MILWAUKEE, March 10, 2016 (GLOBE NEWSWIRE) -- ARI Network Services, Inc. (NASDAQ:ARIS), an award-winning provider of SaaS, software tools and marketing services that help dealers, distributors and manufacturers Sell More Stuff!™, reported financial results today for its fiscal 2016 second quarter ended January 31, 2016.

Highlights for the fiscal second quarter included:

  • Eighth consecutive quarter of revenue growth for the firm.

  • Revenue increased 15.9% to $11.8 million, which compares with $10.1 million for the same period last year and $11.7 million in 1Q16. Recurring revenue growth outpaced overall revenue growth as it increased 17.0% to $10.8 million, which compares with $9.2 million for the same period last year and $10.7 million in 1Q16.

  • Operating income was $873,000, compared with $670,000 for the same period last year and $808,000 in 1Q16.

  • Adjusted EBITDA, a non-GAAP measure, increased 20.3% to $2.1 million, or 17.8% of revenue. This compares with Adjusted EBITDA of $1.7 million, or 17.2% of revenue in the same period last year and $2.0 million, or 17.2% of revenue in 1Q16.

  • Cash generated from operations was $1.2 million, compared with $1.1 million for the same period last year and $1.7 million in 1Q16.

Fiscal Year 2016 Second Quarter Financials
ARI achieved 15.9% revenue growth as it reported revenues of $11.8 million for the second quarter of fiscal year 2016, compared with $10.1 million for the same period last year. Recurring revenue comprised 91.6% of total revenue versus 90.8% for the same period last year.

Gross margin for the second quarter of fiscal year 2016 was 82.4% versus 81.6% last year.

Operating income was $873,000 for the second quarter of fiscal year 2016, compared with operating income of $670,000 for the same period last year, a 30.3% increase.

The company reported net income of $448,000, or $0.03 per diluted share for the quarter, compared with net income of $260,000 or $0.02 per share last year.

Management Discussion
Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “The second quarter results continue to demonstrate that we are successfully executing against our strategy as operating income and Adjusted EBITDA increased at a faster rate than our overall revenue. Further, our total bookings remain strong and in Q2 were up 24%, which we believe will allow us to accelerate organic revenue growth in the back half of the fiscal year.”

William Nurthen, Chief Financial Officer of ARI, commented, “As we reach the midpoint of our fiscal year, we continue to experience year-over-year improvements in both profitability and cash flow. In the second quarter of fiscal 2016, the Company produced record operating income and our highest EPS since the fourth quarter of fiscal 2012. We also experienced another strong quarter of cash flow, while at the same time continuing to transition some of our customers from annual to monthly billing. Despite increased debt repayments in the quarter related to the TCS acquisition, we maintained our cash balance at $3.2 million which continues to leave us well-positioned to execute on future investment opportunities that align with our growth strategy.”

Fiscal 2016 First Quarter Conference Call
ARI will conduct a conference call on Thursday, March 10, 2016, at 4:30 p.m. EST, to review the financial results for the fiscal quarter ended January 31, 2016. Interested parties can access the conference call by dialing 877.359.3639 or 408.427.3725 and referring to Conference ID: 26317186. The conference call is also being webcast and is available via the Company’s investor relations website at investor.arinet.com. A replay of the webcast will be archived on the Company’s investor relations website for 60 days.

Non-GAAP Measures
EBITDA is calculated as net income adjusted to exclude interest expense, amortization, depreciation and income tax expense. Adjusted EBITDA further eliminates non-cash, stock-based compensation expense. Management believes Adjusted EBITDA is helpful in understanding period-over-period operating results separate and apart from non-operating expenses and expenses pertaining to prior period investing activities, particularly given the Company’s significant investments in capitalized software and its continuing efforts in completing acquisitions, which typically result in significant non-cash depreciation and amortization expense in subsequent periods. However, Adjusted EBITDA has significant limitations as an analytical tool and should only be used cautiously in addition to, and never as a substitute for, operating income, cash flows or other measures of financial performance prepared in accordance with generally accepted accounting principles and may not necessarily be comparable to similarly titled measures of other companies. A reconciliation of net income to Adjusted EBITDA can be found in this release and at the Company’s investor relations website for all periods presented.

About ARI
ARI Network Services, Inc. (ARI) (NASDAQ:ARIS) offers an award-winning suite of SaaS, 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 repository of enriched original equipment and aftermarket electronic content spanning more than 17 million active part and accessory SKUs and 750,000 equipment models. 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 23,500 equipment dealers, 195 distributors and 3,360 brands worldwide leverage our web and eCatalog platforms to Sell More Stuff!™ For more information on ARI, visit investor.arinet.com.

Additional Information

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 "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 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. 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.

