Attached files

file filename
8-K - FORM 8-K - ARI NETWORK SERVICES INC /WIari8k.htm
EX-99.2 - TRANSCRIPT OF CONFERENCE CALL - ARI NETWORK SERVICES INC /WIexh992.htm

[exh991001.jpg]


Exhibit 99.1

FOR IMMEDIATE RELEASE


ARI Network Services Announces Fiscal 2014 Results


Milwaukee, Wis., October 28, 2014 – ARI Network Services (NASDAQ: ARIS), an award-winning provider of data-driven software tools and marketing services that help dealers, distributors and manufacturers Sell More Stuff!™, reported financial results today for its fiscal fourth quarter and fiscal year ended July 31, 2014.

Highlights for the fiscal year 2014 included:

·

The company reported record revenues of $33.0 million, a 9.7% increase over fiscal year 2013.

·

Recurring revenues for fiscal 2014 were $30.9 million, a 14.4% increase over fiscal year 2013. As a percentage of total revenues, recurring revenues were 93.6% in fiscal year 2014 versus 89.7% in fiscal year 2013.

·

EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $3.9 million, or 11.7% of revenue in fiscal year 2014, an increase of 10.4% from fiscal year 2013.


Highlights for the fourth quarter of fiscal year 2014 included:

·

Revenues for the fourth quarter were $8.5 million, an increase of 4.5% over 3Q14 and 1.1% over the same period last year.

·

Gross margin was 81.6% in the fourth quarter compared with 80.9% in 3Q14 and 80.8% in the same period last year.

·

EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $1.4 million or 16.1% of revenue in the fourth quarter. This compares with EBITDA of $1.3 million or 15.4% of revenue in 3Q14 and $1.5 million or 17.7% of revenue in the same period last year.

·

Cash generated from operations was $1.3 million for the fourth quarter of fiscal 2014, compared with $1.0 million in 3Q14 and $0.9 million for the same period last year.  

Fiscal Year 2014 Financials
Fiscal 2014 was a record year for ARI, with revenues of more than $33 million. Total revenue increased 9.7% or $2.9 million during fiscal 2014. Recurring revenues were $30.9 million, a $3.9 million increase over the prior year. The increase in revenue and recurring revenue was primarily driven by growth in the company’s website solution offerings, which in fiscal 2014 accounted for 51% of the firm’s revenues.

Gross margin for fiscal year 2014 was 80.7% versus 78.0% last year, with the increase being largely attributable to the growth in the firm’s recurring revenues which have a higher gross profit.  

The company recorded an operating profit of $0.4 million in fiscal 2014 versus an operating loss of $0.2 million in fiscal 2013. Net loss for the fiscal year was $102,000 or ($0.01) per share, compared with a net loss of $753,000 or ($0.08) per share last year.


[exh991002.jpg]


[exh991001.jpg]



Management Discussion
Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “Fiscal 2014 was a year of growth and accomplishments for ARI. We recorded the highest revenue in company history and were able to grow EBITDA 10% versus the prior year. In the early part of our fiscal year, we acquired DUO Web Solutions and through that were able to re-launch our Digital Marketing Services offering, which we expect to be one of our key drivers of organic growth in fiscal 2015. In December of 2013, we successfully re-listed on the Nasdaq Capital Market and recently were added to the Russell Microcap Index. Throughout the year, we were also able to enhance our product offerings and expand our customer base in our primary growth verticals of automotive tire and wheel and home medical equipment, which we entered during fiscal 2013.”

Mr. Olivier continued, “Subsequent to the end of our fiscal year, we completed the acquisition of TCS Technologies. This acquisition further solidifies our leadership position in the automotive tire and wheel industry and expands our product offerings. We are excited about the growth prospects of this acquisition as we look ahead to fiscal 2015.”

William Nurthen, Chief Financial Officer of ARI, commented, “The company experienced marked improvement in profitability and cash flow in the back half of fiscal 2014. EBITDA for the third and fourth quarters of fiscal 2014 were 15.4% and 16.1%, respectively, and the fourth quarter performance was inclusive of more than $100,000 in charges related to the company’s acquisition of TCS. In addition, cash flow from operations for the last two quarters combined was $2.4 million which was the best six-month performance in the company’s history.”  

Fiscal 2014 Conference Call
ARI will conduct a conference call on Tuesday, October 28, 2014 at 4:30 pm EDT to review the financial results for the fiscal year ended July 31, 2014. Interested parties can access the conference call by dialing (877) 359-3639 or (408) 427-3725 and referring to conference ID: 22267504. The conference call is also being webcast, which is available in the Investor Relations section of the company’s website at investor.arinet.com. A replay of the webcast will be archived on the company’s website for 60 days.   

