SaaS-Based Platform Revenue up 62%, Total Gross Margin Improves 300 Basis Points to 28.4%

ENCINO, Calif. – February 14, 2019 – Research Solutions, Inc. (OTCQB: RSSS), a SaaS provider of workflow efficiency solutions for R&D-driven organizations, reported financial results for its fiscal second quarter ended December 31, 2018.

Fiscal Second Quarter 2019 Highlights vs. Year-Ago Quarter

• Platform revenue up 62% to $668,000, with a 45% increase in total Platform deployments to 267. Annual recurring revenue up 58% to $2.7 million.
• Transaction revenue was $6.3 million versus $6.4 million, with customer count up 4% to 1,083.
• Total gross margin up 300 basis points to 28.4%.
• Net loss from continuing operations was $0.6 million, or $(0.03) per share, compared to a net loss of $0.7 million, or $(0.03) per share.

Management Commentary

"Our SaaS-based Platform business continued its momentum in the second quarter with strong growth in revenue and gross margin," said Peter Derycz, president and CEO of Research Solutions. "This was primarily driven by our continued execution of new Platform deployments and continued Platform ‘upsells,’ which confirms that many of our users find significant value from our Platform and seek greater access to all of its functionality.

"During the quarter, we also launched a Platform version update with self-registration capabilities, allowing for more efficient lead generation and frictionless sign-ups, which we believe will drive more deployments. The new release also included the introduction of our Reference Manager gadget. This is a powerful tool that provides key stand-alone capabilities in the arena of literature data accumulation and management, along with full interplay with our gadget ecosystem and integration with standard writing tools, such as Microsoft Word.

"At the end of the second quarter, we successfully launched version 2.4 of the Platform, which contained major improvements to the Reference Manager function, an expanded Gadget Factory, and enhanced self-registration features, including the ability to sign up using a LinkedIn account. Additionally, we expanded our sales team and launched new test marketing campaigns, all of which contributed to the continued Platform acceleration.

"In fact, we’ve had a strong start to our fiscal third quarter, and as of the end of January, we reached 277 Platform customers and an annual recurring revenue run-rate of $2.9 million. Given our momentum, we are in a strong position for the second half of fiscal 2019, especially as we continue our pace of regular Platform technology enrichment and officially launch a new, more efficient marketing strategy.”

Fiscal Second Quarter 2019 Financial Results

Total revenue increased 2% to $7.0 million compared to $6.8 million in the same year-ago quarter.

Platform subscription revenue increased 62% to $668,000 compared to $413,000 in the same year-ago quarter. The increase was due to a 45% increase in the total number of paid Platform deployments to 267. The quarter ended with annual recurring revenue up 58% to $2.7 million (see the company's definition of annual recurring revenue below).

Transaction revenue was $6.3 million compared to $6.4 million in the same year-ago quarter. Total active customers increased 4% from 1,044 to 1,083 and transaction count declined slightly from 205,000 to 203,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 300 basis points to 28.4% from 25.4% in the same year-ago quarter. The increase was primarily driven by a 360 basis point increase in Platform gross margin and the continued revenue mix shift to the higher-margin Platform business.

Total operating expenses were $2.7 million compared to $2.4 million in the same year-ago quarter. The increase was primarily due to higher non-cash stock-based compensation, and increased spending on technology and product development related to the Platform business.

Net loss from continuing operations improved to $0.6 million, or $(0.03) per share, compared to a net loss of $0.7 million, or $(0.03) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.2) million compared to $(0.3) million in the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below).

Cash and cash equivalents at December 31, 2018, amounted to $4.8 million compared to $4.9 million at June 30, 2018. There were no outstanding borrowings under the company’s $2.5 million revolving line of credit. Apart from a $0.1 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Further details about these results are available in the company’s quarterly report on Form 10-Q, which is available in the investor relations section of the company’s website at www.researchsolutions.com.

Conference Call

Research Solutions President and CEO Peter Derycz and CFO Alan Urban will host an investor conference call to discuss these results and the company’s outlook, followed by a question and answer period.

• Date: Thursday, February 14, 2019
• Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
• Toll-free dial-in number: 1-855-327-6837
• International dial-in number: 1-631-891-4304
• Conference ID: 10006085

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and 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 February 28, 2019.

• Toll-free replay number: 1-844-512-2921
• International replay number: 1-412-317-6671
• Replay ID: 10006085

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 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):

About Research Solutions

Research Solutions, Inc. (OTCQB: RSSS) provides workflow efficiency solutions for R&D-driven organizations in life sciences, technology and academia worldwide. Our Software-as-a-Service platform provides tools or “Gadgets” that allow users to discover, access, manage and collaborate around science, technology and medical (STM) content and data. Our customers range from 70 percent of the top 25 global pharmaceutical companies to emerging small and medium-sized businesses. We generate recurring revenue from subscriptions to our SaaS platform and transactional revenue from the sale of STM content. For more information, visit www.researchsolutions.com.

Important Cautions 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 and new Platform deployments; the company's success in technology and product development; the company's ability to execute its business model and strategic plans, 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 Securities and Exchange Commission 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:
Liolios
Cody Slach
Tel: +1-949-574-3860
RSSS@liolios.com

Media Contact:
Research Solutions, Inc. and Reprints Desk, Inc.
Leah Rodriguez
+1 (310) 477-0354
lsrodriguez@reprintsdesk.com