ARI Network Services (OTCBB:ARIS), a leading provider of website,
software, and data solutions that help dealers, distributors, and
manufacturers Sell More Stuff!™, reported financial results today
for its fiscal fourth quarter and fiscal year ended July 31, 2013.
Highlights for the fiscal fourth quarter
included:
- Revenues for the fourth quarter of fiscal year 2013 were $8.5
million, a 44.0% increase over the same period last year.
- Recurring revenues for the fourth quarter of fiscal year 2013
were $7.9 million, a 65.1% increase over the fourth quarter of
fiscal year 2012. As a percentage of total revenues, recurring
revenues in the fourth quarter were 93.6% in fiscal year 2013
versus 81.7% for the same period in fiscal year 2012.
- EBITDA, a non-GAAP measure, adjusted for non-cash charges, was
$1.5 million in the fourth quarter, an increase of 36.4% over the
same period last year.
Highlights for the fiscal year 2013
included:
- The Company reported record revenues of $30.1 million, a 33.8%
increase over fiscal year 2012.
- Recurring revenues for the fiscal year 2013 were $27.0 million,
a 44.3% increase over fiscal year 2012. As a percentage of total
revenues, recurring revenues were 89.7% in fiscal year 2013 versus
83.2% in fiscal year 2012.
- EBITDA, a non-GAAP measure, adjusted for non-cash charges, was
$3.5 million in fiscal year 2013, a decline of 19.5% from fiscal
year 2012, which was related to costs associated with the two
fiscal year 2013 acquisitions.
- On August 17, 2012, the Company acquired substantially all of
the assets of Ready2Ride, Inc., the first-to-market and leading
provider of aftermarket fitment data to the powersports
industry. The Company leveraged this data in its February 2013
release of AccessorySmart™, a fitment driven parts lookup solution,
which won a Nifty 50 Award at the powersports industry's largest
trade show.
- On November 28, 2012, the Company acquired the assets of the
retail division of 50 Below Sales & Marketing, Inc., a leading
provider of eCommerce websites to the powersports, automotive tire
and wheel and durable medical equipment industries. The 50 Below
operation, which was purchased out of bankruptcy, is already
generating positive cash flow.
- On March 13, 2013, the Company announced that it entered into
agreements with various accredited investors in a private placement
of 3.2 million shares ($4.8 million) of its common stock at a
purchase price of $1.50 per share. The Company also issued
warrants to purchase 1.1 million shares, all but 214,000 of which
have been exercised to date. The funds raised in the private
placement were used to pay down a substantial portion of the
Company's outstanding debt.
- On April 25, 2013, the Company announced that it closed new
senior secured credit facilities with Silicon Valley Bank. The
facilities include a $4.5 million term loan and a $3.0 million
revolving credit facility. The proceeds from the transaction
were used to pay down the remaining portion of the Company's
outstanding debt with Fifth Third Bank and with a
shareholder.
Fiscal Year 2013 Financials
ARI reported revenues of $30.1 million for fiscal year 2013
versus $22.5 million for fiscal year 2012, an increase of 33.8%.
Recurring revenue comprised 89.7% of total revenue during fiscal
year 2013 versus 83.2% in fiscal year 2012. The increase in
revenues was driven by the Company's November 2012 acquisition of
the assets of the retail division of 50 Below Sales &
Marketing, Inc.
Overall gross margin for fiscal year 2013 was 78.0%, versus
76.6% last year. The gross margin improvement resulted from
the Company's focus on higher margin, recurring revenue streams and
its continued shift away from one-time revenue sources.
The company incurred a net loss of $753,000 or ($0.08) per share
for the year, compared to net income of $1,055,000 or $0.13 per
share last year. The loss incurred in fiscal 2013 was driven
by acquisition-related costs of approximately $1,200,000, a
non-cash loss on the fair market valuation of stock warrants of
$635,000, a non-cash loss of $682,000 related to the early
repayment of debt and a $420,000 non-cash impairment charge to a
long-lived asset. These charges were offset in part by a
non-cash gain recognized on a change in estimate of contingent
liabilities of $180,000 and an income tax benefit of
$1,133,000.
Management Discussion
Roy W. Olivier, President and Chief Executive Officer of ARI,
commented, "Fiscal 2013 was a transformational year for
ARI. We completed two acquisitions, which provided us with a
first-to-market opportunity in the powersports industry and
introduced ARI to several new markets – aftermarket wheel and tire
and durable medical equipment. We raised $4.5 million in a
private placement transaction that was used to reduce our
post-acquisition debt and are excited about our new relationship
with Silicon Valley Bank, which we believe will be a critical
growth partner for the Company."
