Peter Derycz, Bristol Investment Fund Ltd. (“Bristol Fund”) and
certain of Bristol Fund’s affiliates (collectively, the “Group”),
who collectively beneficially own approximately 20% of Research
Solutions, Inc.’s (NASDAQ: RSSS) outstanding shares, today issued
an open letter from Mr. Derycz to RSSS shareholders regarding why
change is needed at RSSS and the Group’s intention to nominate a
full slate of highly qualified director candidates to RSSS’ board
of directors at RSSS’ 2023 annual meeting of shareholders.
The full text of the letter from Mr. Derycz
follows:
August 4, 2023
To My Fellow RSSS Shareholders:
As the Founder, Executive Chairman and one of
the largest shareholders of Research Solutions, Inc. (the “Company”
or “RSSS”), and as the previous President and Chief Executive
Officer, I write to you now with a heavy heart due to the current
state of the Company. I believe our Company is at a critical
juncture and is in urgent need of change at both the board and
management level in order to put the Company back on the right
path. While I have repeatedly voiced my concerns to other members
of the Company’s board of directors (the “Board”), their inaction
and lack of urgency have compelled me to bring these matters to
your attention.
When I stepped back from my position as
President and Chief Executive Officer of the Company in March 2021
and Roy Olivier took over the role, I trusted that he would be a
good steward of shareholder value and take action to make the
Company more profitable and valuable. Mr. Olivier had a good
business track record and the Board supported the idea of bringing
in a “solid operator” to run the Company. My family and I, as large
shareholders of the Company, remain heavily invested in the
Company’s future, and I was hopeful that Mr. Olivier would generate
a positive outcome for all RSSS shareholders.
On the Company’s Q4 2021 earnings conference
call, Mr. Olivier shared parts of his strategy and vision for the
Company with shareholders. Specifically, Mr. Olivier stated:1
- “Our primary focus will be on
growing recurring revenues from where they are today to over $20
million in three years…”
- “…we indicated that we wanted to
review and update our IR plan, with a focus on expanding our
shareholder base and working to garner additional analyst coverage.
We have completed our initial review and have two firms providing
analyst coverage at this time and we will continue to focus on
executing a proactive IR strategy going forward.”
- “We intend to grow our recurring
revenues or ARR from current levels to north of $20 million through
accelerating organic growth and acquiring companies that are
consistent with our product and business strategy.”
Since the CEO transition, I have been monitoring
Mr. Olivier’s progress in achieving his stated goals, as well as
three key areas with respect to the Company: 1) stock performance,
2) financial performance and 3) management of the operations team.
Unfortunately, I have been deeply disappointed on all three fronts,
as demonstrated by the following:
- The Company’s stock price
is down approximately 22% since Mr. Olivier took over as
CEO.2 Long-term shareholders are losing money and potential
shareholders are not excited by what they see or hear.
- The Company’s annual
selling, technology, general and administrative (“SG&A”)
run-rate has grown by approximately $3.7 million since Mr. Olivier
was appointed as CEO.3 In my opinion, this bloat in
SG&A is unnecessary, harmful to the Company’s share price, and
significantly reduces the quarterly cash the Company could be
generating.
- High turnover among the
senior management team has deprived the Company of valuable
personnel and led to concern about the Company’s
direction. The senior management team that was in place in
late 2021 took years to hire and train, they all had decades of
information industry experience and were directly responsible for
pivoting the Company to Platform revenue and achieving the highest
levels of year over year Platform ARR growth the Company has ever
seen to this day. Half of that team is now gone, in addition to
numerous other key personnel changes. The super-efficient Chief
Financial Officer was let go, the Chief Technology Officer who
built all of our systems quit, and the high-performance Chief
Revenue Officer was let go despite consistently delivering record
new Platform revenue. Quarterly New Platform revenue has dropped by
approximately 42% in the year he left and I fear that critical
senior management and other key personnel will continue to turnover
under the current regime.4
As previously stated, Mr. Olivier forecasted
that in three years the Company’s most valuable line of business,
Platform annual recurring revenues (“ARR”), could grow from
approximately $6 million to approximately $20 million. According to
Mr. Olivier this growth would occur both organically and through
transformative acquisitions. Now, two and a half years after he
first began his tenure at RSSS, the Company is nowhere close to
achieving this key metric as ARR is at approximately $9 million as
of last reported quarter.5 Neither the organic growth nor the
M&A-driven growth that Mr. Olivier pointed to has materialized
and the Platform growth rate has plummeted. The Company’s share
price reflects this disappointment, as it remains approximately 22%
below the closing price when Mr. Olivier was appointed as CEO and
far below the levels it traded when the market expected better
things from RSSS.6
I have repeatedly shared my disappointment and
my view that the status quo cannot continue with my fellow
directors. Their response has been to express unwavering commitment
for Mr. Olivier in the apparent hope that by continuing to blindly
support him, things will somehow eventually improve. Now after
years of poor performance, I believe that maintaining the status
quo is no longer tenable and change is needed immediately to right
the ship. I believe this change needs to include the replacement of
directors who have refused to hold Mr. Olivier accountable and take
the actions that are necessary at the Company.
