Research Solutions Reports Fiscal First Quarter 2025 Results

Reports 60% Increase in ARR to $17.6 Million, Positive Net Income and Cash Flow, Adjusted EBITDA of $1.3 Million

Research Solutions, Inc. (NASDAQ: RSSS), the leading AI-powered research workflow platform, reported financial results for its fiscal first quarter ended September 30, 2024.

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Fiscal First Quarter 2025 Summary

— Total revenue of $12.0 million, a 20% increase from the prior-year quarter

— Platform revenue up 67% to$4.3 million. Platform revenue accounted for 36% of the revenue as compared to 26% in the prior year.

— Annual Recurring Revenue (“ARR”) up 60% to$17.6 million, which includes approximately $12.2 million of B2B recurring revenue and $5.4 million of B2C recurring revenue.

— Gross profit up 43% from the prior-year quarter. Total gross margin improved 780 basis points to 47.9%, a new Company record, representative of the Company's continued mix shift towards Platform revenue.

— Net income of $669,000 or $0.02 per diluted share, compared to a net loss of ($988,000) or ($0.04) per share in the prior-year quarter.

— Adjusted EBITDA of $1.3 million, an 11% margin, compared to ($441,000) in the prior-year quarter. On a trailing twelve-months (“TTM”) basis the Company has now generated Adjusted EBITDA of almost $4 million, which represents a 8.5% margin.

— Cash flow from operations of positive $0.8 million compared to a burn of $0.8 million in the prior-year quarter. On a TTM basis, the Company has now generated over $5.1 million in cash flow from operations, which is approximately 1.3x the Company's TTM Adjusted EBITDA.

“Our first quarter results reflect our continued ability to expand the profitability and cash flow of the business as our Platform offering continues to represent a larger percentage of total revenue. Our margins improved significantly, and we generated strong year-over-year net income and Adjusted EBITDA growth,” said Roy W. Olivier, President and CEO of Research Solutions. “Our sequential ARR growth was impacted by seasonality, primarily in our B2C platform business. From a B2B perspective, we continue to develop additional features that improve the value proposition to our end users that lead to better efficiency and cost savings as budgetary constraints continue to present some challenges to our legacy Platform growth. I remain confident that our products continue to serve as a critical piece to the research process and look forward to growth in both our B2B and B2C user bases.”

Fiscal First Quarter 2025 Results

Total revenue was $12 million, a 20% increase from $10.1 million in the year-ago quarter as both Platform and Transaction revenue increased from the prior period.

Platform subscription revenue increased 67% to $4.3 million compared to $2.6 million in the year-ago quarter. The increase was primarily due to the Scite acquisition as well as to an increase in the total number of paid Platform deployments and upsells to existing customers. The quarter ended with annual recurring revenue of $17.6 million, up 60% year-over-year (see the Company's definition of annual recurring revenue below).

Transaction revenue was $7.7 million, compared to $7.5 million in the first quarter of fiscal 2024. The increase was due to organic growth in copyright revenues. The Transaction customer count for the quarter was 1,390, compared to 1,395 customers in the prior-year quarter (see the Company's definition of active customer accounts and transactions below).

Total gross margin improved 780 basis points from the prior-year quarter to 47.9%. The increase was primarily driven by a continued revenue mix shift to the higher-margin Platforms business as well as increased margins in both the Platforms and the Transactions business.

Total operating expenses were $5.1 million, unchanged compared to the first quarter of 2024.

Net income in the first quarter was $669,000, or $0.02 per diluted share, compared to net loss of ($988,000), or ($0.04) per share, in the prior-year quarter. Adjusted EBITDA was $1.3 million, compared to ($441,000) in the year-ago quarter (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, November 14, 2024 Time: 5:00 p.m. ET (2:00 p.m. PT) Dial-in number: 1-203-518-9708 Conference ID: RESEARCH

The conference call will be broadcast live and available for replay until December 14, 2024 by dialing 1-412-317-6671 and using the replay ID 11157176, and via the investor relations section of the Company's website at http://researchsolutions.investorroom.com/.

