0000879796-16-000054.txt : 20161027 0000879796-16-000054.hdr.sgml : 20161027 20161027160947 ACCESSION NUMBER: 0000879796-16-000054 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20161027 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20161027 DATE AS OF CHANGE: 20161027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARI NETWORK SERVICES INC /WI CENTRAL INDEX KEY: 0000879796 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 391388360 STATE OF INCORPORATION: WI FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-19608 FILM NUMBER: 161955610 BUSINESS ADDRESS: STREET 1: 10850 WEST PARK PLACE STREET 2: SUITE 1200 CITY: MILWAUKEE STATE: WI ZIP: 53224 BUSINESS PHONE: 414 973-4300 MAIL ADDRESS: STREET 1: 10850 WEST PARK PLACE STREET 2: SUITE 1200 CITY: MILWAUKEE STATE: WI ZIP: 53224 8-K 1 aris-20161027x8k.htm 8-K 8K Earnings Release

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 8-K



CURRENT REPORT





  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



  Date of Report (Date of earliest event reported): October 27, 2016





ARI NETWORK SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 



 

 

Wisconsin  

(State or other jurisdiction of incorporation)

0-19608 

(Commission File Number)

39-1388360 

(IRS Employer Identification No.)





10850 W. Park Place, Suite 1200

 Milwaukee, Wisconsin

(Address of principal executive offices)

 

 

53224

(Zip Code)

 

 

Registrant’s telephone number, including area code:  (414) 973-4300



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:



 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



   

   


   


 

 

 

Item 2.02.

Results of Operations and Financial Condition.



On October 27, 2016, ARI Network Services, Inc. issued a press release announcing its operating results for the year ended July 31, 2016.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.



Item 9.01.

Financial Statements and Exhibits.

 

 

(d)

Exhibits

 



Exhibit No.

Description

   

   

      99.1

Earnings Release dated October 27, 2016



   

   


   

 

SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 



 

 

Dated:  October 27, 2016

ARI NETWORK SERVICES, INC.

   

   

   

   

   

   

   

   

   

   

By:

/s/ William A. Nurthen

   

   

William A. Nurthen

   

   

Vice President of Finance and Chief Financial Officer



   

   


   



EXHIBIT INDEX



Exhibit No.                                                                  Description



    99.1                                               Earnings Release dated October 27, 2016

 

 

   







EX-99 2 aris-20161027xex99.htm EX-99 Exhibits 991

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

ARI Network Services, Inc. Announces Fourth Quarter and Fiscal 2016 Results
Fiscal 2016 revenue increases 18% to $47.7M, Adjusted EBITDA increases 29% to $8.5M



Milwaukee, Wis., October 27, 2016ARI 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 fourth quarter and fiscal year ended July 31, 2016.

Highlights for the fiscal year 2016 included:

·

Revenue increased 17.9% to $47.7 million, which compares with $40.4 million for the same period last year. Recurring revenues increased 20.4% and were $43.9 million, or 92.1% of revenue, compared with $36.5 million, or 90.2% of revenue, for the same period last year.

·

Operating income was $3.5 million, compared with $2.3 million for the same period last year, an increase of 53.2%. Net Income was $1.7 million, compared with net income of $1.1 million last year. The Company produced earnings per share of $0.10 versus $0.07 in the prior year.

·

Adjusted EBITDA, a non-GAAP measure, was $8.5 million or 17.8% of revenue compared with Adjusted EBITDA of $6.6 million or 16.3% of revenue in the same period last year, an increase of 29.3%.

·

Cash generated from operations was $7.7 million, compared with $6.3 million for the same period last year, an increase of 22.4%.



Highlights for the fourth quarter of fiscal 2016 included:

·

Revenue increased 12.0% to $12.2 million, which compares with $10.9 million for the same period last year. Recurring revenues were $11.4 million, or 93.1% of revenue, which compares with $9.8 million, or 90.1% of revenue for the same period last year. The quarter marked our tenth consecutive quarter of revenue growth.

·

Operating income was $942,000, compared with $686,000 for the same period last year an increase of 37.3%. Net income increased 24.5% to$458,000, or $0.03 per share, compared with $368,000, or $0.02 per share for the same period last year.

·

Adjusted EBITDA was $2.2 million, or 18.0% of revenue compared with Adjusted EBITDA of $1.8 million, or 16.5% of revenue in the same period last year, an increase of 22.2%.

