ARI Network Services Announces 3rd Quarter 2012 Financial Results

MILWAUKEE, Wis., June 14 -- ARI Network Services, 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."

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 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.