Fiscal First Quarter Financial and Operational Summary Tables vs. Prior-Year Quarter Quarter Ended September 30 2024 2023 Change % ChangeRevenue: Platforms $ 4,329,645 $ 2,600,192 $ 1,729,453 66.5% Transactions $ 7,714,837 $ 7,460,779 254,058 3.4%Total Revenue 12,044,482 10,060,971 1,983,511 19.7%Gross Profit: Platforms 3,782,478 2,217,577 1,564,901 70.6% Transactions 1,983,398 1,813,988 169,410 9.3%Total Gross Profit 5,765,876 4,031,565 1,734,311 43.0%Gross profit as a % of revenue: Platforms 87.4% 85.3% 2.1% Transactions 25.7% 24.3% 1.4%Total Gross Profit 47.9% 40.1% 7.8%Operating Expenses: Sales and marketing 1,190,407 685,016 505,391 73.8% Technology and product development 1,372,758 1,244,579 128,179 10.3% General and administrative 1,930,176 2,542,869 (612,692) -24.1% Depreciation and amortization 312,095 59,620 252,475 423.5% Stock-based compensation 417,989 591,814 (173,825) -29.4% Foreign currency translation loss (104,240) 6,620 (110,860) NMTotal Operating Expenses 5,119,185 5,130,518 (11,332) -0.2%Income (loss) from operations 646,691 (1,098,952) 1,745,643 158.8%Other Income (Expenses): Other income 68,525 140,311 (71,786) -51.2% Provision for income taxes (46,212) (29,402) (16,810) 57.2%Total Other Income (Expenses): 22,313 110,909 (88,596) -79.9%Net income (loss) $ 669,004 $ (988,043) 1,657,047 167.7%Adjusted EBITDA $ 1,272,535 $ (440,898) $ 1,713,433 388.6% Quarter Ended September 30 2024 2023 Change % ChangePlatforms: B2B ARR (Annual recurring revenue*): Beginning of Period $ 12,060,201 $ 9,444,130 $ 2,616,071 27.7% Incremental ARR 127,633 1,576,111 (1,448,478) -91.9% End of Period $ 12,187,834 $ 11,020,241 $ 1,167,593 10.6% Deployments: Beginning of Period 1,021 835 186 22.3% Incremental Deployments 8 45 (37) -82.2% End of Period 1,029 880 149 16.9% ASP (Average sales price): Beginning of Period $ 11,812 $ 11,310 $ 502 4.4% End of Period $ 11,844 $ 12,523 $ (679) -5.4% B2C ARR (Annual recurring revenue*): Beginning of Period $ 5,363,129 $ – $ 5,363,129 Incremental ARR 67,666 – 67,666 NM End of Period $ 5,430,795 $ – $ 5,430,795 NM Total ARR (Annualized recurring revenue): $ 17,618,629 $ 11,020,241 $ 6,598,388 59.9%Transaction Customers: Corporate customers 1,074 1,090 (16) -1.5% Academic customers 316 305 11 3.6% Total customers 1,390 1,395 (5) -0.4%

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. Deployments represent total product deployments across our customer base.

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) including any change in fair value of contingent earnout liability, 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 September 30, 2024 2023 Change % ChangeNet Income (loss) $ 669,004 $ (988,043) $ 1,657,047 167.7%Add (deduct): Other income (expense) (68,525) (140,311) 71,786 -51.2% Foreign currency translation loss (104,240) 6,620 (110,860) NM Provision for income taxes 46,212 29,402 16,810 57.2% Depreciation and amortization 312,095 59,620 252,475 423.5% Stock-based compensation 417,989 591,814 (173,825) -29.4%Adjusted EBITDA $ 1,272,535 $ (440,898) $ 1,713,433 388.6%

