RSSS Research Solutions Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report:

(Date of earliest event reported)

 

February 8, 2024

 

 

Research Solutions, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other Jurisdiction of Incorporation)

 

1-39256		11-3797644
(Commission File Number)		(IRS Employer Identification No.)

 

N/A

(Address of Principal Executive Offices and
zip code)

 

(310) 477-0354

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

 

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each Class	Trading Symbol(s)	Name of each Exchange on which  registered
Common stock, $0.001 par value	RSSS	The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

 

Emerging growth company     ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On February 8, 2024, the Registrant announced its financial results for the second quarter ended December 31, 2023. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information in this Item 2.02 and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.

 

Item 9.01.

Financial Statements and Exhibits

 

(d)

Exhibits.

 

	Exhibit Number		Description
	99.1		Press Release issued February 8, 2024 entitled “Research Solutions Reports Fiscal Second Quarter 2024 Results”.
	104		Cover Page Interactive Data File (embedded as Inline XBRL document).

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	RESEARCH SOLUTIONS, INC.
Date: February 8, 2024	By:	/s/ William Nurthen
		William Nurthen
		Chief Financial Officer

 

 

 

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

 

 

Research Solutions Reports Fiscal Second Quarter 2024 Results

 

Reports 18.3% Revenue Increase and ARR of $15.6 Million

 

HENDERSON, Nev., February 8, 2024 — Research Solutions, Inc. (NASDAQ: RSSS), a trusted partner providing cloud-based workflow solutions to accelerate research for R&D-driven organizations, reported financial results for its fiscal second quarter ended December 31, 2023.

 

Fiscal Second Quarter 2024 Summary

 

·

Total revenue of $10.3 million, an 18.3% increase from the prior-year quarter

·

Platform revenue up 48% to $3.1 million. Annual Recurring Revenue (“ARR”) up 77% to $15.6 million, which includes approximately $4.0 million of B2C recurring revenue and $0.4M of B2B recurring revenue from the Scite, Inc. (“Scite”) acquisition. B2C ARR is broken out on a separate line in the Company’s Financial and Operational Summary Tables and for the purposes of calculating B2C ARR, the value of any monthly recurring subscriptions has been multiplied by twelve (see the Financial and Operational Summary Tables and associated notes below).

·

Gross profit up 31.7% from the prior-year quarter. Total gross margin improved 450 basis points to 43.5%.

·

Net loss of $54,000 or ($0.00) on a per share basis, compared to a net loss of ($256,000) or ($0.01) per share in the prior-year quarter. The quarter’s loss includes $307,000 in expenses related to M&A activities, most of which were legal expenses.

·

Adjusted EBITDA of $318,000 compared to $201,000 in the prior-year quarter. The Adjusted EBITDA result is inclusive of the expenses related to M&A activities noted above. Without these costs, Adjusted EBITDA would have been approximately $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 $15.6 million. We also experienced continued organic growth across our platform and transaction offerings, with net incremental ARR on the Article Galaxy platform being our best result in the last four quarters” said Roy W. Olivier, President and CEO of Research Solutions. “In addition, we have greatly enhanced the offerings available within our Article Galaxy platform over the past six months with the addition of ResoluteAI and Scite. When combined with our existing products, these acquisitions add multiple new workflow and advanced search and discovery solutions that can be sold to new or existing customers. These new solutions materially increase our Total Addressable Market (“TAM”) and as we further integrate the products together, we will be able to deliver unique value to our customers. Overall, we remain a critical piece of the research process and believe we are well-positioned to expand our user base as macroeconomic conditions improve.”

 

 

Fiscal Second Quarter 2024 Results

 

Total revenue was $10.3 million, an 18% increase from $8.7 million in the year-ago quarter as both platform and transaction revenue increased from the prior-year period.

 

Platform subscription revenue increased 48% to $3.1 million compared to $2.1 million in the year-ago quarter. The increase was primarily due to the acquisitions of ResoluteAI and Scite, as well as organic growth in the core Article Galaxy platform. The quarter ended with annual recurring revenue of $15.569 million, up 77% year-over-year, including approximately $4.355 million of ARR from Scite (see the company’s definition of annual recurring revenue below).

 

Transaction revenue was $7.2 million, compared to $6.6 million in the second quarter of fiscal 2023. The increase was primarily due to organic growth, which was also enhanced by higher transaction volumes related to contracts transferred from FIZ Karlsruhe effective on January 1, 2023. The transaction customer count for the quarter was 1,398, compared to 1,223 customers in the prior-year quarter (see the company’s definition of active customer accounts and transactions below).

 

Total gross margin improved 450 basis points from the prior-year quarter to 43.5%. The increase was primarily driven by the continued revenue mix shift to the higher-margin Platforms business, as well as increased margins in the transactions business.

 

Total operating expenses were $4.9 million, compared to $3.7 million in the second quarter of 2023. The increase was primarily related to the additional expense base associated with the acquisitions of ResoluteAI and Scite. Additionally, this quarter’s results include $307,000 in expenses related to M&A activities, the vast majority of which were legal expenses.

 

Net loss in the second quarter was $54,000, or roughly breakeven on a per share basis, compared to a net loss of ($256,000), or ($0.01) per share, in the prior-year quarter. Adjusted EBITDA was $318,000, compared to $201,000 in the year-ago quarter. The Adjusted EBITDA result is inclusive of the $307,000 in M&A activity related costs noted above (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, 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			$	2,110,272			$	1,015,312				48.1	%		$	5,725,776			$	4,130,239			$	1,595,537				38.6	%
Transactions		$	7,188,158			$	6,606,394				581,764				8.8	%		$	14,648,937			$	13,271,070				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	%
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		$	11,020,241			$	8,331,770			$	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		$	11,614,748			$	8,776,977			$	2,837,771				32.3	%		$	11,614,748			$	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):		$	15,568,838			$	8,776,977			$	6,791,861				77.4	%		$	15,568,838			$	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	)		$	(1,000,706	)			-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

Consolidated Balance Sheets

 

		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 $94,991 and $85,015, respectively			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 $905,411 and $881,908, respectively			103,195				70,193
Intangible assets, net of accumulated amortization of $940,234 and $747,355, respectively ($10,806,487 provisional)			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; $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; 32,619,598 and 29,487,508 shares issued and outstanding, respectively			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

Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)

 

		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

Consolidated Statements of Cash Flows

(Unaudited)

 

		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			$	—

 

Contact

Steven Hooser or John Beisler

Three Part Advisors

(214) 872-2710

 

shooser@threepa.com; jbeisler@threepa.com

 

# # #

 

 

v3.24.0.1

Cover	Feb. 08, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 08, 2024
Entity File Number	1-39256
Entity Registrant Name	Research Solutions, Inc.
Entity Central Index Key	0001386301
Entity Tax Identification Number	11-3797644
Entity Incorporation, State or Country Code	NV
City Area Code	310
Local Phone Number	477-0354
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, $0.001 par value
Trading Symbol	RSSS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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