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): December 11, 2014

 

 

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 December 11, 2014, ARI Network Services, Inc. issued a press release announcing its operating results for the quarter ended October 31, 2014.  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 December 11, 2014

 

   

   


   

 

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:  December 11, 2014

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 December 11, 2014

 

 

   


EXHIBIT 99.1

FOR IMMEDIATE RELEASE

 


 

ARI Network Services Announces Fiscal 2015 First Quarter Results
Quarterly revenue tops $9 million with addition of TCS Technologies

 

Milwaukee, Wis., December 11, 2014ARI Network Services, Inc. (NASDAQ: ARIS), an award-winning provider of data-driven software tools and marketing services that help dealers, distributors and manufacturers Sell More Stuff!™, reported financial results today for its fiscal 2015 first quarter ended October 31, 2014. 

Highlights for the fiscal first quarter included:

·

The company completed its acquisition of Tire Company Solutions, LLC (“TCS Technologies”) on September 30, 2014, further consolidating its position as the leader in eCommerce-enabled websites and digital marketing services in the automotive tire and wheel industry.

·

Total revenues for the first quarter of fiscal year 2015 were $9.1 million, which compares with $8.2 million for the same period last year and $8.5 million in 4Q14.

·

Operating income was $0.3 million for the first quarter of fiscal 2015, compared with operating income of $0.2 million for the same period last year and $0.4 million in 4Q14.

·

Net income was $104,000 or $0.01 per diluted share for the first quarter of fiscal 2015, compared with net income of $25,000 or $0.00 per share for the same period last year and $174,000 or $0.01 per share in 4Q14.

·

EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $1.2 million or 13.2% of revenue in the first quarter of fiscal year 2015. This compares with EBITDA of $1.0 million or 11.8% of revenue in the same period last year and $1.4 million or 16.1% of revenue in 4Q14. 

·

Cash generated from operations was $1.6 million for the first quarter of fiscal 2015, compared with ($26,000) for the same period last year and $1.3 million in 4Q14.

Fiscal Year 2015 First Quarter Financials
ARI experienced 11.7% revenue growth as it reported revenues of $9.1 million for the first quarter of fiscal year 2015 compared with $8.2 million for the same period last year. Recurring revenues for the first quarter of fiscal year 2015 were $8.2 million versus $7.7 million in the same period last year. Recurring revenue comprised 89.5% of total revenue for the first quarter versus 94.7% for the same period last year.

Gross margin for the first quarter of fiscal year 2015 was 80.8% versus 80.9% last year.

Operating income was $283,000 for the first quarter of fiscal year 2015, compared with operating income of $167,000 for the same period last year, a 69.5% increase. The increase in results from operations is attributed to cost efficiencies and reductions made in fiscal year 2014, partially offset by incremental costs in the quarter related to the acquisition of TCS Technologies.

The company reported net income of $104,000 or $0.01 per diluted share for the quarter, compared with a net income of $25,000 or $0.00 per share last year.

Management Discussion

Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “With our first quarter results, we are off to a great start for our fiscal year. We closed the TCS Technologies acquisition on September 30, 2014, and with the incremental revenue they contributed for the quarter, ARI revenue topped $9.0 


 

million in quarterly revenue for the first time. In addition to the revenue growth, we were able to improve upon both our profit and EBITDA performance from the prior year.”

William Nurthen, Chief Financial Officer, commented, “Our profit and EBITDA performance in the quarter was strong given we experienced more than $200,000 in charges related to the TCS Technologies acquisition in the quarter. In addition, we posted our largest quarterly cash flow from operations performance ever at $1.6 million. We are pacing well ahead of last year as this result represents more cash flow than we generated in the first three quarters of fiscal 2014.”

First Quarter Fiscal 2015 Conference Call
ARI will conduct a conference call on Thursday, December 11, 2014 at 4:30 pm ET to review the financial results for the fiscal quarter ended October 31, 2014. Interested parties can access the conference call by dialing 877.359.3639 or 408.427.3725 and referring to conference ID: 45024166. 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 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 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 data-driven 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.

