Exhibit 99.1

 

 

 

Research Solutions Reports Preliminary Financial Results for Fiscal Fourth Quarter and Full Year 2016

 

On a Preliminary Basis, Total Article Galaxy Revenue Increased by 13% to a Record $24.1 Million in Fiscal 2016, with 59 Article Galaxy SaaS Platform Deployments at Year End

 

 

ENCINO, Calif. – September 7, 2016 – Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing on-demand access to scientific, technical and medical (STM) information for life science companies, academic institutions, and other research intensive organizations, reported preliminary results for its fiscal fourth quarter and full year ended June 30, 2016. All quarterly comparisons are to the same year-ago quarter.

 

Beginning this quarter, the company has begun to report its Article Galaxy’s subscriptions and transactions results separately: Article Galaxy SaaS Platforms represent customer deployments that provide premium access to Article Galaxy on a subscription basis, and Article Galaxy Transactions that represent all customer transactions conducted via both premium and standard access.

 

Fiscal Fourth Quarter 2016 Highlights

 

·

Total revenue was up 10% to 8.3 million, with adjusted EBITDA up 61% to $162,000.

 

·

Active Article Galaxy Transaction customer accounts increased 12% to 909.

 

·

Article Galaxy transactions increased 17% to a 192,000, increasing related revenue by 12% to $6.0 Million and gross profit up 8% to $1.3 million. (See definitions of transactions and active customer accounts in the section, “About Transactions and Active Customer Accounts,” below.)

 

Fiscal Full Year 2016 Highlights

 

·

Total revenue was up 8% to a $34.4 million, with adjusted EBITDA lower by 37% to $389,000.

 

·

Number of Article Galaxy SaaS Platform deployments increased 210% to 59, increasing related revenue by 127% to $402,000, and subscription-based annual billing run-rate by 146% to $581,000.

 

·

Article Galaxy transactions increased 23% to 742,000, driving related revenue up 12% to a record $23.7 Million and gross profit up 4% to $5.3 million.

 

·

Active Article Galaxy Transaction customer accounts increased 14% to 873, with corporate customer up 9% to 733, and academic customers up 48% to 140.

 

·

Cash and equivalents at June 30, 2016 totaled $6.1 million versus $1.4 million at June 30, 2015

 

Management Commentary

“Throughout fiscal 2016, Article Galaxy platform deployments and transactions continued to gain momentum,” said Research Solutions president and CEO, Peter Derycz. “These strong results reflect our increasing focus on our newer line of higher margin, subscription-based Article Galaxy SaaS Platform deployments that provide premium features and functionality for our customers.

 

“In fact, by yearend, we had 59 premium platform deployments, or nearly three times more than last year, which were generating an annual run rate of $581,000 in subscription-based revenue. We has previously combined Article Galaxy Transactions and SaaS Platforms into one line, but now given this significant amount of subscription revenue and the difference in gross margin, it seemed appropriate to begin breaking it out.

 

 

“Further, we’re very excited about how this new business line is developing. While revenue from Article Galaxy Transactions is still many times greater than revenue from Article Galaxy SaaS Platforms, Article Galaxy SaaS Platforms gross margin has been at 82%, or about four times Article Galaxy Transactions at 22%. Further, while Article Galaxy Transactions represent repeat revenue, Article Galaxy SaaS Platforms generate more predicable recurring revenue and reflects the strengthening leverage in our business model.”

 

Preliminary Fiscal Fourth Quarter and Full Year 2016 Financial Summary Tables

The following financial summary tables are preliminary and may be updated with the filing of the company’s upcoming Annual Report on Form 10-K for the year ended June 30, 2016. The company plans to release on Tuesday, September, 20, 2016 its complete financial results for the year ended June 30, 2016, which will be available in the investor relations section of the company’s website at www.researchsolutions.com.

 