·

Cash generated from operations was $2.2 million, compared with $1.7 million for the same period last year, an increase of 27.0%.

Fiscal Year 2016 Financials
Fiscal 2016 was another record year for ARI. The Company achieved record results in total revenues, operating income, Adjusted EBITDA and cash flow from operations.

Recurring revenues grew faster than overall revenue and increased as a total percentage of revenue. In addition, operating income and Adjusted EBIDTA continued to grow at a pace exceeding our growth in revenue, indicating the leverage in the Company’s operating model.

Management Discussion
Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “I am proud of the ARI team who have worked hard to consistently deliver improving performance throughout the year. We continue to focus on executing our strategy, and the Company’s financial performance in the fourth quarter and fiscal 2016 are representative of our continued ability to deliver outstanding results. In the fourth


 

quarter, I am delighted to report that our annualized churn rates trended down to 13.1%, the lowest rate in the last 7 quarters. This gives us further confidence in our ability to grow organic revenues at a faster pace as we head into fiscal 2017.

William Nurthen, Chief Financial Officer of ARI, commented, “In fiscal 2016, we focused on integrating the acquisitions we completed in fiscal 2015. The result was that we were able to expand our margins and improve our cash flow performance. Through the course of fiscal 2016 we generated cash from operations of $7.7 million and reduced our net debt by $4.5 million. We accomplished all this, while at the same time making significant investments in product development and operational scale, which leaves us well positioned to continue to grow and leverage the business in the years to come.”

Fiscal 2016 Conference Call
ARI will conduct a conference call on Thursday October 27, 2016, at 4:30 p.m. EDT, to review the financial results for the year ended and fiscal quarter ended July 31, 2016. Investors and interested parties can access the conference call by dialing 877.359.3639 or 408.427.3725 and referring to Conference ID: 79342981. 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

Adjusted EBITDA, a non-GAAP measure, is defined as earnings before interest, income taxes, depreciation and amortization, excluding stock-based compensation. Management believes Adjusted 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 Adjusted 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 Adjusted 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 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/117293073211296447579

·

LinkedIn: linkedin.com/company/ari_2

·

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.

For media inquiries, contact:

Colleen Malloy, Director of Marketing, ARI, 414.973.4323, colleen.malloy@arinet.com



Investor inquiries, contact:

Theresa DeNicola, ARI 414.973.4334, theresa.deNicola@arinet.com






 













 

 

 

 

 

 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Statements of Operations

(Dollars in Thousands, Except per Share Data)





 

 

 

 

 

 

 



Three months ended July 31

 

Twelve months ended July 31



2016

 

2015

 

2016

 

2015



(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Audited)

Net revenue

$

12,220 

 

$

10,912 

 

$

47,693 

 

$

40,443 

Cost of revenue

 

2,339 

 

 

1,911 

 

 

8,806 

 

 

7,302 

Gross profit

 

9,881 

 

 

9,001 

 

 

38,887 

 

 

33,141 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

2,533 

 

 

2,499 

 

 

10,847 

 

 

10,427 

Customer operations and support

 

2,692 

 

 

2,419 

 

 

9,940 

 

 

7,811 

Software development and technical support (net of capitalized software product costs)

 

1,298 

 

 

1,153 

 

 

5,093 

 

 

4,199 

General and administrative

 

1,809 

 

 

1,731 

 

 

7,056 

 

 

6,634 

Depreciation and amortization (exclusive of amortization of software product costs included in cost of revenue)

 

607 

 

 

513 

 

 

2,407 

 

 

1,756 

Net operating expenses

 

8,939 

 

 

8,315 

 

 

35,343 

 

 

30,827 

Operating income

 

942 

 

 

686 

 

 

3,544 

 

 

2,314 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(110)

 

 

(113)

 

 

(460)

 

 

(465)

Other, net

 

 

 

 —

 

 

10 

 

 

33 

Total other income (expense)

 

(105)

 

 

(113)

 

 

(450)

 

 

(432)

Income before provision for income tax

 

837 

 

 

573 

 

 

3,094 

 

 

1,882 

Income tax expense

 

(379)

 

 

(205)

 

 

(1,351)

 

 

(811)

Net income

$

458 

 

$

368 

 

$

1,743 

 