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 SubsidiariesConsolidated Balance Sheets September30, 2024 June30, (unaudited) 2024AssetsCurrent assets:Cash and cash equivalents $ 6,924,773 $ 6,100,031Accounts receivable, net of allowance of $101,949 and $68,579, respectively 6,298,606 6,879,800Prepaid expenses and other current assets 649,497 643,553Prepaid royalties 572,524 1,067,237Total current assets 14,445,400 14,690,621Non-current assets:Property and equipment, net of accumulated depreciation of $927,386 and$922,558, respectively 71,659 88,011Intangible assets, net of accumulated amortization of $1,834,897 and$1,535,310, respectively 10,497,023 10,764,261($8,117,222 provisional)Goodwill ($13,171,486 provisional) 16,345,888 16,315,888Deposits and other assets 915 981Total assets $ 41,360,885 $ 41,859,762Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable and accrued expenses $ 8,257,821 $ 8,843,612Deferred revenue 8,046,056 9,023,848Total current liabilities 16,303,877 17,867,460Non-current liabilities:Contingent earnout liability 12,298,114 12,298,114Total liabilities 28,601,991 30,165,574Commitments and contingenciesStockholders' 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; 32,513,172 and 32,295,373shares 32,513 32,295issued and outstanding, respectivelyAdditional paid-in capital 38,491,610 38,089,958Accumulated deficit (25,640,242) (26,309,246)Accumulated other comprehensive loss (124,987) (118,819)Total stockholders' equity 12,758,894 11,694,188Total liabilities and stockholders' equity $ 41,360,885 $ 41,859,762Research Solutions, Inc. and SubsidiariesConsolidated Statements of Operations and Other Comprehensive Loss(Unaudited) Three Months Ended September30, 2024 2023Revenue:Platforms $ 4,329,645 $ 2,600,192Transactions 7,714,837 7,460,779Total revenue 12,044,482 10,060,971Cost of revenue:Platforms 547,167 382,615Transactions 5,731,439 5,646,791Total cost of revenue 6,278,606 6,029,406Gross profit 5,765,876 4,031,565Operating expenses:Selling, general and administrative 4,807,090 5,070,897Depreciation and amortization 312,095 59,620Total operating expenses 5,119,185 5,130,517Income (loss) from operations 646,691 (1,098,952)Other income 68,525 140,311Income (loss) from operations before provision for income taxes 715,216 (958,641)Provision for income taxes (46,212) (29,402)Net income (loss) 669,004 (988,043)Other comprehensive income (loss):Foreign currency translation (6,168) (946)Comprehensive income (loss) $ 662,836 $ (988,989)Basic income (loss) per common share:Net income (loss) per share $ 0.02 $ (0.04)Weighted average common shares outstanding 30,346,871 27,052,445Diluted income (loss) per common share:Net income (loss) per share $ 0.02 $ (0.04)Weighted average common shares outstanding 33,234,858 27,052,445Research Solutions, Inc. and SubsidiariesConsolidated Statements of Cash Flows(Unaudited) Three Months Ended September30, 2024 2023Cash flow from operating activities:Net income (loss) $ 669,004 $ (988,043)Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation and amortization 312,095 59,620Fair value of vested stock options 28,856 17,471Fair value of vested restricted common stock 389,133 574,343Changes in operating assets and liabilities:Accounts receivable 566,194 (112,965)Prepaid expenses and other current assets (5,944) 109,946Prepaid royalties 494,713 35,140Accounts payable and accrued expenses (618,140) 195,747Deferred revenue (992,792) (646,830)Net cash provided by (used in) operating activities 843,119 (755,571)Cash flow from investing activities:Purchase of property and equipment – (33,825)Payment for acquisition of Resolute, net of cash acquired – (2,718,253)Net cash used in investing activities – (2,752,078)Cash flow from financing activities:Common stock repurchase (16,119) (46,135)Payment of contingent acquisition consideration – (110,190)Net cash used in financing activities (16,119) (156,325)Effect of exchange rate changes (2,258) 705Net increase (decrease) in cash and cash equivalents 824,742 (3,663,269)Cash and cash equivalents, beginning of period 6,100,031 13,545,333Cash and cash equivalents, end of period $ 6,924,773 $ 9,882,064Supplemental disclosures of cash flow information:Cash paid for income taxes $ 46,212 $ 29,402Non-cash investing and financing activities:Contingent consideration accrual on asset acquisition $ 33,353 $ 42,989

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