		Quarter Ended June 30,
		2016				2015				Change				% Change
Revenue:
Article Galaxy SaaS Platforms		$	129,963			$	32,000			$	97,963				306.1	%
Article Galaxy Transactions			6,025,972				5,382,124				643,848				12.0	%
Reprints and ePrints			2,141,466				2,166,382				(24,916	)			-1.2	%
Total Revenue			8,297,401				7,580,506				716,895				9.5	%
Gross profit:
Article Galaxy SaaS Platforms			106,537				24,256								0.0	%
Article Galaxy Transactions			1,323,080				1,220,826				102,254				8.4	%
Reprints and ePrints			155,385				218,095				(62,710	)			-28.8	%
Total Gross profit			1,585,002				1,463,177				39,544				2.7	%
Gross profit as a % of revenue:
Article Galaxy SaaS Platforms			82.0	%			75.8	%			6.2	%
Article Galaxy Transactions			22.0	%			22.7	%			-0.7	%
Reprints and ePrints			7.3	%			10.1	%			-2.8	%
Total Gross profit			19.1	%			19.3	%			-0.2	%
General and Administrative Expenses			1,423,069				1,362,790				(60,279	)			-4.4	%
Depreciation and Amortization			29,702				16,934				(12,768	)			-75.4	%
Stock-based Compensation			162,192				506,634				344,442				68.0	%
Foreign Currency Translation Loss			994				4,004				3,010				75.2	%
Total Operating Expenses			1,615,957				1,890,362				274,405				14.5	%
Income (loss) from operations			(30,955	)			(427,185	)			396,230				92.8	%
Net (loss) from continuing operations			(52,989	)			(439,257	)			386,268				87.9	%
Net income from discontinued operations			-				163,453				(163,453	)			-100.0	%
Net income (loss)			(52,989	)			(275,804	)			222,815				80.8	%
Adjusted EBITDA (a Non-GAAP term, see definition and discussion, below)			161,933				100,387				61,546				61.3	%
Article Galaxy Transactions:
Transaction Count		$	191,376			$	163,137			$	28,239				17.3	%
Corporate Customers			756				704				52				7.4	%
Academic Customers			153				107				46				43.0	%
Total Customers			909				811				98				12.1	%

 

 

		Year Ended June 30,
		2016				2015				Change				% Change
Revenue:
Article Galaxy SaaS Platforms		$	402,038			$	176,873			$	225,165				127.3	%
Article Galaxy Transactions			23,690,073				21,200,101				2,489,972				11.7	%
Reprints and ePrints			10,271,834				10,523,169				(251,335	)			-2.4	%
Total Revenue			34,363,945				31,900,143				2,463,802				7.7	%
Gross profit:
Article Galaxy SaaS Platforms			328,116				140,296				187,820				133.9	%
Article Galaxy Transactions			5,306,527				5,088,938				217,589				4.3	%
Reprints and ePrints			866,022				946,967				(80,945	)			-8.5	%
Total Gross profit			6,500,665				6,176,201				324,464				5.3	%
Gross profit as a % of revenue:
Article Galaxy SaaS Platforms			81.6	%			79.3	%			2.3	%
Article Galaxy Transactions			22.4	%			24.0	%			-1.6	%
Reprints and ePrints			8.4	%			9.0	%			-0.6	%
Total Gross profit			18.9	%			19.4	%			-0.4	%
General and Administrative Expenses			6,111,345				5,563,040				(548,305	)			-9.9	%
Depreciation and Amortization			90,846				174,819				83,973				48.0	%
Stock-based Compensation			713,890				834,672				120,782				14.5	%
Foreign Currency Translation Loss			5,287				98,122				92,835				94.6	%
Total Operating Expenses			6,921,368				6,670,653				(250,715	)			-3.8	%
Income (loss) from operations			(420,703	)			(494,452	)			73,749				14.9	%
Net (loss) from continuing operations			(497,858	)			(542,185	)			44,327				8.2	%
Net income from discontinued operations			-				1,316,404				(1,316,404	)			-100.0	%
Net income (loss)			(497,858	)			774,219				(1,272,077	)			-164.3	%
Adjusted EBITDA (a non-GAAP term)			389,320				613,161				(223,841	)			-36.5	%
Article Galaxy SaaS Platforms:
Annual License Billing Run Rate		$	580,902			$	236,424			$	344,478				146	%
Deployments			59				19				40				211	%
Article Galaxy Transactions:
Transaction Count		$	741,849			$	602,413			$	139,436				23.1	%
Corporate Customers			733				673				60				8.9	%
Academic Customers			140				95				46				48.0	%
Total Customers			873				768				106				13.8	%

 

Conference Call

Research Solutions president and CEO, Peter Derycz, and CFO Alan Urban will host an investor conference call on September 20, 2016 to discuss the company’s results and the outlook, followed by a question and answer period. Complete financial results will be issued in a press release prior to the call.

 

Date:	Tuesday, September 20, 2016
Time:	4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Toll-free dial-in number:	1-855-327-6837
International dial-in number:	1-631-891-4304
Conference ID:	10001638

 

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

 

The conference call will be broadcast live and available for replay here, as well via the investor relations section of the company’s website at www.researchsolutions.com.