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 is included in this release and can be found on the investor relations section of our website for all periods presented.


About ARI
ARI Network Services, Inc. (ARI) (NASDAQ: ARIS) offers an award-winning suite of data-driven software tools and marketing services to help dealers, equipment manufacturers and distributors in selected vertical markets Sell More Stuff!™ – online and in-store. Our innovative products are powered by a proprietary data



[exh991002.jpg]


[exh991001.jpg]


repository of enriched original equipment and aftermarket electronic content spanning more than 10.5 million active part and accessory SKUs, 469,000 models and $1.7 billion in retail product value. Business is complicated, but we believe our customers’ technology tools don’t have to be. We remove the complexity of selling and servicing new and used vehicle inventory, parts, garments and accessories (PG&A) for customers in the automotive tire and wheel aftermarket, powersports, outdoor power equipment, marine, home medical equipment, recreational vehicles and appliance industries. More than 22,000 equipment dealers, 195 distributors and 1,500 manufacturers worldwide leverage our web and eCatalog platforms to Sell More Stuff!™ For more information on ARI, visit investor.arinet.com.

Additional Information

·

Follow @ARI_Net on Twitter: twitter.com/ARI_Net

·

Become a fan of ARI on Facebook: www.facebook.com/ARInetwork

·

Join us on G+: plus.google.com

·

LinkedIn: www.linkedin.com

·

Read more about ARI: investor.arinet.com/about-us


Images for media use only

Roy W. Olivier Hi Res | Roy W. Olivier Low Res

ARI Logo Hi Res| ARI Logo Low Res


Forward-Looking Statements
Certain statements in this news release contain "forwardlooking 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 forwardlooking 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 companys most recent annual report on Form 10K, 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. Readers are cautioned not to place undue reliance on these forwardlooking statements. The forwardlooking 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 forwardlooking statements. For more information, please refer to the companys filings with the Securities and Exchange Commission.

For media inquiries, contact:

Colleen Brousil, Director of Marketing, ARI, +1.414.973.4323, colleen.brousil@arinet.com


Investor inquiries, contact:

Steven Hooser, Three Part Advisors, +1.214.872.2710, shooser@threepa.com



[exh991002.jpg]


[exh991001.jpg]


ARI  Network Services, Inc.
Consolidated Statements of Operations
(Dollars in Thousands, Except per Share Data)


 

Three months ended July 31

 

Year ended July 31

 

2014

 

2013

 

2014

 

2013

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

$

 8,548

 

$

 8,454

 

$

33,019

 

$

   30,102

Cost of revenue

 

 1,572

 

 

 1,622

 

 

    6,378

 

 

    6,636

Gross profit

 

6,976

 

 

 6,832

 

 

   26,641

 

 

  23,466

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 2,154

 

 

2,021

 

 

   9,344

 

 

  7,480

Customer operations and support

 

1,616

 

 

1,728

 

 

  6,645

 

 

   5,834

Software development and technical support (net of capitalized

 

 

 

 

 

 

 

 

 

 

 

  software product costs)

 

701

 

 

 653

 

 

    2,717

 

 

    2,648

General and administrative

 

1,732

 

 

1,547

 

 

    6,222

 

 

    6,005

Depreciation and amortization (exclusive of amortization of

 

 

 

 

 

 

 

 

 

 

 

  software product costs included in cost of revenue)

 

 308

 

 

328

 

 

    1,322

 

 

    1,281

Loss on impairment of long-lived assets

 

    35

 

 

 

 

    35

 

 

    420

Net operating expenses

 

 6,546

 

 

 6,277

 

 

26,285

 

 

   23,668

Operating income (loss)

 

 430

 

 

555

 

 

  356

 

 

  (202)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

  (70)

 

 

 (92)

 

 

    (286)

 

 

   (626)

Loss on debt extinguishment

 

    —

 

 

 

 

   —

 

 

    (682)

Loss on change in fair value of stock warrants

 

   —

 

 

 (635)

 

 

   (28)

 

 

 (635)

Gain on change in fair value of estimated contingent liabilities

 

    41

 

 

180

 

 

    67

 

 

   180

Gain on change in fair value of contingent assets

 

  —

 

 

 

 

   —

 

 

    64

Other, net

 

   3

 

 

  8

 

 

   30

 

 

  15

Total other income (expense)

 

 (26)

 

 

 (539)

 

 

  (217)

 

 

   (1,684)

Income (loss) before provision for income tax

 

404

 

 

16

 

 

  139

 

 

   (1,886)

Income tax benefit (expense)

 

 (230)

 

 

 (314)

 

 

    (241)

 

 

    1,133

Net loss

$

174

 

$

 (298)

 

$

    (102)

 

$

  (753)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

Basic

$

0.01

 

$

 (0.02)

 