Accordingly, I intend to nominate a majority
slate of highly qualified and seasoned director candidates to the
Board for election at the Company’s 2023 annual meeting of
shareholders, including:
- Paul Kessler, founder of Bristol Investment Fund Ltd., one of
RSSS’s largest shareholders;
- Jan Peterson, scholarly and scientific information industry
veteran with decades of experience and a former director of the
Company;
- Alan Urban, the Company’s former high performing CFO has 20
years’ experience in the information industry and over 30 years’
experience in corporate finance and accounting;
- Michael Breen, the Executive Chairman and interim CEO of GT
Biopharma, Inc. (NASDAQ: GTBP);
- Andrew Ritter, a successful artificial intelligence and
healthcare technology entrepreneur; and
- Myself, Peter Derycz, Executive Chairman and former President
and CEO of the Company.
I intend to continue communicating my views to
shareholders and I invite any shareholders to reach out to me with
their views on the Company. Below, please find additional details
on my views of the state of the Company and why change is urgently
needed.
Why Change is Needed at Research
Solutions, Inc. (RSSS)
• Share Price
Underperformance
After two and a half years, CEO Roy Olivier has
produced no noticeable shareholder value. In fact, the market price
of RSSS stock has decreased 22%, from $2.61 on October 4, 2021 (the
date of his appointment as CEO) to $2.05 as of July 28, 2023.7
RSSS Stock Price (10/4/2021 to 7/28/2023)
Source: Yahoo Finance
RSSS compared to NASDAQ Composite Index
(10/4/2021 to 7/28/2023)
Source: Yahoo Finance
• Stunning Increase in SG&A Expenses
Mr. Olivier has lacked discipline in controlling
SG&A expenses, which have increased a stunning ~39% since Mr.
Olivier was appointed interim CEO on March 29, 2021 (~$3.7 million
increase in SG&A expenses for the 12 months ended 3/31/2023
compared to 12 months ended 3/31/2021).8
• Distressing Decrease in Net New Platform ARR and
Deployments
Since Mr. Olivier was appointed interim CEO on
March 29, 2021, there has been a distressing 38% decrease (from
$534K to $331K) in net new Platform ARR, and a 51% decrease (from
51 to 25) in platform deployments (3/31/2023 quarter compared to
3/31/2021 quarter).9
• Failure to Translate Revenue Growth and Margin
Improvement into Shareholder Value
Mr. Olivier has failed to translate revenue
growth and margin improvement into shareholder value due to his
inability to properly message and deliver an effective investor
relation program, which has led to no significant interest in RSSS
stock from current or potential new shareholders.
• Alarming Disconnect Between Current Stock Price and
Implied Price Based on Applicable Valuation Multiples
Prior to the public announcement of the
formation of a 13D group by Peter Derycz and Bristol, the price of
RSSS stock was $2.05,10 but based on applicable valuation multiples
as set forth in the Software Equity Group Quarterly SaaS Report for
Q2 2023 and the Berkerey Noyes Q1 2023 Information Industry Trends,
we believe it should be $2.57. The alarming ~25% disconnect is
further evidence that current and potential new shareholders have
grown weary and unimpressed in Mr. Olivier’s uninspiring
performance and his inability to take any corrective action after
two and a half years.
• Failed SaaS ARR Acquisition Strategy
Despite a well published SaaS ARR acquisition
strategy, after two and a half Mr. Olivier has failed to execute on
the strategy and has produced no noticeable results or shareholder
value. The recently announced acquisition of ResoluteAI, while
positive, is simply too little too late.