 

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through October 14, 2016.

 

Toll-free replay number:	1-877-870-5176
International replay number:	1-858-384-5517
Replay ID:	10001638

 

About Article Galaxy SaaS Platform

Article Galaxy is cloud-based SaaS solution that consists of proprietary software and Internet-based interfaces that allow customers to initiate orders, manage transactions, obtain reporting, automate authentication, improve seamless connectivity to corporate intranets, and enhance the information resources they already own, or have access to via subscriptions or internal libraries, as well as organize workgroups to collaborate around scientific information.

 

As a cloud-based SaaS solution, Article Galaxy is deployed as a single system across the company’s entire customer base. Customers access Article Galaxy securely through online web interfaces and via web service APIs, which enable customers to leverage Article Galaxy features and functionality from within proprietary and other 3rd party software systems. Article Galaxy can also be configured to satisfy a customer’s individual preferences in areas such as user experience, business processes, and spend management. As a SaaS solution, Article Galaxy benefits from efficiencies in scalability, stability and development costs, resulting in significant advantages versus multiple instance or installed desktop software alternatives. The company leverages these technical efficiencies to fuel rapid innovation and competitive advantage.

 

About Article Galaxy Transactions and Active Customer Accounts

The company defines a transaction as an order for a unit of copyrighted content fulfilled or managed in Article Galaxy. An Active Customer Accounts are defined as the sum of the average whole and partial customers for the respective quarter or year. A whole customer is one with at least one Article Galaxy transaction in every month of the respective quarter or year. A partial customer is one with at least one Article Galaxy transaction in one or more months, but not every month of the respective quarter or year.

 

For example, if a customer has at least one transaction in every month of the quarter, they are counted as a whole customer. However, if they have at least one transaction in only one of the three months of the quarter, they are counted as a partial customer (one third of a customer).

 

On an annual basis, if a customer has at least one transaction in every month of the year, they are counted as a whole customer. However, if they have at least one transaction in only six of the 12 months of the year, they are counted as a partial customer (one half of a customer).

 

Use of Non-GAAP Measure – Adjusted EBITDA

Research Solutions’ management evaluates and makes operating decisions using various financial metrics. In addition to our GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP measure provides useful information about our operating results.

 

 

The attached tables 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, income (loss) from discontinued operations, and other potential adjustments that may arise.

 

On a preliminary basis, set forth below is a reconciliation of Adjusted EBITDA to net income (loss):

 

		Quarter Ended June 30,								Year Ended June 30,
		2016				2015				2016				2015
Net Income (loss)		$	(52,989	)		$	(275,804	)		$	(497,858	)		$	774,219
Add (deduct):
Interest expense			3,000				6,390				17,382				18,056
Other (income) expense			13,382				(317	)			31,611				(1,215	)
Foreign currency translation loss			994				4,004				5,287				98,122
Provision for income taxes			5,652				5,999				28,162				30,892
Depreciation and amortization			29,702				16,934				90,846				174,819
Stock-based compensation			162,192				506,634				713,890				834,672
(Income) loss from discontinued operations			-				(163,453	)			-				(1,316,404	)
Adjusted EBITDA		$	161,933			$	100,387			$	389,320			$	613,161

 

 

About Research Solutions

Research Solutions, Inc. (RSSS) is a pioneer in providing on-demand access to scientific, technical, and medical (STM) information for life science companies, academic institutions and other research-intensive organizations. More than 70 percent of the top 25 pharmaceutical companies in the world rely on services powered by Research Solutions’ wholly owned subsidiary, Reprints Desk, Inc. Article Galaxy, the company's cloud-based solution, gives customers access to the over one million newly published articles each year in addition to tens of millions of articles previously published, helping them to create and speed discoveries, save time and money, and remain copyright-compliant. Research Solutions has arrangements with numerous STM content publishers that allow electronic access and distribution of their content. In addition to serving end users of content, the company also serves STM publishers by facilitating compliance with applicable copyright laws. For more information about Research Solutions, visit www.researchsolutions.com.

 

About Reprints Desk

Reprints Desk improves how journal articles and clinical reprints are accessed, procured, and legally used in evidence-based promotions, medical affairs, and scientific, technical, and medical (STM) research. Organizations fueled by intellectual property choose Reprints Desk because of its collaborative business approach, efficient article supply system and services, and commitment to quality post-sales support. Reprints Desk has ranked #1 in every Document Delivery Vendor Scorecard from industry analyst and advisory firm Outsell Inc. since 2008. For more information about Reprints Desk, visit www.reprintsdesk.com.