$

1,071 



 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

17,274 

 

 

16,721 

 

 

17,218 

 

 

14,849 

Diluted

 

17,792 

 

 

17,117 

 

 

17,710 

 

 

15,279 



 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

Basic

$

0.03 

 

$

0.02 

 

$

0.10 

 

$

0.07 

Diluted

$

0.03 

 

$

0.02 

 

$

0.10 

 

$

0.07 



 

 

 

 

 

 

 

 

 

 

 
















































 



 

 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, Except per Share Data)



 

 

 

 

 

 



 

(Unaudited)

 

(Audited)



July 31

 

July 31



 

2016

 

2015

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,118 

 

$

2,284 

Trade receivables, less allowance for doubtful accounts of $211

 

 

 

 

 

 

and $372 at July 31, 2016 and 2015, respectively

 

 

1,942 

 

 

2,046 

Work in process

 

 

132 

 

 

165 

Prepaid expenses and other

 

 

781 

 

 

820 

Deferred income taxes

 

 

3,182 

 

 

3,092 

Total current assets

 

 

11,155 

 

 

8,407 

Equipment and leasehold improvements:

 

 

 

 

 

 

Computer equipment and software for internal use

 

 

3,575 

 

 

2,800 

Leasehold improvements

 

 

639 

 

 

629 

Furniture and equipment

 

 

2,544 

 

 

2,981 

          Total equipment and leasehold improvements

 

 

6,758 

 

 

6,410 

Less accumulated depreciation and amortization

 

 

(4,237)

 

 

(3,989)

Net equipment and leasehold improvements

 

 

2,521 

 

 

2,421 

Capitalized software product costs:

 

 

 

 

 

 

Amounts capitalized for software product costs

 

 

24,774 

 

 

25,463 

Less accumulated amortization

 

 

(19,743)

 

 

(20,337)

Net capitalized software product costs

 

 

5,031 

 

 

5,126 

Deferred income taxes

 

 

1,112 

 

 

2,398 

Other intangible assets

 

 

7,890 

 

 

10,116 

Goodwill

 

 

21,634 

 

 

21,168 

Total non-current assets

 

 

38,188 

 

 

41,229 

Total assets

 

$

49,343 

 

$

49,636 



LIABILITIES

 

 

 

 

 

 

Current portion of long-term debt

 

$

2,417 

 

$

1,338 

Current portion of contingent liabilities

 

 

331 

 

 

754 

Accounts payable

 

 

718 

 

 

708 

Deferred revenue

 

 

6,763 

 

 

7,327 

Accrued payroll and related liabilities

 

 

1,817 

 

 

1,752 

Accrued sales, use and income taxes

 

 

297 

 

 

140 

Other accrued liabilities

 

 

677 

 

 

748 

Current portion of capital lease obligations

 

 

50 

 

 

174 

Total current liabilities

 

 

13,070 

 

 

12,941 

Long-term debt

 

 

6,658 

 

 

9,079 

Long-term portion of contingent liabilities

 

 

60 

 

 

362 

Capital lease obligations

 

 

63 

 

 

106 

Other long-term liabilities

 

 

166 

 

 

199 

Total non-current liabilities

 

 

6,947 

 

 

9,746 

Total liabilities

 

 

20,017 

 

 

22,687 



 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at July 31, 2016 and 2015, respectively

 

 

 —

 

 

 —

Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0 shares issued and outstanding at July 31, 2016 and 2015, respectively

 

 

 —

 

 

 —

Common stock, par value $.001 per share, 25,000,000 shares authorized; 17,310,763 and  17,097,426 shares issued and outstanding at July 31, 2016 and 2015, respectively

 

 

17 

 

 

17 

Additional paid-in capital

 

 

115,364 

 

 

114,700 

Accumulated deficit

 

 

(86,050)

 

 

(87,793)

Other accumulated comprehensive income

 

 

(5)

 

 

25 

Total shareholders' equity

 

 

29,326 

 

 

26,949 

Total liabilities and shareholders' equity

 

$

49,343 

 

$

49,636 




 









 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Statements of Cash Flows

(Dollars in Thousands)





 

Twelve months ended July 31



 

2016

 

2015



 

(Unaudited)

 

(Audited)

Operating activities:

 

 

 

 

 

 

Net income

 

$

1,743 

 

$

1,071 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Amortization of software products

 

