ARI Network Services Announces Third Quarter 2012 Financial Results
MILWAUKEE, Wis., June 14, 2012 /PRNewswire/ — ARI Network Services (OTCBB: ARIS), a leader in creating, marketing, and supporting software, SaaS, and DaaS solutions that connect consumers, dealers, distributors, and manufacturers in selected vertical markets, reported financial results today for the third quarter of fiscal year 2012 ended April 30, 2012.
Highlights for the third quarter of fiscal 2012 included:
- Total revenue for the third quarter of fiscal 2012 increased 6.7% to $5.7 million compared to $5.4 million in the third quarter of fiscal 2011.
- Recurring revenue for the quarter increased 9.8% to $4.8 million, or 83.7% of total revenue, from $4.4 million, or 81.3% of total revenue, in the third quarter of fiscal 2011; compared to the second quarter of fiscal 2012, recurring revenue increased 2.7%, representing the seventh straight quarter of growth.
- During the quarter, the Company invested $851,000 in strategic research and technology investments to support future new product introductions and revenue growth.
- The Company paid down $398,000 of debt in the third quarter. In fiscal 2012 the Company reduced its total debt from $5.6 million at July 31, 2011 to $4.5 million at April 30, 2012.
- In the third quarter, the Company added 103 new customers and 2 new reseller agreements;
- For the nine-month period ended April 30, 2012, churn (the measure of customers that do not renew) improved 15% compared to the end of the third fiscal quarter of 2011.
Third quarter 2012 Financials
For the third fiscal quarter ended April 30, 2012, ARI reported revenue of $5.7 million versus $5.4 million in the comparable quarter of fiscal 2011; an increase of 6.7%. Total operating expenses in the third quarter were $4.0 million, up 11.8%, compared to $3.6 million in the fiscal 2011 third quarter. This increase resulted from investments made in product research and development, the Company’s internal technology infrastructure and the roll out of the Company’s fiscal 2012 investor relations initiative. As a result of these investments, operating income for the third quarter was $327,000 compared to $675,000 in the third quarter of 2011.
The company reported net income of $210,000, or $0.03 per share, in the third quarter of 2012, compared to net income of $541,000, or $0.07 per share in the third quarter of 2011. The decline was largely due to a $433,000 gain on the disposition of a component of the business recognized in the third quarter of fiscal 2011 that did not recur in fiscal 2012. Recurring revenue for the quarter was $4.8 million, or 83.7% of total revenue, versus $4.4 million, or 82.8% of total revenue, for the third quarter last year.
EBITDA for the third quarter was $1.1 million, comparable to EBITDA of $1.9 million in the third quarter last year.
Management Discussion
Roy W. Olivier, president and chief executive officer of ARI, commented, “We are pleased with the results of the quarter in regards to top line revenue growth. Our fiscal 2012 recurring revenue has increased to 84.0% of total revenue, compared to 81.4% last year, and we reduced our rate of churn by 15% over this same period. These improvements resulted in an increase in recurring revenue of nearly 8%. We have signed on two new resellers, added over 100 new customers and signed a deal with a national retailer to use our catalog content in their 1,200 service centers, all of which will contribute to recurring revenue growth.”
Mr. Olivier continued, “We are very focused on the execution of our revenue growth strategy and are making strategic investments in technology to achieve this growth. We have expanded our product research and development resources to focus solely on providing our customers with easy access to the innovative technology they need to grow their businesses. We continue to integrate several of our core product offerings and have updated our lead management tools to allow us to electronically distribute them to a large number of potential new users in an extremely cost efficient manner, which is a critical driver of revenue growth. “
Darin Janecek, chief financial officer of ARI, commented, “We had a year over year decline in operating income for the quarter of 27.7% or $381,000 due to planned investments in our products, technology infrastructure and our investor relations program. These investments are critical components of executing on our growth strategy and increasing shareholder value. Since the beginning of Fiscal 2012, we have seen substantial increases in both our average daily trading volume and our stock price during this time. Several of these costs are one-time and will not continue into the fourth quarter.”
Non-GAAP Measures
EBITDA, a non-GAAP measure, is defined as earnings before interest, income taxes, depreciation and amortization. Management believes EBITDA, to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations. While management considers EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with generally accepted accounting principles (GAAP). Not all companies calculate EBITDA in the same manner and the measure as presented may not be comparable to similarly titled measures presented by other companies. A reconciliation of net income to EBITDA can be found on the investor relations section of our website for all periods presented.
Third quarter Conference Call
ARI will conduct a conference call today, Thursday, June 14, 2012 at 4:30 pm EDT to review the financial results for the third quarter of fiscal year 2012 ended April 30, 2012. Interested parties can access the conference call by dialing (877) 317-6789 or (412) 317-6789 or can listen via a live Internet web cast, which is available in the Investor Relations section of the Company’s website at http://www.arinet.com.
A teleconference replay of the call will be available for three days at (877) 344-7529 or (412) 317-0088, confirmation #10015031. A web cast replay will be available in the Investor Relations section of the Company’s website at http://www.arinet.com until the next earnings conference call.
About ARI
ARI Network Services, Inc. (“ARI” or the “Company”) is a leader in creating, marketing, and supporting software, software as a service (“SaaS”) and data as a service (“DaaS”) solutions that enhance revenue and reduce costs for our customers. Our innovative, technology-enabled solutions connect the community of consumers, dealers, distributors, and manufacturers to help our customers efficiently service and sell more whole goods, parts, garments, and accessories (“PG&A”) worldwide in selected vertical markets that include power sports, outdoor power equipment, marine, and white goods. We estimate that approximately 18,000 equipment dealers, 125 manufacturers, and 150 distributors worldwide leverage our technology to drive revenue, gain efficiencies and increase customer satisfaction.