 

Cautionary Note Regarding Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's success in technology and product development; the Company's ability to execute its business model and strategic plans; the Company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the Company's Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. The Company assumes no obligation to update the cautionary information in this release.

 

 

Investor Relations Contact:

Alan Urban, CFO

Research Solutions, Inc.

Tel +1 (818) 646-2202

ir@researchsolutions.com

 

Media Contact:

Ian Palmer, Chief Sales and Marketing Officer

Research Solutions, Inc.

Tel +1 (415) 533-8308

ipalmer@reprintsdesk.com

 

Preliminary Full Year 2016 Financial Results

The following financial results are preliminary and may be updated with the filing of the company’s upcoming Annual Report on Form 10-K for the year ended June 30, 2016. In addition, the following preliminary financial results should be read in conjunction with the financial statements and accompanying notes in the company’s Annual Report on Form 10-K for the periods ended June 30, 2016 to be filed by the company with the Securities and Exchange Commission and viewable at www.sec.gov. The company plans to release on Tuesday, September, 20, 2016 its complete financial results for the year ended June 30, 2016, which will be available in the investor relations section of the company’s website at www.researchsolutions.com.

 

 

Research Solutions, Inc. and Subsidiaries

Preliminary Consolidated Balance Sheets

 

		Preliminary				Audited
		June 30, 2016				June 30, 2015
Assets
Current assets:
Cash and cash equivalents		$	6,076,875			$	1,354,158
Accounts receivable, net of allowance of $52,084 and $69,731, respectively			5,761,860				5,162,184
Prepaid expenses and other current assets			164,610				70,195
Prepaid royalties			173,665				372,581
Total current assets			12,177,010				6,959,118
Other assets:
Property and equipment, net of accumulated depreciation of $642,051 and $585,410, respectively			82,207				83,238
Intangible assets, net of accumulated amortization of $546,679 and $513,605, respectively			104,848				-
Deposits and other assets			7,594				9,471
Total assets		$	12,371,659			$	7,051,827
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses		$	5,690,768			$	5,611,453
Deferred revenue			639,834				347,558
Total current liabilities			6,330,602				5,959,011
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; 23,809,593 and 18,242,125 shares issued and outstanding, respectively			23,810				18,242
Additional paid-in capital			21,642,763				16,188,358
Accumulated deficit			(15,582,295	)			(15,084,437	)
Accumulated other comprehensive loss			(43,221	)			(29,347	)
Total stockholders’ equity			6,041,057				1,092,816
Total liabilities and stockholders’ equity		$	12,371,659			$	7,051,827

 

 

Research Solutions, Inc. and Subsidiaries

Preliminary Consolidated Statements of Operations and Other Comprehensive Income (Loss)

 

		Preliminary Year Ended June 30, 2016				Audited Year Ended June 30, 2015
Revenue		$	34,363,945			$	31,900,143
Cost of revenue			27,863,280				25,723,942
Gross profit			6,500,665				6,176,201
Operating expenses:
Selling, general and administrative			6,830,522				6,495,834
Depreciation and amortization			90,846				174,819
Total operating expenses			6,921,368				6,670,653
Loss from operations			(420,703	)			(494,452	)
Other expenses:
Interest expense			(17,382	)			(18,056	)
Other income (expense)			(31,611	)			1,215
Total other expenses			(48,993	)			(16,841	)
Loss from continuing operations before provision for income taxes			(469,696	)			(511,293	)
Provision for income taxes			(28,162	)			(30,892	)
Loss from continuing operations			(497,858	)			(542,185	)
Discontinued operations:
Loss from discontinued operations			-				(395,344	)
Gain from deconsolidation of former French subsidiary			-				1,711,748
Income from discontinued operations			-				1,316,404
Net income (loss)			(497,858	)			774,219
Other comprehensive income (loss):
Foreign currency translation			(13,874	)			(10,764	)
Comprehensive income (loss)		$	(511,732	)		$	763,455
Basic income (loss) per common share:
Loss per share from continuing operations		$	(0.03	)		$	(0.03	)
Income (loss) per share from discontinued operations		$	-			$	0.07
Net income (loss) per share		$	(0.03	)		$	0.04
Basic weighted average common shares outstanding			17,769,827				17,445,812
Diluted income (loss) per common share:
Loss per share from continuing operations		$	(0.03	)		$	(0.03	)
Income (loss) per share from discontinued operations		$	-			$	0.07
Net income (loss) per share		$	(0.03	)		$	0.04
Diluted weighted average common shares outstanding			17,769,827				17,962,157

