Research Solutions, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2020 (the company’s fiscal second quarter and first half of fiscal 2021). Unaudited results are compared with the periods ended December 31, 2019. The company provides SaaS research-intelligence platform subscriptions and transaction-based delivery of scientific, technical and medical content.
Financial performance
| Metric | Quarter ended Dec. 31, 2020 | Six months ended Dec. 31, 2020 |
|---|---|---|
| Revenue | $7.45 million | $15.20 million |
| Gross profit / gross margin | $2.39 million / 32.1% | $4.84 million / 31.9% |
| Operating loss | $261,005 | $244,090 |
| Net loss | $260,606 | $245,961 |
| Net loss per diluted share | $0.01 | $0.01 |
| Adjusted EBITDA, non-GAAP | $160,514 | $327,693 |
| Cash provided by operating activities | Not separately stated for the quarter | $884,478 |
- Revenue mix: Quarterly Platforms revenue was $1.22 million, up 28.5%; Transactions revenue was $6.23 million, down 5.3%. For six months, Platforms revenue increased 30.8% to $2.36 million, while Transactions fell 3.6% to $12.84 million.
- Margins and expenses: Quarterly gross margin improved from 30.2% to 32.1%; six-month gross margin rose from 30.3% to 31.9%. Lower operating expenses helped reduce the quarterly and six-month operating losses. Stock-based compensation remained substantial: $435,949 for the quarter and $606,739 for six months.
- Cash flow: Six-month operating cash flow declined from $1.62 million to $884,478 year over year. It benefited from an $861,000 increase in deferred revenue and a $221,657 decrease in accounts receivable, partly offset by a $550,693 decrease in accounts payable and accrued expenses.
Financial position and liquidity
- At December 31, 2020, cash and cash equivalents were $10.16 million, compared with $9.31 million at June 30, 2020. Current assets were $15.36 million and current liabilities $10.20 million; working capital was approximately $5.17 million.
- Total assets were $15.39 million and stockholders’ equity was $5.19 million. The company reported no borrowings on its revolving credit line. Approximately $1.72 million was available under the facility, which matures February 14, 2022; the company reported compliance with its covenants.
- Current lease liability was $11,444. The filing reports no off-balance-sheet arrangements.
Changes, outlook and risks
- Quarterly revenue decreased 1.1% year over year; six-month revenue increased 0.5%. Management attributed the Platform growth to additional deployments and expansion among new and existing customers, and the Transactions decline primarily to lower order volume.
- Net losses narrowed year over year, but the company remained loss-making. Prior-year comparisons included gains from discontinued operations; no such gain was reported in the current periods.
- The filing provides no quantitative revenue or earnings guidance. Management described new interactive Platform “gadgets” under development to support research workflows.
- Management stated that COVID-19 had not caused a significant negative impact on results or cash flows to date, but warned that reduced article orders or subscriptions could materially harm performance. The future impact remained uncertain.
- Other items to monitor include foreign-exchange exposure (the company does not hedge currencies), customer receivables concentration (one customer represented 11% of receivables), and vendor concentration (two vendors represented 18% and 13% of six-month cost of revenue, respectively). No customer represented 10% or more of revenue.
- Disclosure controls and procedures were assessed as effective at a reasonable assurance level as of December 31, 2020; management reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Platform subscription growth can continue to offset lower transaction volumes.
- The sources and sustainability of operating cash flow, particularly deferred-revenue movements and payables.
- The company’s path to GAAP profitability and the effect of ongoing stock-based compensation and potential share dilution.
- Available borrowing capacity and covenant compliance under the secured credit facility.
- Any evolving effects of COVID-19, customer or vendor concentration, and currency movements on demand, costs and liquidity.