$

   (0.01)

 

$

  (0.08)

Diluted

$

0.01

 

$

 (0.02)

 

$

  (0.01)

 

$

   (0.08)




[exh991002.jpg]


[exh991001.jpg]


ARI Network Services, Inc.
Consolidated Balance Sheets
(Dollars in Thousands, Except per Share Data)

 

 

(Unaudited)

 

(Audited)

 

 

July 31

 

July 31

 

 

2014

 

2013

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

  1,808

 

$

  2,195

Trade receivables, less allowance for doubtful accounts of $359

 

 

 

 

 

 

   and $220 at July 31,2014 and 2013, respectively

 

 

  1,212

 

 

    945

Work in process

 

 

    294

 

 

    154

Prepaid expenses and other

 

 

  1,030

 

 

    934

Deferred income taxes

 

 

  2,655

 

 

  2,938

Total current assets

 

 

  6,999

 

 

  7,166

Equipment and leasehold improvements:

 

 

 

 

 

 

Computer equipment and software for internal use

 

 

  2,382

 

 

  2,641

Leasehold improvements

 

 

    626

 

 

    609

Furniture and equipment

 

 

  2,327

 

 

  2,561

 

 

 

  5,335

 

 

  5,811

Less accumulated depreciation and amortization

 

 

   (3,564)

 

 

   (3,948)

Net equipment and leasehold improvements

 

 

  1,771

 

 

  1,863

Capitalized software product costs:

 

 

 

 

 

 

Amounts capitalized for software product costs

 

 

  22,676

 

 

  20,814

Less accumulated amortization

 

 

   (18,656)

 

 

   (16,604)

Net capitalized software product costs

 

 

  4,020

 

 

  4,210

Deferred income taxes

 

 

  3,507

 

 

  3,451

Other long term assets

 

 

  72

 

 

    141

Other intangible assets

 

 

  3,612

 

 

  4,099

Goodwill

 

 

  12,367

 

 

  12,198

Total non-current assets

 

 

  25,349

 

 

  25,962

Total assets

 

$

  32,348

 

$

  33,128

 

 

 

 

 

 

 




[exh991002.jpg]


[exh991001.jpg]


ARI Network Services, Inc.
Consolidated Balance Sheets
(Dollars in Thousands, Except per Share Data)

 

 

(Unaudited)

 

(Audited)

 

 

July 31

 

July 31

 

 

2014

 

2013

LIABILITIES

 

 

 

 

 

 

Current portion of long-term debt

 

$

    675

 

$

    450

Current portion of contingent liabilities

 

 

    295

 

 

    303

Accounts payable

 

 

    656

 

 

    710

Deferred revenue

 

 

  7,415

 

 

  8,571

Accrued payroll and related liabilities

 

 

  1,336

 

 

  1,434

Accrued sales, use and income taxes

 

 

    123

 

 

    147

Other accrued liabilities

 

 

    472

 

 

    316

Current portion of capital lease obligations

 

 

    195

 

 

  24

Total current liabilities

 

 

  11,167

 

 

  11,955

Long-term debt

 

 

  3,375

 

 

  4,050

Common stock warrants at fair value

 

 

   —

 

 

    254

Long-term portion of contingent liabilities

 

 

    153

 

 

    418

Capital lease obligations

 

 

    233

 

 

    169

Other long term liabilities

 

 

    214

 

 

    233

Total non-current liabilities

 

 

  3,975

 

 

  5,124

Total liabilities

 

 

  15,142

 

 

  17,079

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized;
0 shares issued and outstanding at July 31, 2014 and July 31, 2013, respectively

 

 

   —

 

 

   —

Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0
shares issued and outstanding at July 31, 2014 and July 31, 2013, respectively

 

 

   —

 

 

   —

Common stock, par value $.001 per share, 25,000,000 shares authorized;
13,506,316 and 12,976,588 shares issued and outstanding at July 31, 2014 and
2013, respectively

 

 

  14

 

 

  13

Additional paid-in capital

 

 

  106,077

 

 

  104,816

Accumulated deficit

 

 

   (88,864)

 

 

   (88,762)

Other accumulated comprehensive loss

 

 

     (21)

 

 

     (18)

Total shareholders' equity

 

 

  17,206

 

 

  16,049

Total liabilities and shareholders' equity

 

$

  32,348

 

$

  33,128

 

 

 

 

 

 

 




[exh991002.jpg]


[exh991001.jpg]


ARI Network Services, Inc.
Consolidated Statements of Cash Flows
(Dollars inThousands)


 

 

Year ended July 31

 

 

2014

 

2013

 

 

(Unaudited)

 

(Audited)

Operating activities:

 

 

 

 

 

 

Net loss

 

$

    (102)

 

$

    (753)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Amortization of software products