  
ARI Network Services, Inc. 
Consolidated Statements of Operations 
(Dollars in Thousands, Except per Share Data) 
(Unaudited) 
         
 Three months ended January 31 Six months ended January 31 
 2016 2015 2016 2015 
Net revenue$   11,752  $   10,139  $   23,489  $   19,251  
Cost of revenue     2,064      1,862      4,133      3,611  
Gross profit    9,688      8,277      19,356      15,640  
Operating expenses:            
Sales and marketing    2,748      2,668      5,513      5,210  
Customer operations and support    2,428      1,871      4,874      3,561  
Software development and technical support (net of capitalized software product costs)    1,319      1,072      2,574      1,944  
General and administrative     1,730      1,588      3,515      3,192  
Depreciation and amortization (exclusive of amortization of software product costs included in cost of revenue)      590      408      1,199      780  
Net operating expenses    8,815      7,607      17,675      14,687  
Operating income    873      670      1,681      953  
Other income (expense):            
Interest expense    (120)     (140)     (232)     (229) 
Other, net        4      (8)     3  
Total other income (expense)    (120)     (136)     (240)     (226) 
Income before provision for income tax    753      534      1,441      727  
Income tax expense    (305)     (274)     (604)     (363) 
Net income$   448  $   260  $   837  $   364  
             
Weighted average common shares outstanding:            
Basic    17,188      14,393      17,170      14,043  
Diluted    17,695      14,861      17,655      14,475  
             
Net income per common share:            
Basic$   0.03  $   0.02  $   0.05  $   0.03  
Diluted$   0.03  $   0.02  $   0.05  $   0.03  
             

 

   
 ARI Network Services, Inc. 
 Consolidated Balance Sheets 
 (Dollars in Thousands, Except per Share Data) 
         
   (Unaudited) (Audited) 
   January 31 July 31 
   2016 2015 
 ASSETS       
 Cash and cash equivalents $   3,166  $   2,284  
 Trade receivables, less allowance for doubtful accounts of        
    $372 at January 31, 2016 and July 31, 2015     2,152      2,046  
 Work in process     184      165  
 Prepaid expenses and other     704      820  
 Deferred income taxes     3,145      3,092  
 Total current assets     9,351      8,407  
 Equipment and leasehold improvements:       
 Computer equipment and software for internal use     3,356      2,800  
 Leasehold improvements     629      629  
 Furniture and equipment     2,624      2,981  
   Total equipment and leasehold improvements     6,609      6,410  
 Less accumulated depreciation and amortization     (4,413)     (3,989) 
   Net equipment and leasehold improvements     2,196      2,421  
 Capitalized software product costs:       
 Amounts capitalized for software product costs    26,523      25,463  
 Less accumulated amortization   (21,377)    (20,337) 
   Net capitalized software product costs     5,146      5,126  
 Deferred income taxes     1,753      2,398  
 Other intangible assets     8,660      10,116  
 Goodwill    21,639      21,168  
 Total non-current assets    39,394      41,229  
 Total assets $  48,745  $   49,636  
   
 LIABILITIES       
 Current portion of long-term debt $   1,929  $   1,338  
 Current portion of contingent liabilities     470      754  
 Accounts payable     723      708  
 Deferred revenue     6,165      7,327  
 Accrued payroll and related liabilities     1,772      1,752  
 Accrued sales, use and income taxes     208      140  
 Other accrued liabilities     787      748  
 Current portion of capital lease obligations     78      174  
 Total current liabilities    12,132      12,941  
 Long-term debt     7,899      9,079  
 Long-term portion of contingent liabilities     224      362  
 Capital lease obligations     81      106  
 Other long-term liabilities     185      199  
 Total non-current liabilities     8,389      9,746  
 Total liabilities    20,521      22,687  
         
 SHAREHOLDERS' EQUITY       
 Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at January 31, 2016 and July 31, 2015, respectively         
 Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0 shares issued and outstanding at January 31, 2016 and July 31, 2015, respectively         
 Common stock, par value $.001 per share, 25,000,000 shares authorized; 17,257,728 and 17,097,426 shares issued and outstanding at January 31, 2016 and July 31, 2015, respectively     17      17  
 Additional paid-in capital   115,139    114,700  
 Accumulated deficit   (86,956)   (87,793) 
 Other accumulated comprehensive income     24      25  
 Total shareholders' equity    28,224      26,949  
 Total liabilities and shareholders' equity $  48,745  $   49,636  
   

 