For media inquiries, contact:

Colleen Malloy, Director of Marketing, ARI, +1.414.973.4323, colleen.malloy@arinet.com

 

Investor inquiries, contact:

Steven Hooser, Three Part Advisors, +1.214.872.2710, shooser@threepa.com


 

 

 

 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Statements of Operations

(Dollars in Thousands, Except per Share Data)

Unaudited

 

 

 

 

 

Three months ended October 31

 

 

 

 

 

 

 

 

 

2014

 

2013

Net revenue

 

$

9,112 

 

$

8,160 

Cost of revenue

 

 

1,749 

 

 

1,560 

Gross profit

 

 

7,363 

 

 

6,600 

Operating expenses:

 

 

 

 

 

 

Sales and marketing

 

 

2,542 

 

 

2,457 

Customer operations and support

 

 

1,690 

 

 

1,611 

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

 

 

872 

 

 

556 

General and administrative

 

 

1,604 

 

 

1,488 

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

 

 

372 

 

 

321 

Net operating expenses

 

 

7,080 

 

 

6,433 

Operating income

 

 

283 

 

 

167 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(89)

 

 

(70)

Loss on change in fair value of stock warrants

 

 

 —

 

 

(22)

Gain on change in fair value of estimated contingent liabilities

 

 

 —

 

 

26 

Other, net

 

 

(1)

 

 

Total other income (expense)

 

 

(90)

 

 

(58)

Income before provision for income tax

 

 

193 

 

 

109 

Income tax expense

 

 

(89)

 

 

(84)

Net income

 

$

104 

 

$

25 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

13,693 

 

 

12,995 

Diluted

 

 

14,014 

 

 

13,758 

Net income per common share:

 

 

 

 

 

 

Basic

 

$

0.01 

 

$

0.00 

Diluted

 

$

0.01 

 

$

0.00 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, Except per Share Data)

 

 

 

 

 

 

 

 

 

(Unaudited)

 

(Audited)

 

Oct 31

 

July 31

 

 

2014

 

2014

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,597 

 

$

1,808 

Trade receivables, less allowance for doubtful accounts of $521

 

 

 

 

 

 

and $359 at October 31, 2014 and July 31,2014, respectively

 

 

2,062 

 

 

1,212 

Work in process

 

 

316 

 

 

294 

Prepaid expenses and other

 

 

877 

 

 

1,030 

Deferred income taxes

 

 

2,551 

 

 

2,655 

Total current assets

 

 

7,403 

 

 

6,999 

Equipment and leasehold improvements:

 

 

 

 

 

 

Computer equipment and software for internal use

 

 

2,386 

 

 

2,382 

Leasehold improvements

 

 

626 

 

 

626 

Furniture and equipment

 

 

2,464 

 

 

2,327 

 

 

 

5,476 

 

 

5,335 

Less accumulated depreciation and amortization

 

 

(3,712)

 

 

(3,564)

Net equipment and leasehold improvements

 

 

1,764 

 

 

1,771 

Capitalized software product costs:

 

 

 

 

 

 

Amounts capitalized for software product costs

 

 

23,797 

 

 

22,676 

Less accumulated amortization

 

 

(19,205)

 

 

(18,656)

Net capitalized software product costs

 

 

4,592 

 

 

4,020 

Deferred income taxes

 

 

3,542 

 

 

3,507 

Other long-term assets

 

 

102 

 

 

72 

Other intangible assets

 

 

7,057 

 

 

3,612 

Goodwill

 

 

17,666 

 

 

12,367 

Total non-current assets

 

 

34,723 

 

 

25,349 

Total assets

 

$

42,126 

 

$

32,348 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, Except per Share Data)

 

 

(Unaudited)

 

(Audited)

 

Oct 31

 

July 31

 

 

2014

 

2014

LIABILITIES

 

 

 

 

 

 

Current borrowings on line of credit

 

$

1,000 

 

$

 —

Current portion of long-term debt

 

 

605 

 

 

675 

Current portion of contingent liabilities

 

 

165 

 

 

295 

Accounts payable

 

 

942 

 

 

656 

Deferred revenue

 

 

7,631 

 

 

7,415 

Accrued payroll and related liabilities

 

 

1,660 

 

 

1,336 

Accrued sales, use and income taxes

 

 

132 

 

 

123 

Other accrued liabilities

 

 

622 

 

 