 

2,108 

 

 

2,023 

Amortization of deferred loan fees and imputed interest expense

 

 

42 

 

 

77 

Depreciation and other amortization

 

 

2,407 

 

 

1,756 

Gain on change in fair value of earn-out receivable and payable

 

 

(5)

 

 

(28)

Provision for bad debt allowance

 

 

55 

 

 

168 

Deferred income taxes

 

 

1,196 

 

 

720 

Stock based compensation

 

 

427 

 

 

446 

Net change in assets and liabilities:

 

 

 

 

 

 

Trade receivables

 

 

74 

 

 

114 

Work in process, prepaid expenses and other

 

 

68 

 

 

153 

Other long-term assets

 

 

 -

 

 

(50)

Accounts payable

 

 

(1)

 

 

(75)

Deferred revenue

 

 

(618)

 

 

(584)

Accrued payroll and related liabilities

 

 

167 

 

 

266 

Accrued taxes and other accrued liabilities

 

 

62 

 

 

256 

Net cash provided by operating activities

 

$

7,725 

 

$

6,313 

Investing activities:

 

 

 

 

 

 

Purchase of equipment, software and leasehold improvements

 

 

(1,090)

 

 

(692)

Cash received on earn-out from disposition of a component of the business

 

 

 -

 

 

111 

Cash paid for contingent liabilities related to acquisitions

 

 

(626)

 

 

(250)

Cash paid for net assets related to acquisitions

 

 

 -

 

 

(9,700)

Software development costs capitalized

 

 

(1,780)

 

 

(1,411)

Net cash used in investing activities

 

$

(3,496)

 

$

(11,942)

Financing activities:

 

 

 

 

 

 

Payments on long-term debt

 

 

(1,298)

 

 

(622)

Borrowings under long-term debt

 

 

 -

 

 

2,168 

Payments of capital lease obligations

 

 

(176)

 

 

(253)

Net proceeds from public equity offering

 

 

 -

 

 

4,756 

Proceeds from exercise of common stock options and warrants

 

 

93 

 

 

78 

Net cash provided by (used in) financing activities

 

$

(1,381)

 

$

6,127 

Effect of foreign currency exchange rate changes on cash

 

 

(14)

 

 

(22)

Net change in cash and cash equivalents

 

 

2,834 

 

 

476 

Cash and cash equivalents at beginning of period

 

 

2,284 

 

 

1,808 

Cash and cash equivalents at end of period

 

$

5,118 

 

$

2,284 

Cash paid for interest

 

$

442 

 

$

350 

Cash paid for income taxes

 

$

46 

 

$

64 



 

 

 

 

 

 












 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-Gaap Measures

(Unaudited)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA for the three and twelve

months ended July 31, 2016 and 2015, respectively:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA:

FY2016

 

 

FY2015

 

 

FY2016

 

 

FY2015

 

 

 

 

 

 



Q4

 

 

Q4

 

 

YTD

 

 

YTD

 

 

 

 

 

 

Net Income (loss)

$

458 

 

$

368 

 

$

1,743 

 

$

1,071 

 

 

 

 

 

 

Interest

 

110 

 

 

113 

 

 

460 

 

 

465 

 

 

 

 

 

 

Amortization of software products

 

537 

 

 

463 

 

 

2,108 

 

 

2,023 

 

 

 

 

 

 

Other depreciation and amortization

 

607 

 

 

511 

 

 

2,407 

 

 

1,756 

 

 

 

 

 

 

Income taxes

 

379 

 

 

205 

 

 

1,351 

 

 

811 

 

 

 

 

 

 

  EBITDA

$

2,091 

 

$

1,660 

 

$

8,069 

 

$

6,126 

 

 

 

 

 

 

Stock-based compensation

 

111 

 

 

141 

 

 

427 

 

 

446 

 

 

 

 

 

 

  Adjusted EBITDA

$

2,202 

 

$

1,801 

 

$

8,496 

 

$

6,572 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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 depreciation and amortization expense in subsequent periods. The Company uses Adjusted EBITDA as a factor in evaluating potential acquisition targets and analyzing the pro forma impact of the acquisition on the Company. 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.

The Company began using EBITDA, adjusted to add back non-cash, stock-based compensation, as a performance measure during the fourth quarter of fiscal 2015. All prior periods have been updated to reflect this presentation.