Forward-Looking Statements
Certain statements in this news release contain “forward?looking statements” regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933. 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 projects 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 Part 1A of the Company’s annual report on Form 10?K for fiscal year ended July 31, 2011, filed with the Securities and Exchange Commission. 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.
For more information, contact:
Darin Janecek, Chief Financial Officer
ARI Network Services, Inc.
Phone: (414) 973-4300
Investor Contact:
Joe Dorame, Robert Blum, Joe Diaz
Lytham Partners, LLC
Phone: (602) 889-9700
aris@lythampartners.com
ARI Network Services, Inc.
Consolidated Statements of Income
(Dollars in Thousands, Except per Share Data)
(Unaudited) (Unaudited)
Three months ended Nine months ended
April 30 April 30
------------------ ------------------
2012 2011 2012 2011
---- ---- ---- ----
Net revenue $5,712 $5,354 $16,623 $15,916
Cost of revenue 1,378 1,095 3,765 3,348
----- ----- ----- -----
Gross profit 4,334 4,259 12,858 12,568
Operating expenses:
Sales and marketing 1,121 946 3,272 3,172
Customer operations and
support 800 834 2,496 2,545
Software development and
technical support (net of
capitalized software product
costs) 467 351 1,345 1,127
General and administrative 1,304 1,011 3,630 3,091
Depreciation and amortization
(exclusive of
amortization of software
product costs included in
cost of revenue) 315 442 1,122 1,259
--- --- ----- -----
Net operating expenses 4,007 3,584 11,865 11,194
----- ----- ------ ------
Operating income 327 675 993 1,374
Other income (expense):
Interest expense (40) (192) (161) (596)
Other, net 79 435 96 441
--- --- --- ---
Total other income (expense) 39 243 (65) (155)
--- --- --- ----
Income before provision for
income tax 366 918 928 1,219
Income tax (expense) benefit (156) (402) (385) (481)
Income from continuing
operations 210 516 543 738
--- --- --- ---
Discontinued operations, net
of tax - 25 - 25
Net income $210 $541 $543 $763
==== ==== ==== ====
Net income per common share:
Basic $0.03 $0.07 $0.07 $0.10
===== ===== ===== =====
Diluted $0.03 $0.07 $0.07 $0.10
===== ===== ===== =====
ARI Network Services, Inc.
Consolidated Balance Sheets
(Dollars in Thousands, Except per Share Data)
(Unaudited) (Audited)
April 30 July 31
2012 2011
---- ----
Current assets:
Cash and cash
equivalents $486 $1,134
Trade receivables,
less allowance
for doubtful
accounts of $256
and $383 at
April 30,
2012 and July
31, 2011,
respectively 1,389 1,179
Work in process 183 169
Prepaid expenses
and other 760 802
Deferred income
taxes 2,832 2,693
-----------
Total current
assets 5,650 5,977
Equipment and leasehold improvements:
Computer equipment
and software for
internal use 2,736 2,304
Leasehold
improvements 584 558
Furniture and
equipment 2,178 2,000
-----------
5,498 4,862
Less accumulated
depreciation and
amortization 3,608 2,988
-----------
Net equipment
and leasehold
improvements 1,890 1,874
Capitalized software product costs:
Amounts
capitalized for
software product
costs 17,898 16,693
Less accumulated
amortization 14,917 13,878
Net
capitalized
software
product costs 2,981 2,815
Deferred income taxes 2,080 2,607
Other long term assets 306 346
Other intangible assets 1,553 2,041
Goodwill 5,439 5,439
Total assets $19,899 $21,099
======= =======
ARI Network Services, Inc.
Consolidated Balance Sheets
(Dollars in Thousands, Except per Share Data)
(Unaudited) (Audited)
April 30 July 31
2012 2011
---- ----
Current liabilities:
Current
borrowings on
line of credit $ - $245
Current portion
of long-term
debt 1,000 917
Accounts payable 647 561
Deferred revenue 5,044 5,282
Accrued payroll
and related
liabilities 584 1,264
Accrued taxes 27 106
Other accrued
liabilities 554 473
Current portion
of capital
lease
obligations 136 127
Total
current
liabilities 7,992 8,975
Non-current liabilities:
Long-term debt 3,222 4,083
Capital lease
obligations 94 210
Total non-
current
liabilities 3,316 4,293
----- -----
Total liabilities 11,308 13,268
Shareholders' equity:
Cumulative
preferred
stock, par
value $.001 per
share,
1,000,000
shares
authorized;
0 shares
issued and
outstanding
at April 30,
2012 and
July 31,
2011,
respectively - -
Junior preferred
stock, par
value $.001 per
share, 100,000
shares
authorized;
0 shares
issued and
outstanding
at April 30,
2012 and
July 31,
2011,
respectively - -
Common stock,
par value $.001
per share,
25,000,000
shares
authorized;
8,034,350
and
7,901,774
shares
issued and
outstanding
at April 30,
2012 and
July 31,
2011,
respectively 8 8
Common stock
options 1,202 1,092
Additional paid-
in capital 95,921 95,834
Accumulated
deficit (88,521) (89,064)
Other
accumulated
comprehensive
loss (19) (39)
Total shareholders' equity 8,591 7,831
----- -----
Total liabilities and shareholders' equity $19,899 $21,099
======= =======
SOURCE ARI Network Services, Inc.