472 

Current portion of capital lease obligations

 

 

241 

 

 

195 

Total current liabilities

 

 

12,998 

 

 

11,167 

Long-term debt

 

 

8,445 

 

 

3,375 

Long-term portion of contingent liabilities

 

 

761 

 

 

153 

Capital lease obligations

 

 

241 

 

 

233 

Other long-term liabilities

 

 

208 

 

 

214 

Total non-current liabilities

 

 

9,655 

 

 

3,975 

Total liabilities

 

 

22,653 

 

 

15,142 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at October 31, 2014 and July 31, 2014, respectively

 

 

 —

 

 

 —

Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0 shares issued and outstanding at October 31, 2014 and July 31, 2014, respectively

 

 

 —

 

 

 —

Common stock, par value $.001 per share, 25,000,000 shares authorized; 14,227,257 and 13,506,316  shares issued and outstanding at October 31, 2014 and July 31, 2014, respectively

 

 

14 

 

 

14 

Additional paid-in capital

 

 

108,231 

 

 

106,077 

Accumulated deficit

 

 

(88,760)

 

 

(88,864)

Other accumulated comprehensive loss

 

 

(12)

 

 

(21)

Total shareholders' equity

 

 

19,473 

 

 

17,206 

Total liabilities and shareholders' equity

 

$

42,126 

 

$

32,348 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

ARI Network Services, Inc.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

Unaudited

 

 

Three months ended October 31

 

 

2014

 

2013

Operating activities:

 

 

 

 

 

 

Net income

 

$

104 

 

$

25 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Amortization of software products

 

 

549 

 

 

444 

Amortization of discount related to present value of earnout

 

 

(3)

 

 

(4)

Amortization of bank loan fees

 

 

12 

 

 

Interest expense related to earnout payable

 

 

 

 

24 

Depreciation and other amortization

 

 

371 

 

 

321 

Loss on change in fair value of stock warrants

 

 

 -

 

 

22 

Gain on change in fair value of earnout payable

 

 

 -

 

 

(26)

Provision for bad debt allowance

 

 

51 

 

 

32 

Deferred income taxes

 

 

69 

 

 

121 

Stock based compensation

 

 

68 

 

 

36 

Stock based director fees

 

 

35 

 

 

 -

Net change in assets and liabilities:

 

 

 

 

 

 

Trade receivables

 

 

(224)

 

 

(453)

Work in process

 

 

(22)

 

 

37 

Prepaid expenses and other

 

 

185 

 

 

115 

Other long-term assets

 

 

(39)

 

 

(17)

Accounts payable

 

 

226 

 

 

(158)

Deferred revenue

 

 

(130)

 

 

(638)

Accrued payroll and related liabilities

 

 

230 

 

 

(140)

Accrued sales, use and income taxes

 

 

 -

 

 

(43)

Other accrued liabilities

 

 

144 

 

 

269 

Net cash provided by (used in) operating activities

 

$

1,634 

 

$

(26)

Investing activities:

 

 

 

 

 

 

Purchase of equipment, software and leasehold improvements

 

 

(21)

 

 

(189)

Cash received on earnout from disposition of a component of the business

 

 

 -

 

 

37 

Cash paid for contingent liabilities related to acquisitions

 

 

(249)

 

 

(252)

Cash paid for net assets related to acquisitions

 

 

(4,200)

 

 

 -

Software development costs capitalized

 

 

(341)

 

 

(548)

Net cash used in investing activities

 

$

(4,811)

 

$

(952)

Financing activities:

 

 

 

 

 

 

Borrowings (repayments) under line of credit, net

 

$

1,000 

 

$

 -

Payments on long-term debt

 

 

(168)

 

 

(112)

Borrowings under long-term debt

 

 

2,168 

 

 

 -

Payments of capital lease obligations

 

 

(55)

 

 

 -

Proceeds from issuance of common stock

 

 

16 

 

 

16 

Net cash provided by (used in) financing activities

 

$

2,961 

 

$

(96)

Effect of foreign currency exchange rate changes on cash

 

 

 

 

 -

Net change in cash and cash equivalents

 

 

(211)

 

 

(1,074)

Cash and cash equivalents at beginning of period

 

 

1,808 

 

 