Mr. Olivier continued, "Our acquisition of 50 Below in November
2012 was a game changer for ARI. We posted record revenues in
fiscal 2013, exceeding $30 million for the first time in the
Company's history and now host and maintain more than 5,500
websites. ARI has proven time and time again that it is
highly capable of acquiring and efficiently integrating
companies. The 50 Below operation, which we acquired out of
bankruptcy in November 2012, recorded an operating loss of $3.4
million on revenues of $9.2 million for the trailing twelve months
ended October 31, 2012. By the quarter ended April 30, 2013, we had
already achieved positive cash flow and EBITDA for 50 Below, ahead
of our original expectations."
Darin Janecek, Chief Financial Officer of ARI, commented, "ARI's
overall profitability was affected in fiscal year 2013 as a result
of the one-time acquisition-related costs and other non-cash
charges. Excluding these charges, ARI generated adjusted
EBITDA of $1.5 million in the fourth fiscal quarter; it's the first
quarter since the acquisitions of both Ready2Ride and 50 Below of
year over year EBITDA growth, an indication that we are
successfully integrating the acquisitions. Further, we continued to
improve on two of our most important growth metrics – recurring
revenue and churn. Recurring revenues exceeded 90% of total
revenue in the fourth fiscal quarter and our overall rate of churn
improved to 12.8% in fiscal year 2013 versus 13.4% last year. The
private placement and Silicon Valley Bank financing transactions
enabled us to improve our balance sheet substantially following the
two acquisitions, leaving us poised for continued growth as we head
into fiscal 2014."
Fiscal 2013 Conference Call
ARI will conduct a conference call on Tuesday
October 29, 2013 at 4:30 pm EDT to review the financial results for
the fiscal year ended July 31, 2013. Interested parties can access
the conference call by dialing (877) 359-3639 or (408) 427-3725 and
referring to conference ID: 69931955. The conference call is
also being webcast, which is available in the Investor Relations
section of the company's website at www.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 can be found on the investor relations section of our
website for all periods presented.
About ARI
ARI Network Services, Inc. ("ARI") (OTCBB:ARIS), creates
award-winning software-as-a-service ("SaaS") and data-as-a-service
("DaaS") solutions that help equipment manufacturers,
distributors and dealers in selected vertical markets Sell More
Stuff!™ – online and in-store. Our innovative products are
powered by a proprietary library of enriched original equipment and
aftermarket content that spans more than 10.5 million active part
and accessory SKUs, 469,000 models and $1.7 billion in retail
product value. We remove the complexity of selling and
servicing new and used inventory, parts, garments, and accessories
("PG&A") for customers in automotive tire and wheel,
powersports, outdoor power equipment, marine, RV and white goods
industries. More than 22,000 equipment dealers, 195 distributors
and 140 manufacturers worldwide leverage our web and eCatalog
platforms to Sell More Stuff!™. For more information on ARI,
visit www.investor.arinet.com.
Additional Information
- Follow @ARI_Net on Twitter: www.twitter.com/ARI_Net
- Become a fan of ARI on Facebook:
www.facebook.com/ARINetwork
- Read more about ARI: www.investor.arinet.com/about-us
(Roy W. Olivier Photo:
http://arinet.com/images/uploads/press_release_images/RoyWOlivier1.png)
(ARI Logo:
http://arinet.com/images/uploads/press_release_images/NewLogoTransparency_Black.jpg)
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 related to the ongoing integration of our recently
acquired businesses, as well as those factors described in Part 1A
of the Company's annual report on Form 10‐K for fiscal year ended
July 31, 2013, 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) |
|
|
|
Twelve months ended July
31 |
|
2013 |
2012 |
Net revenue |
$ 30,102 |
$ 22,494 |
Cost of revenue |
6,636 |
5,266 |
Gross profit |
23,466 |
17,228 |
Operating expenses: |
|
|
Sales and marketing |
7,480 |
4,585 |
Customer operations and
support |
5,834 |
3,213 |
Software development and