• Disturbing Lack of Sense of Urgency or
Importance of Share Price Underperformance
The Board lacks a sense of urgency and has
failed to grasp the critical importance of creating shareholder
value. Despite repeatedly raising concerns and urging action, my
fellow directors have been unwilling to hold Mr. Olivier
accountable for the share price underperformance he has overseen
and the Board has not taken needed corrective action after two and
a half years.
• No New Ideas Resulting in No New
Shareholders and Fatigued Current Shareholders
Despite high hopes, Mr. Olivier has failed to
produce any new, creative, or inspiring ideas which has resulted in
a lack of new shareholders and fatigued current shareholders. In
fact, the “Key Takeaways” slide of the Company’s May 2023 investor
presentation is almost identical to the same 4+ year old slide from
the Company’s October 2018 investor presentation.11
• Conclusion - Unlikely Shareholder
Value Will be Created Unless There is a Refreshed Board, CEO and
CFO
We have concluded that it is unlikely
shareholder value will be created unless there is a refresh of the
current Board and CEO. All shareholders will benefit from a
refreshed Board and CEO that are aligned and focused on the
critical importance and urgency of creating shareholder value. All
shareholders will benefit from a refreshed Board that will hold the
CEO accountable for creating shareholder value by executing on an
effective and greatly improved investor relation program, properly
managing SG&A expenses, focusing on revenue growth, critically
evaluating the SaaS acquisition strategy and associated costs,
returning capital to shareholders, and inspiring and re-engaging
with current and potential new shareholders.
/s/ Peter DeryczExecutive Chairman
About Peter Derycz
Mr. Derycz is the Founder and Executive Chairman
of Research Solutions, Inc. and previously served as the President
and Chief Executive Officer. Mr. Derycz has also founded and served
as the Chief Executive Officer and a member of the board of
directors of several other companies.
About Bristol Investment Fund
Ltd.
Bristol primarily focuses on the small cap
sector of public companies and private companies with similar
valuation metrics where we believe there is the greatest potential
for growth. Bristol evaluates the enterprise, financial condition,
strength of management, strategy, governance, shareholder
constituency, and potential catalysts for growth in identifying
those companies best suited for investment allocation.
___________________1
https://seekingalpha.com/article/4456841-research-solutions-inc-s-rsss-ceo-roy-olivier-on-q4-2021-results-earnings-call-transcript2 Closing
price of $2.61 on October 4, 2021 compared to closing price of
$2.05 July 28, 2023. Yahoo Finance.3 Comparing Net New ARR March
31, 2023 Quarter to June 30, 2022 Quarter. “Financial Highlights”
file as posted on the Company’s investor relations website:
https://researchsolutions.investorroom.com/investor-information4
Company filings with the Securities and Exchange Commission
(“SEC”).5 Company filings with the SEC.6 Closing price of
$2.61 on October 4, 2021 compared to closing price of $2.05 July
28, 2023. Yahoo Finance.7 Yahoo Finance.8 Company filings with the
SEC9 “Financial Highlights” file as posted on the Company’s
investor relations website:
https://researchsolutions.investorroom.com/investor-information10
As of July 28, 2023.11 May 2023 Investor Presentation:
https://researchsolutions.investorroom.com/products
12166600-6
Photos accompanying this announcement are available
athttps://www.globenewswire.com/NewsRoom/AttachmentNg/88df7859-cba1-46f5-850a-fedac56dd129https://www.globenewswire.com/NewsRoom/AttachmentNg/30f55a1f-c9dc-4d3b-a6cb-94e48d66ff5bhttps://www.globenewswire.com/NewsRoom/AttachmentNg/c5a3ecc1-1fb6-4770-9cf0-48bf1781e2b2https://www.globenewswire.com/NewsRoom/AttachmentNg/e3facb2d-e219-45ae-a8da-d0fe934059e7https://www.globenewswire.com/NewsRoom/AttachmentNg/67ee7b08-7ab1-49a3-8301-186945f05c51https://www.globenewswire.com/NewsRoom/AttachmentNg/a565541c-2787-433b-b79f-5f2f3f4d0d58
Contact
Peter Derycz
(310) 990-8085
trichicanovegano@gmail.com
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