2,195 

Cash and cash equivalents at end of period

 

$

1,597 

 

$

1,121 

Cash paid for interest

 

$

74 

 

$

71 

Cash paid for income taxes

 

$

20 

 

$

66 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

Issuance of common stock in connection with acquisitions

 

$

1,980 

 

$

 -

Debt issued in connection with acquisitions

 

 

3,000 

 

 

 -

Capital leases acquired in connection with acquisitions

 

 

109 

 

 

 -


 

Issuance of common stock related to payment of contingent liabilities

 

 

42 

 

 

 -

Issuance of common stock related to payment of director compensation

 

 

31 

 

 

 -

Issuance of common stock related to payment of employee compensation

 

 

97 

 

 

 -

Contingent liabilities incurred in connection with acquisition

 

 

761 

 

 

 -

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Measures

 

 

 

 

 

 

 

 

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

October 31, 2014 and 2013, respectively:

 

 

 

 

 

 

 

 

 

EBITDA:

FY2015

FY2014

FY2015

FY2014

 

 

 

 

Q1

Q1

Q TTM

Q TTM

 

 

 

Net Income (loss)

$                 104 

$                   25 

$                  (23)

$                (845)

 

 

 

Interest

89 
70 
305 
359 

 

 

 

Amortization of software products

549 
444 
2,157 
1,325 

 

 

 

Other depreciation and amortization

372 
321 
1,373 
983 

 

 

 

Loss on debt extinguishment

 -

 -

 -

682 

 

 

 

Loss on FMV of Warrant Derivatives

 -

22 
657 

 

 

 

Loss on impairment of long-lived assets

 -

 -

35 
420 

 

 

 

Income taxes

89 
84 
246 
(340)

 

 

 

  EBITDA

$              1,203 

$                 966 

$              4,099 

$              3,241 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the following fiscal quarters:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10/31/14

7/31/14

04/30/14

01/31/14

10/31/13

07/31/13

04/30/13

1/31/13

 

 

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

 

Quarterly

2015

2014

2014

2014

2014

2013

2013

2013

 

Net Income (loss)

$                 104 

$                 174 

$                 160 

$                (461)

$                   25 

$                (299)

$                (571)

$                      4 

 

Interest

89 
70 
68 
78 
70 
92 
197 
269 

 

Amortization of software products

549 
558 
532 
518 
444 
429 
452 
464 

 

Other depreciation and amortization

372 
308 
354 
339 
321 
328 
334 
339 

 

Loss on debt extinguishment

682 

 

Loss on FMV of Warrant Derivatives

(4)
10 
22 
635 

 

Loss on impairment of long-lived assets

35 
420 

 

Income taxes

89 
230 
153 
(226)
84 
314 
(738)
(835)

 

  EBITDA

$              1,203 

$              1,375 

$              1,263 

$                 258 

$                 966 

$              1,499 

$                  776 

$                  241 

 

 

 

 

 

 

 

 

 

 

 

Trailing 12 months (TTM)

 

 

 

 

 

 

 

 

 

Net Income (loss)

$                  (23)

$                (102)

$                (575)

$            (1,306)

$                (841)

$                (753)

$                    58 

$                  839 

 

Interest

305 
286 
308 
437 
628 
626 
608 
451 

 

Amortization of software products

2,157 
2,052 
1,923 
1,843 
1,789 
1,741 
1,693 
1,595 

 

Other depreciation and amortization

1,373 
1,322 
1,342 
1,322 
1,322 
1,281 
1,245 
1,226 

 

Loss on debt extinguishment

682 
682 
682 
682 

 

Loss on FMV of Warrant Derivatives

28 
663 
667 
657 
635 

 

Loss on impairment of long-lived assets

35 
35 
420 
420 
420 
420 

 

Income taxes

246 
241 
325 
(566)
(1,175)
(1,133)
(1,605)
(711)

 

  EBITDA

$              4,099 

$              3,862 

$              3,986 

$              3,499 

$              3,482 

$              3,499 

$              3,101 

$              3,400 

 

 

 

 

 

 

 

 

 

 

 

 


 

Management believes 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 EBITDA as a factor in evaluating potential acquisition targets and analyzing the pro forma impact of the acquisition on the Company.  However, 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.