technical support (net of capitalized software product costs) |
2,648 |
2,267 |
General and
administrative |
6,005 |
4,454 |
Depreciation and amortization
(exclusive of amortization of software product costs included in
cost of revenue) |
1,281 |
1,414 |
Loss on impairment of
long-lived assets |
420 |
-- |
Net operating expenses |
23,668 |
15,933 |
Operating income (loss) |
(202) |
1,295 |
Other income (expense): |
|
|
Interest expense |
(626) |
(235) |
Loss on debt
extinguishment |
(682) |
-- |
Loss on change in fair value of
stock warrants |
(635) |
-- |
Gain on change in fair value of
estimated contingent liabilities |
180 |
-- |
Gain on change in fair value of
contingent assets |
64 |
70 |
Other, net |
15 |
152 |
Total other income (expense) |
(1,684) |
(13) |
Income (loss) before provision for income
tax |
(1,886) |
1,282 |
Income tax benefit
(expense) |
1,133 |
(227) |
Net income (loss) |
$ (753) |
$ 1,055 |
|
|
|
Net income (loss) per common share: |
|
|
Basic |
$ (0.08) |
$ 0.13 |
Diluted |
$ (0.08) |
$ 0.13 |
|
ARI Network Services, Inc. |
Consolidated Balance
Sheets |
(Dollars in Thousands, Except
per Share Data) |
|
|
|
|
July 31 2013 |
July 31 2012 |
ASSETS |
|
|
Cash and cash equivalents |
$ 2,195 |
$ 1,350 |
Trade receivables, less
allowance for doubtful accounts of $220 and $215 at July 31, 2013
and 2012, respectively |
945 |
1,187 |
Work in process |
154 |
151 |
Prepaid expenses and other |
934 |
766 |
Deferred income taxes |
2,938 |
2,686 |
Total current assets |
7,166 |
6,140 |
Equipment and leasehold
improvements: |
|
|
Computer equipment and software
for internal use |
2,641 |
2,592 |
Leasehold improvements |
609 |
584 |
Furniture and equipment |
2,561 |
1,989 |
|
5,811 |
5,165 |
Less accumulated depreciation
and amortization |
3,948 |
3,214 |
Net equipment and leasehold
improvements |
1,863 |
1,951 |
Capitalized software product
costs: |
|
|
Amounts capitalized for
software product costs |
20,814 |
18,247 |
Less accumulated
amortization |
16,604 |
15,298 |
Net capitalized software
product costs |
4,210 |
2,949 |
Deferred income taxes |
3,451 |
2,443 |
Other long term assets |
141 |
148 |
Other intangible assets |
4,099 |
1,439 |
Goodwill |
12,198 |
5,439 |
Total assets |
$ 33,128 |
$ 20,509 |
|
ARI Network Services, Inc. |
Consolidated Balance
Sheets |
(Dollars in Thousands, Except
per Share Data) |
|
|
|
|
July 31 2013 |
July 31 2012 |
LIABILITIES |
|
|
Current portion of long-term
debt |
$ 450 |
$ 1,084 |
Current portion of contingent
liabilities |
303 |
-- |
Accounts payable |
710 |
725 |
Deferred revenue |
8,571 |
4,926 |
Accrued payroll and related
liabilities |
1,434 |
758 |
Accrued sales, use and income
taxes |
147 |
216 |
Other accrued liabilities |
316 |
214 |
Current portion of capital
lease obligations |
24 |
150 |
Total current liabilities |
11,955 |
8,073 |
Long-term debt |
4,050 |
2,888 |
Common stock warrants at fair
value |
254 |
-- |
Long-term portion of contingent
liabilities |
418 |
-- |
Capital lease obligations |
169 |
58 |
Other long term
liabilities |
233 |
274 |
Total non-current
liabilities |
5,124 |
3,220 |
Total liabilities |
17,079 |
11,293 |
|
|
|
SHAREHOLDERS' EQUITY |
|
|
Cumulative preferred stock, par
value $.001 per share, 1,000,000 shares authorized; 0 shares issued
and outstanding at July 31, 2013 and 2012 |
-- |
-- |
Junior preferred stock, par
value $.001 per share, 100,000 shares authorized; 0 shares issued
and outstanding at July 31, 2013 and 2012 |
-- |
-- |
Common stock, par value $.001
per share, 25,000,000 shares authorized; 12,976,588 and 8,037,750
shares issued and outstanding at July 31, 2013 and 2012 |
13 |
8 |
Additional paid-in capital |
104,816 |
97,218 |
Accumulated deficit |
(88,762) |
(88,009) |
Other accumulated comprehensive
loss |
(18) |
(1) |
Total shareholders' equity |
16,049 |
9,216 |
Total liabilities and
shareholders' equity |
$ 33,128 |
$ 20,509 |
CONTACT: For More Information, contact
Darin Janecek, Chief Financial Officer,
+1-414-973-4300, Darin.Janecek@arinet.com; or
Gregory V. Taylor, CFA, Three Part Advisors,
+1-214-295-8370, gtaylor@threepa.com
ARI Network Services, Inc. (NASDAQ:ARIS)
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ARI Network Services, Inc. (NASDAQ:ARIS)
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