 

 

Research Solutions, Inc. and Subsidiaries

Preliminary Consolidated Statement of Stockholders' Equity

For the Years Ended June 30, 2016 and 2015

 

										Additional								Other				Total
		Common Stock								Paid-in				Accumulated				Comprehensive				Stockholders'
		Shares				Amount				Capital				Deficit				Income				Equity
Balance, July 1, 2014			17,600,242				17,600				15,406,033				(15,858,656	)			16,097				(418,926	)
Fair value of vested stock options			-				-				488,437				-				-				488,437
Fair value of common stock issued for services			50,000				50				52,450				-				-				52,500
Fair value of vested restricted common stock			647,353				647				239,456												240,103
Repurchase of common stock			(55,470	)			(55	)			(51,650	)			-				-				(51,705	)
Modification cost of warrants issued to directors			-				-				53,632				-				-				53,632
Elimination of cumulative translation adjustment upon deconsolidation of former French subsidiary			-				-				-				-				(34,680	)			(34,680	)
Net loss			-				-				-				774,219				-				774,219
Foreign currency translation			-				-				-				-				(10,764	)			(10,764	)
Balance, June 30, 2015			18,242,125				18,242				16,188,358				(15,084,437	)			(29,347	)			1,092,816
Fair value of vested stock options			-				-				305,734				-				-				305,734
Common stock issued for cash			5,200,000				5,200				4,778,630				-				-				4,783,830
Fair value of vested restricted common stock			414,366				415				377,926												378,341
Repurchase of common stock			(46,898	)			(47	)			(37,700	)			-				-				(37,747	)
Modification cost of options issued to directors			-				-				29,815				-				-				29,815
Net loss			-				-				-				(497,858	)			-				(497,858	)
Foreign currency translation			-				-				-				-				(13,874	)			(13,874	)
Balance, June 30, 2016			23,809,593			$	23,810			$	21,642,763			$	(15,582,295	)		$	(43,221	)		$	6,041,057

 

 

Research Solutions, Inc. and Subsidiaries

Preliminary Consolidated Statements of Cash Flows

 

		Preliminary Year Ended June 30, 2016				Audited Year Ended June 30, 2015
Cash flow from operating activities:
Net income (loss)		$	(497,858	)		$	774,219
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities of continuing operations:
Loss from discontinued operations			-				395,344
Gain from deconsolidation of former French subsidiary			-				(1,711,748	)
Depreciation and amortization			90,846				174,819
Fair value of vested stock options			305,734				488,437
Fair value of common stock issued for services			-				52,500
Fair value of vested restricted common stock			378,341				240,103
Modification cost of warrants issued to directors			-				53,632
Modification cost of options issued to directors			29,815				-
Changes in operating assets and liabilities:
Accounts receivable			(599,676	)			(894,950	)
Prepaid expenses and other current assets			(94,415	)			12,836
Prepaid royalties			198,916				180,108
Deposits and other assets			1,877				238
Accounts payable and accrued expenses			79,315				(138,241	)
Deferred revenue			292,276				75,311
Net cash provided by (used in) operating activities from continuing operations			185,171				(297,392	)
Net cash used in operating activities of discontinued operations			-				(34,503	)
Net cash provided by (used in) operating activities			185,171				(331,895	)
Cash flow from investing activities:
Purchase of property and equipment			(58,376	)			(67,555	)
Purchase of intangible assets			(137,922	)			(27,666	)
Net cash used in investing activities from continuing operations			(196,298	)			(95,221	)
Cash flow from financing activities:
Common stock issued for cash			4,783,830				-
Advance under line of credit			1,000,000				2,000,000
Payment under line of credit			(1,000,000	)			(2,000,000	)
Common stock repurchase and retirement			(37,747	)			(51,705	)
Net cash provided by (used in) financing activities of continuing operations			4,746,083				(51,705	)
Net cash used in financing activities of discontinued operations			-				(67,515	)
Net cash provided by (used in) financing activities			4,746,083				(119,220	)
Effect of exchange rate changes			(12,239	)			15,827
Net increase (decrease) in cash and cash equivalents			4,722,717				(530,509	)
Cash and cash equivalents, beginning of period			1,354,158				1,884,667
Cash and cash equivalents, end of period		$	6,076,875			$	1,354,158
Supplemental disclosures of cash flow information:
Cash paid for income taxes		$	28,162			$	30,892
Cash paid for interest		$	17,382			$	18,056