Research Solutions, Inc. — Form 10-Q Summary
Reporting-period note: The filing covers the quarter and nine months ended March 31, 2018 (fiscal 2018 third quarter), not 2017 Q3 as stated in the request metadata. The report was filed May 15, 2018.
Business context
The company provides annual licenses to its cloud-based research-intelligence platform and sells access to scientific, technical, and medical content through that platform. The filing reports continuing operations; the Reprints and ePrints business was sold in June 2017.
Financial performance and liquidity
- Quarter revenue: $7.28 million, up 9.6% year over year. Platform revenue was $489,219, up 80.6%; transaction revenue was $6.79 million, up 6.6%.
- Nine-month revenue: $20.85 million, up 10.3%. Platform revenue rose 94.9% to $1.29 million; transaction revenue increased 7.2% to $19.56 million.
- Gross profit and margin: Quarter gross profit was $1.92 million, up 20.9%, with a 26.3% margin versus 23.9%. Nine-month gross profit was $5.40 million, up 22.9%, with a 25.9% margin versus 23.3%.
- Operating results: Quarter operating loss was $271,000, versus $781,000 a year earlier; continuing-operations loss was $265,000. Nine-month operating loss was $1.80 million, versus $2.33 million; continuing-operations loss was $1.80 million.
- Net loss: $196,000 for the quarter versus $637,000 a year earlier; $1.59 million for nine months versus $1.89 million. Discontinued-operations income included a $69,277 quarterly and $205,779 nine-month gain on the sale of the former business.
- Cash flow: Nine-month operating cash use was $735,000, compared with $675,000 a year earlier. Investing cash use was $87,000 and financing cash use was $128,000. Cash declined $973,000 from June 30, 2017 to $4.80 million.
- Liquidity and debt: Working capital was $3.11 million at March 31, 2018. There were no borrowings on the revolving credit line; approximately $2.2 million was available. The line matures December 31, 2019, and the company reported compliance with its covenants. Lease liabilities totaled $357,062; the filing reports no other borrowings.
- Adjusted EBITDA (non-GAAP): Loss of $133,000 for the quarter and $989,000 for nine months, compared with losses of $628,000 and $1.69 million, respectively. This measure is not a substitute for GAAP results or operating cash flow.
Material changes and management commentary
- Revenue gains reflected additional platform deployments and transaction orders from new customers. Gross margin improved primarily as transaction copyright discounts increased; platform cost as a share of revenue rose over the nine-month period due to third-party data costs.
- Quarter operating expenses fell 7.6%, mainly as sales and marketing costs declined. Nine-month operating expenses rose 7.0%, including 26.5% higher technology and product development spending and 38.1% higher stock-based compensation.
- Management said losses may continue for an indeterminate period and the company may never sustain profitability. It gave no specific financial guidance or outlook in the provided filing text.
- The former Reprints and ePrints business sale includes contingent earn-out consideration based on gross margin over 30 months; $205,779 was recognized as realizable through March 31, 2018.
Risks, contingencies, and other items
- Ongoing losses and operating cash use could constrain the company’s ability to operate and expand. Cash fell during the nine months despite improved revenue and lower GAAP net loss.
- Three content vendors each represented at least 10% of nine-month cost/revenue-related vendor concentration: 14%, 12%, and 11%. No customer represented 10% or more of revenue or accounts receivable.
- The company has foreign-currency exposure, including costs in Mexican pesos, and does not hedge currency risk. It reported a $22,609 foreign-currency transaction gain for the nine months.
- The company reported effective disclosure controls at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Confirm the correct period: the filing is for the quarter ended March 31, 2018, not 2017 Q3.
- Track whether platform growth and transaction demand persist, and whether gross-margin improvement continues.
- Assess cash burn, working-capital movements, and covenant compliance alongside the $2.2 million of available credit.
- Separate continuing operating performance from contingent sale proceeds and review the remaining earn-out terms.
- Monitor vendor concentration, stock-based compensation, and the continuing operating losses; compare GAAP results with the company’s non-GAAP Adjusted EBITDA.