ARI Network Services, Inc. Announces Fiscal 2016 First Quarter Results

MILWAUKEE, Dec. 09, 2015 (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 first quarter ended October 31, 2015.

Highlights for the fiscal first quarter included:

• Revenue increased 28.8% to $11.7 million, which compares with $9.1 million for the same period last year and $10.9 million in 4Q15. Recurring revenue increased 31.4% to $10.7 million, which compares with $8.2 million for the same period last year and $9.8 million in 4Q15.
• Operating income was $808,000, compared with $283,000 for the same period last year and $686,000 in 4Q15.
• Adjusted EBITDA, a non-GAAP measure, increased 54.7% to $2.0 million, or 17.2% of revenue. This compares with Adjusted EBITDA of $1.3 million, or 14.3% of revenue in the same period last year and $1.8 million, or 16.5% of revenue in 4Q15.
• Cash generated from operations was $1.7 million, compared with $1.6 million for the same period last year and $1.7 million in 4Q15.

Fiscal Year 2016 First Quarter Financials

ARI achieved 28.8% revenue growth as it reported revenues of $11.7 million for the first quarter of fiscal year 2016, compared with $9.1 million for the same period last year. Recurring revenue comprised 91.2% of total revenue versus 89.4% for the same period last year.

Gross margin for the first quarter of fiscal year 2016 was 82.4% versus 80.8% last year.

Operating income was $808,000 for the first quarter of fiscal year 2016, compared with operating income of $283,000 for the same period last year, a 185.5% increase.

The company reported net income of $389,000, or $0.02 per diluted share for the quarter, compared with net income of $104,000 or $0.01 per share last year.

Management Discussion
Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “In the first quarter of fiscal 2016, we were able to experience the full impact of all three of the acquisitions we completed in fiscal 2015. The results demonstrate the significant progress we have made over the past year in expanding our product and service offerings and increasing the size of our total addressable market. Recurring revenue increased at a faster rate than our overall revenue, which is indicative of the growing number of customers subscribing to our SaaS and other recurring revenue offerings, as well as an increase in the overall spend of those customers. This is a strong start to our fiscal 2016, and we look forward to building upon this performance through the remainder of the year.”

William Nurthen, Chief Financial Officer of ARI, commented, “In the first quarter of fiscal 2016, we were able to reverse a three-year trend in which we experienced a sequential drop in Adjusted EBITDA from the prior fourth quarter. Adjusted EBITDA not only improved over 4Q15, but it also topped $2 million for the first time in the Company’s history. We also experienced another strong quarter of cash flow, despite transitioning some of our customers to monthly billing, and were able to increase our overall cash balance to $3.2 million at period end. The Adjusted EBITDA and cash flow performance continue to better position us 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 Wednesday December 9, 2015, at 4:30 p.m. EST, to review the financial results for the fiscal quarter ended October 31, 2015. Interested parties can access the conference call by dialing 877.359.3639 or 408.427.3725 and referring to Conference ID: 56616344. 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

• 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 "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 Balance Sheets
(Dollars in Thousands, Except per Share Data)
	(Unaudited)			(Audited)
	October 31			July 31
		2015			2015
ASSETS
Cash and cash equivalents	$	3,179		$	2,284
Trade receivables, less allowance for doubtful accounts of $335
and $372 at October 31, 2015 and July 31, 2015, respectively		2,147			2,046
Work in process		136			165
Prepaid expenses and other		736			820
Deferred income taxes		3,305			3,092
Total current assets		9,503			8,407
Equipment and leasehold improvements:
Computer equipment and software for internal use		2,936			2,800
Leasehold improvements		629			629
Furniture and equipment		3,012			2,981
Total equipment and leasehold improvements		6,577			6,410
Less accumulated depreciation and amortization		(4,202	)		(3,989	)
Net equipment and leasehold improvements		2,375			2,421
Capitalized software product costs:
Amounts capitalized for software product costs		25,836			25,463
Less accumulated amortization		(20,833	)		(20,337	)
Net capitalized software product costs		5,003			5,126
Deferred income taxes		1,892			2,398
Other intangible assets		9,719			10,116
Goodwill		21,066			21,168
Total non-current assets		40,055			41,229
Total assets	$	49,558		$	49,636
LIABILITIES
Current portion of long-term debt	$	1,693		$	1,338
Current portion of contingent liabilities		639			754
Accounts payable		785			708
Deferred revenue		6,674			7,327
Accrued payroll and related liabilities		2,207			1,752
Accrued sales, use and income taxes		167			140
Other accrued liabilities		696			748
Current portion of capital lease obligations		121			174
Total current liabilities		12,982			12,941
Long-term debt		8,510			9,079
Long-term portion of contingent liabilities		245			362
Capital lease obligations		94			106
Other long-term liabilities		199			199
Total non-current liabilities		9,048			9,746
Total liabilities		22,030			22,687
SHAREHOLDERS' EQUITY
Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at October 31, 2015 and July 31, 2015, respectively		—			—
Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0 shares issued and outstanding at October 31, 2015 and July 31, 2015, respectively		—			—
Common stock, par value $.001 per share, 25,000,000 shares authorized; 17,169,523 and 17,097,426 shares issued and outstanding at October 31, 2015 and July 31, 2015, respectively		17			17
Additional paid-in capital		114,892			114,700
Accumulated deficit		(87,404	)		(87,793	)
Other accumulated comprehensive income		23			25
Total shareholders' equity		27,528			26,949
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