   
 ARI Network Services, Inc. 
 Consolidated Statements of Cash Flows 
 (Dollars in Thousands) 
 (Unaudited) 
   Six months ended January 31 
   2016 2015 
 Operating activities:       
 Net income $   837  $   364  
 Adjustments to reconcile net income to net cash provided by operating activities:         
 Amortization of software products     1,040      1,102  
 Non-cash interest expense     19      39  
 Depreciation and other amortization     1,199      778  
 Loss on change in fair value of earn-out payable     8      -   
 Provision for bad debt allowance     78      79  
 Deferred income taxes     592      314  
 Stock based compensation     147      141  
 Stock based director fees     56      69  
 Net change in assets and liabilities:       
 Trade receivables     (166)     (842) 
 Work in process     (19)     145  
 Prepaid expenses and other     126      162  
 Other long-term assets     -       (112) 
 Accounts payable     4      303  
 Deferred revenue     (1,207)     (144) 
 Accrued payroll and related liabilities     144      283  
 Accrued sales, use and income taxes     68      (2) 
 Other accrued liabilities     25      55  
    Net cash provided by operating activities $   2,951  $   2,734  
 Investing activities:       
 Purchase of equipment, software and leasehold improvements     (324)     (279) 
 Cash received on earn-out from disposition of a component of the business     -       58  
 Cash paid for contingent liabilities related to acquisitions     (322)     (250) 
 Cash paid for net assets related to acquisitions     -       (4,200) 
 Software development costs capitalized     (827)     (718) 
    Net cash used in investing activities $   (1,473) $   (5,389) 
 Financing activities:       
 Borrowings under line of credit, net $   -   $   750  
 Payments on long-term debt     (530)     (319) 
 Borrowings under long-term debt     -       2,168  
 Payments of capital lease obligations     (121)     (115) 
 Proceeds from exercise of common stock options     56      72  
    Net cash provided by (used in) financing activities $   (595) $   2,556  
 Effect of foreign currency exchange rate changes on cash     (1)     (21) 
 Net change in cash and cash equivalents     882      (120) 
 Cash and cash equivalents at beginning of period     2,284      1,808  
 Cash and cash equivalents at end of period $   3,166  $   1,688  
    Cash paid for interest $   227  $   176  
    Cash paid for income taxes $   43  $   55  
         

 

 
ARI Network Services, Inc.
Reconciliation of Non-Gaap Measures
(Dollars in Thousands)
(Unaudited)
          
          
Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA for the three, six and twelve 
months ended January 31, 2016 and 2015, respectively:
          
EBITDA:FY2016FY2015FY2016FY2015FY2016FY2015  
  Q2Q2YTDYTDTTMTTM  
Net Income (loss)$  448 $  260 $  837 $  364 $  1,544 $  698   
   Interest   120    140    232    229    468    367   
 Amortization of software products   544    553    1,040    1,102    1,961    2,192   
 Other depreciation and amortization   590    408    1,199    780    2,175    1,442   
 Loss on debt extinguishment   -     -     -     -     -     -    
 Loss on FMV of Warrant Derivatives   -     -     -     -     -     (4)  
 Loss on impairment of long-lived assets   -     -     -     -     -     35   
 Income taxes   305    274    604    363    1,052    746   
   EBITDA$  2,007 $  1,635 $  3,912 $  2,838 $  7,200 $  5,476   
 Stock-based compensation   88    107    203    210    439    609   
   Adjusted EBITDA$  2,095 $  1,742 $  4,115 $  3,048 $  7,639 $  6,085   
          
          
Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA for the following fiscal quarters:        
          
  1/31/1610/31/157/31/154/30/151/31/1510/31/147/31/1404/30/14
  Q2Q1Q4Q3Q2Q1Q4Q3
 Quarterly 2016  2016  2015  2015  2015  2015  2014  2014 
Net Income (loss)$  448 $  389 $  368 $  339 $  260 $  104 $  174 $  160 
 Interest 120  112  113  123  140  89  70  68 
 Amortization of software products 544  496  463  458  553  549  558  532 
 Other depreciation and amortization 590  609  511  465  408  372  308  354 
 Loss on debt extinguishment   -     -     -     -     -     -     -     -  
 Loss on FMV of Warrant Derivatives   -     -     -     -     -     -     -     (4)
 Loss on impairment of long-lived assets   -     -     -     -     -     -     35    -  
 Income taxes   305    299    205    243    274    89    230    153 
   EBITDA$  2,007 $  1,905 $  1,660 $  1,628 $  1,635 $  1,203 $  1,375 $  1,263 
 Stock-based compensation   88 $  115 $  141 $  95 $  107 $  103 $  231 $  168 
   Adjusted EBITDA$  2,095 $  2,020 $  1,801 $  1,723 $  1,742 $  1,306 $  1,606 $  1,431 
          
 Trailing 12 months (TTM)        
Net Income (loss)$  1,544 $  1,356 $  1,071 $  877 $  698 $  (23)$  (102)$  (575)
 Interest 468  488  465  422  367  305  286  308 
 Amortization of software products 1,961  1,970  2,023  2,118  2,192  2,157  2,052  1,923 
 Other depreciation and amortization 2,175  1,993  1,756  1,553  1,442  1,373  1,322  1,342 
 Loss on debt extinguishment   -     -     -     -     -     -     -     -  
 Loss on FMV of Warrant Derivatives   -     -     -     -     (4)   6    28    663 
 Loss on impairment of long-lived assets     -     -     -     35    35    35    35    -  
 Income taxes   1,052    1,021    811    836    746    246    241    325 
   EBITDA$  7,200 $  6,828 $  6,126 $  5,841 $  5,476 $  4,099 $  3,862 $  3,986 
 Stock-based compensation   439 $  458 $  446 $  536 $  609 $  627 $  560 $  29 
   Adjusted EBITDA$  7,639 $  7,286 $  6,572 $  6,377 $  6,085 $  4,726 $  4,422 $  4,015 
          

 

For media inquiries, contact:
Colleen Malloy, Director of Marketing, ARI, +1.414.973.4323, colleen.malloy@arinet.com

Investor inquiries, contact:
Steven Hooser, Three Part Advisors, +1.214.872.2710, shooser@threepa.com