ARI Network Services Announces Fiscal 2013 Results

ARI NETWORK SERVICES ANNOUNCES FISCAL 2013 RESULTS

MILWAUKEE, Oct. 29 -- ARI Network Services (ARIS), a leading provider of website, software, and data solutions that help dealers, distributors, and manufacturers Sell More Stuff!(TM), 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(TM), 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 and 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 and 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."

ARI Network Services Announces Fiscal Year 2013 2nd Quarter Financial Results

MILWAUKEE -- March 12 -- ARI Network Services, a leader in creating, marketing, and supporting SaaS and DaaS solutions that connect consumers, dealers, distributors, and manufacturers in selected vertical markets, reported financial results today for the second quarter of fiscal 2013 ended January 31, 2013. The Company also announced today that it has entered into definitive agreements with various accredited investors in a private placement of $4.8 million of common stock at a price of $1.50 per share.

Highlights for the quarter included:

-- On November 28, 2012, the Company acquired the assets of the retail division of 50 Below Sales and Marketing, Inc., a leading provider of eCommerce websites to the powersports, automotive tire and wheel aftermarket, medical equipment and pool and spa industries. The acquisition brings with it over 3,500 dealer websites, more than doubling the size of ARI's website business and making websites the Company's largest source of revenue.

-- Total revenue for the second quarter of fiscal 2013 increased 35.9% to $7.5 million compared to $5.5 million in for the same period in fiscal 2012, primarily as a result of the acquisition.

-- Recurring revenue for the quarter increased 41.9% to $6.6 million, or 88.3% of total revenue, from $4.7 million, or 84.6% of total revenue, for the same period in fiscal 2012.

-- For the quarter ended January 31, 2013, churn (the measure of customers that do not renew) improved approximately 28.4% compared to the same quarter last year.

Fiscal Year 2013 Second Quarter Financials

ARI reported revenue of $7.5 million for the second quarter of fiscal 2013 versus $5.5 million for the same period last year, an increase of 35.9%. Recurring revenue comprised approximately 88.3% of total revenue during the quarter and 86.0% of total year to date revenue in fiscal 2013, compared to 84.6% and 84.2% for the same periods last year.

Total operating expenses increased 55.0% to $6.3 million for the three months ended January 31, 2013 compared with $4.1 million for the three months ended January 31, 2012. This increase resulted primarily from the addition of the Ready2Ride and 50 Below operations. Of this increase, approximately $625,000 represents acquisition-related legal and professional fees. The company reported a loss from operations of $566,000 during the quarter, versus operating income last year of $170,000. This loss stems primarily from the acquisition-related fees as well as ongoing integration activities.

The company reported net income of $4,000, or $0.00 per share, for the quarter ended January 31, 2013, compared to $61,000 or $0.01 per share for the same period last year. EBITDA, a non-GAAP measure, was $241,000 for the second quarter of fiscal 2013, compared to $935,000 for the same period last year.

Private Placement Transaction

The Company entered into definitive agreements with various accredited investors in a private placement of approximately $4.8 million of common shares at a price of $1.50 per share. In addition, the Company will issue to the investors warrants to purchase 1,066,667 shares of common stock. The warrants have an exercise price of $2.00 per share and are exercisable for five years.

New institutional investors accounted for the majority of the financing and existing investors made up the remainder. The signing of the purchase agreements occurred on Tuesday, March 12, 2013. The offering is expected to close on or about Monday, March 18, 2013, subject to satisfaction of customary closing conditions. Ascendiant Capital Markets LLC acted as the exclusive placement agent for the transaction.

The securities offered in this private placement have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws. Accordingly, the securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act of 1933 and such applicable state securities laws. The securities were offered only to accredited investors.

Management Discussion

Roy W. Olivier, President and Chief Executive Officer of ARI, commented, "50 Below integration activities are well underway; this acquisition will be a game changer for ARI. The integration of 50 Below into ARI makes us one of the leading providers of websites to the powersports market, and the addition of Ready2Ride's aftermarket fitment data to our product offering makes ARI one of the most comprehensive providers of eCommerce solutions to the powersports industry. This acquisition also provides us with a footprint in the automotive aftermarket industry with more than 2,000 wheel and tire dealer websites."

Mr. Olivier continued, "The recent acquisitions should rapidly facilitate the growth of the company, and the synergistic opportunities from integrating operations significantly enhance the scalability of the combined organization. We expect both of these acquisitions to be accretive to earnings in fiscal 2014 and anticipate EBITDA returning to historical levels in fiscal 2015, as we continue to consolidate operations and further leverage our fixed operating cost structure. We remain very focused on our organic growth strategy as well and released numerous product upgrades and new features, including the roll out of our new AccessorySmartTM aftermarket parts lookup solution, a first for the powersports industry. I am extremely excited with the future prospects for our organization."

Darin Janecek, Chief Financial Officer of ARI, commented, "While our operating results will be affected over the remainder of fiscal 2013 from the acquisition-related legal and professional fees as well as ongoing integration activities, we anticipate significant year-over-year revenue growth from these acquisitions. We expect both the Ready2Ride and 50 Below acquisitions to be accretive to earnings in fiscal 2014 and anticipate additional revenue growth next year as well."

With respect to the private placement transaction, Mr. Olivier commented, "we are also very pleased to announce this significant financing transaction, the proceeds of which will be used to pay down the debt used to finance our recent acquisitions. Reducing our debt structure to pre-acquisition levels will allow us to prioritize our efforts on integrating the acquired companies, which will position us to further advance our competitive position in the marketplace and opportunistically take advantage of strategic situations."

About ARI

ARI Network Services, Inc. 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 powersports, outdoor power equipment, marine, and white goods. We estimate that more than 22,000 equipment dealers, 140 manufacturers, and 195 distributors worldwide leverage our technology to drive revenue, gain efficiencies and increase customer satisfaction.