Peter Derycz and Bristol Investment Fund Ltd. Issue Open Letter to Research Solutions, Inc. Shareholders
Believe Urgent Change is Needed at Research Solutions to Address Underperformance, Poor Operational Execution, and Lack of Accountability
Highlight that Since Roy Olivier Became Chief Executive Officer, Research Solutions' Share Price Has Declined More than 20%
THOUSAND OAKS, Calif., Aug. 04, 2023 (GLOBE NEWSWIRE) -- 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 Derycz
Executive 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.
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1 https://seekingalpha.com/article/4456841-research-solutions-inc-s-rsss-ceo-roy-olivier-on-q4-2021-results-earnings-call-transcript
2 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-information
4 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 SEC
9 "Financial Highlights" file as posted on the Company's investor relations website: https://researchsolutions.investorroom.com/investor-information
10 As of July 28, 2023.
11 May 2023 Investor Presentation: https://researchsolutions.investorroom.com/products
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Contact Peter Derycz (310) 990-8085 [email protected]