase their Total Addressable Market (TAM). The diversification of their workflow and advanced search and discovery solutions is likely to resonate well with R&D-driven organizations looking for comprehensive research tools. This strategy aligns with current industry trends where companies are seeking to consolidate their offerings to provide more integrated solutions to customers.
The reported organic growth and the increased customer count indicate that the company is not only retaining but also expanding its client base. This could be attributed to the heightened demand for cloud-based research solutions, a sector that is experiencing significant growth due to increased digital transformation initiatives across industries. The company's ability to capitalize on macroeconomic improvements and leverage their enhanced product suite may position them favorably against competitors in the research solutions market.
The mention of macroeconomic conditions by the CEO suggests a recognition of the broader economic environment's impact on business performance. In periods of economic uncertainty, R&D spending may fluctuate, affecting companies like Research Solutions that cater to R&D-driven organizations. However, the company's reported revenue growth in the face of such conditions is indicative of robust demand for its services and potential resilience to economic headwinds.
The operational leverage demonstrated by improved gross margins could provide the company with flexibility to manage costs and invest in growth even if the economic climate becomes more challenging. The strategic acquisitions have expanded the company's offerings, which could help in buffering against sector-specific downturns by diversifying revenue sources. The ability to maintain a steady ARR growth trajectory in such an environment could be a strong signal to investors of the company's market position and operational effectiveness.
Reports
Fiscal Second Quarter 2024 Summary
- Total revenue of
$10.3 million 18.3% increase from the prior-year quarter - Platform revenue up
48% to$3.1 million . Annual Recurring Revenue ("ARR") up77% to$15.6 million , which includes approximately$4.0 million $0.4M - Gross profit up
31.7% from the prior-year quarter. Total gross margin improved 450 basis points to43.5% . - Net loss of
$54,000 $0.00 $256,000 $0.01 $307,000 - Adjusted EBITDA of
$318,000 $201,000 $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
Fiscal Second Quarter 2024 Results
Total revenue was
Platform subscription revenue increased
Transaction revenue was
Total gross margin improved 450 basis points from the prior-year quarter to
Total operating expenses were
Net loss in the second quarter was
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 | $ 1,015,312 | 48.1 % | $ 5,725,776 | $ 4,130,239 | $ 1,595,537 | 38.6 % | |||
Transactions | $ 7,188,158 | 581,764 | 8.8 % | 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 | $ 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 | $ 2,837,771 | 32.3 % | $ 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): | $ 6,791,861 | 77.4 % | $ 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) | -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 | |||||||
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 | 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 | 103,195 | 70,193 | |||||
Intangible assets, net of accumulated amortization of | 11,290,225 | 462,068 | |||||
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; | — | — | |||||
Common stock; | 32,620 | 29,487 | |||||
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 | |||||||||||||
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 | |||||||
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.
FAQ
What is the ticker symbol for Research Solutions, Inc.?
What was the total revenue reported for the fiscal second quarter ended December 31, 2023?
What was the percentage increase in platform revenue?
What was the net loss reported for the fiscal second quarter?
What was the percentage increase in Annual Recurring Revenue (ARR)?
When did the company close its acquisition of Scite?
