Research Solutions, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and first six months ended December 31, 2021; comparative periods ended December 31, 2020. The company provides SaaS research platforms and transactional delivery of scientific, technical, and medical articles.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2021 | Six months ended Dec. 31, 2021 |
|---|---|---|
| Revenue | $7.87 million (+5.7% year over year) | $15.61 million (+2.7%) |
| Platform revenue | $1.60 million (+31.5%) | $3.11 million (+31.9%) |
| Transaction revenue | $6.27 million (+0.6%) | $12.50 million (-2.6%) |
| Gross profit / margin | $2.84 million / 36.0% (32.1% prior year) | $5.50 million / 35.2% (31.9% prior year) |
| Operating loss | $481,849 | $848,357 |
| Net loss | $481,585; $0.02 per share | $853,587; $0.03 per share |
| Adjusted EBITDA | $(165,068), versus $160,514 | $(346,327), versus $327,693 |
| Operating cash flow | $(316,899), versus $884,478 in the prior-year six-month period |
- Operating expenses rose 25.1% in the quarter and 24.8% for six months, exceeding gross-profit growth; management attributed the increase largely to technology/product development, personnel, consulting, legal costs, and separation costs paid to a former officer.
- Cash and cash equivalents were $10.68 million at December 31, down $324,623 from June 30, 2021. Current assets were $16.28 million and current liabilities $11.26 million; stockholders’ equity was $5.06 million.
- No borrowings were outstanding under the SVB revolving credit facility at December 31. The facility offered approximately $1.858 million of availability and carried a 5.5% rate. The filing reports no outstanding debt.
Changes versus the prior comparable period
- Platform growth drove most of the revenue increase, attributed to deployments to new and existing customers and expansion within existing customers. Six-month transaction revenue declined primarily because of lower order volume.
- Gross margin improved by 3.9 percentage points in the quarter and 3.3 points for six months, reflecting lower cost of revenue as a proportion of revenue.
- Despite higher revenue and gross profit, net losses widened: 84.8% year over year in the quarter and 247.0% for six months, primarily because of increased operating expenses.
- Cash from operations shifted from positive $884,478 to negative $316,899 for the six-month period; the prior-year period benefited substantially from an $861,000 increase in deferred revenue.
Outlook, risks, contingencies, and unusual items
- The filing provides no numerical financial guidance or specific forecast. Management describes continued development of platform apps and product functionality, but does not quantify expected results.
- On February 14, 2022, after quarter-end, SVB provided a short-term extension of the credit facility maturity to allow negotiations over an extension and other terms. The original maturity was February 14, 2022. The company reported covenant compliance at December 31, 2021.
- Management said it had not experienced significant COVID-19 effects on operating results or cash flows to date, but warned that effects on customers, article orders, subscriptions, suppliers, and service providers remain uncertain.
- The company does not hedge foreign currency exposure. It reported foreign-currency transaction losses of $11,982 for the quarter and $23,225 for six months; currency fluctuations may affect results.
- Vendor A represented 20% of six-month cost of revenue; Vendor B represented 13%. No customer accounted for at least 10% of revenue in the reported periods.
- Stock-based compensation was $471,649 for six months. The company’s 2017 equity plan authorization was increased to 6,874,513 shares in November 2021; 4,284,903 shares remained available for grant at December 31.
- Management concluded disclosure controls and procedures were effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress and final terms of the SVB facility extension, including continued availability and covenant requirements.
- Whether platform growth can persist and offset transaction revenue trends, and whether operating expense growth moderates.
- Cash-flow trajectory, particularly working-capital movements and deferred-revenue trends.
- Potential future effects of COVID-19, foreign-exchange movements, and reliance on major content vendors.
- Expected expense and dilution from outstanding equity awards and the expanded incentive-plan share pool.