 

 

    2,052

 

 

    1,741

Amortization of discount related to present value of earnout

 

 

    (15)

 

 

    (25)

Amortization of bank loan fees

 

 

      26

 

 

   160

Interest expense related to earnout payable

 

 

      76

 

 

   151

Depreciation and other amortization

 

 

    1,322

 

 

    1,281

Loss on impairment of long-lived assets

 

 

      35

 

 

   420

Gain on change in fair value of earnout receivable

 

 

    —

 

 

    (64)

Loss on debt extinguishment

 

 

    —

 

 

   682

Loss on change in fair value of stock warrants

 

 

      28

 

 

   635

Gain on change in fair value of earnout payable

 

 

    (67)

 

 

    (180)

Provision for bad debt allowance

 

 

   279

 

 

   194

Deferred income taxes

 

 

   227

 

 

     (1,260)

Stock based compensation

 

 

   340

 

 

   193

Stock based director fees

 

 

   220

 

 

   127

Net change in assets and liabilities:

 

 

 

 

 

 

Trade receivables

 

 

    (545)

 

 

      98

Work in process

 

 

    (140)

 

 

    (3)

Prepaid expenses and other

 

 

    (41)

 

 

    (209)

Other long term assets

 

 

    —

 

 

    (170)

Accounts payable

 

 

    (40)

 

 

    (16)

Deferred revenue

 

 

     (1,156)

 

 

     (1,042)

Accrued payroll and related liabilities

 

 

    (229)

 

 

   873

Accrued sales, use and income taxes

 

 

    (24)

 

 

    (69)

Other accrued liabilities

 

 

   137

 

 

    (360)

Net cash provided by operating activities

 

$

    2,383

 

$

    2,404

Investing activities:

 

 

 

 

 

 

Purchase of equipment, software and leasehold improvements

 

 

    (631)

 

 

    (722)

Cash received on earnout from disposition of a component of the business

 

 

   101

 

 

   147

Cash paid for contingent liabilities related to acquisitions

 

 

    (249)

 

 

    —

Net cash paid for net assets related to acquisitions

 

 

    (241)

 

 

     (2,479)

Software developed for internal use

 

 

    (29)

 

 

    (60)

Software development costs capitalized

 

 

     (1,769)

 

 

     (1,686)

Net cash used in investing activities

 

$

     (2,818)

 

$

     (4,800)

Financing activities:

 

 

 

 

 

 

Payments on long-term debt

 

$

    (450)

 

$

     (8,172)

Borrowings under long-term debt

 

 

    —

 

 

    6,000

Proceeds from capital lease obligations incurred

 

 

   312

 

 

    —

Payments of capital lease obligations

 

 

    (100)

 

 

    (210)

Payment of  stock issuance fees

 

 

    —

 

 

    (550)

Proceeds from exercise of common stock warrants

 

 

    —

 

 

    1,650

Proceeds from issuance of common stock

 

 

   289

 

 

    4,531

Net cash provided by financing activities

 

$

      51

 

$

    3,249

Effect of foreign currency exchange rate changes on cash

 

 

    (3)

 

 

    (8)

Net change in cash and cash equivalents

 

 

    (387)

 

 

   845

Cash and cash equivalents at beginning of period

 

 

    2,195

 

 

    1,350

Cash and cash equivalents at end of period

 

$

    1,808

 

$

    2,195

Cash paid for interest

 

$

   292

 

$

   596

Cash paid for income taxes

 

$

   106

 

$

      91




[exh991002.jpg]


[exh991001.jpg]


Reconciliation of Non-gaap Measures
(Dollars in Thousands)
(Unaudited)

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the three and twelve months ended
July 31, 2014 and 2013, respectively

 

 

 

 

 

 

 

 

 

 

 

Three months ended July 31

 

Year ended July 31

 

 

2014

 

2013

 

2014

 

2013

Net Income (loss)

 $                   174

 

 $                 (299)

 

 $                 (102)

 

 $                 (753)

 

Interest

                          70

 

                          92

 

                       286

 

                       626

 

Amortization of software products

                       558

 

                       429

 

                  2,052

 

                  1,741

 

Other depreciation and amortization

                       308

 

                       328

 

                  1,322

 

                  1,281

 

Loss on debt extinguishment

                           —

 

                           —

 

                           —

 

                       682

 

Loss on FMV of Warrant Derivatives

                           —

 

                       635

 

                          28

 

                       635

 

Loss on impairment of long-lived assets

                          35

 

                           —

 

                          35

 

                       420

 

Income taxes

                       230

 

                       314

 

                       241

 

                (1,133)

 

   EBITDA

 $              1,375

 

 $              1,499

 

 $              3,862

 

 $              3,499




[exh991002.jpg]