ARI revenue up 8 percent over 2013

MILWAUKEE, March 6, 2014 — ARI Network Services, a leading provider of website, software, and data solutions that help dealers, distributors, and manufacturers Sell More Stuff!, reported financial results today for its fiscal 2014 second quarter ended January 31, 2014.

Highlights for the fiscal second quarter included:

  • Recurring revenues for the second quarter of fiscal year 2014 were $7.7 million, a 17.1% increase over the second quarter of fiscal year 2013. As a percentage of total revenues, recurring revenues in the second quarter were 94.7% in fiscal year 2014 versus 87.9% for the same period in fiscal year 2013.
  • Total revenues for the second quarter of fiscal year 2014 were $8.1 million, an 8.8% increase over the same period last year.
  • EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $258,000 in the second quarter of fiscal year 2014, an increase of 7.1% compared to the same period last year. Adjusting for the charge for termination benefits noted below, EBITDA would have been $492,000, an increase of 104% over the same period last year.
  • As part of the company’s ongoing integration of acquisitions, the firm reduced its headcount in the second quarter resulting in a $234,000 charge for termination benefits. It is anticipated that the reduction in headcount associated with the charge will result in $2.5 million in annualized savings.

Fiscal Year 2014 Second Quarter Financials

ARI reported revenues of $8.1 million for the second quarter of fiscal year 2014 versus $7.5 million for the second quarter of fiscal year 2013, an increase of 8.8%. Recurring revenue comprised 94.7% of total revenue for the second quarter of fiscal year 2014 versus 87.9% for the second quarter of fiscal year 2013.

Overall gross margin for the second quarter of fiscal year 2014 was 79.3%, versus 77.0% last year. The gross margin improvement resulted primarily from the growth in the firm’s recurring revenue which carries a higher gross profit.

Operating loss was ($606,000) for the second quarter of fiscal year 2014, compared to ($566,000) for the same period last year. The decrease in results from operations was primarily due to the $234,000 charge related to termination benefits.

The company reported a net loss of ($461,000) or ($0.03) per share for the quarter, compared to net income of $4,000 or $0.00 per share last year.

Management Discussion

Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “We continue to make good progress from our increased investment in sales and marketing which we initiated in the fiscal first quarter of 2014 and continued in the fiscal second quarter. During the second quarter of fiscal 2014, we invested 30.0% of revenue in sales and marketing versus 25.6% for the same period last year. Early indications are that these investments are having a positive impact as new dealer sales and upsells, measured as the annual contract value (“ACV”), are up 28.1% year to date versus last year.”

Mr. Olivier continued, “In addition, the Company showed improvement year over year in both its gross margin and recurring revenue as a percent of total revenue.”

William Nurthen, Chief Financial Officer, commented, “In the second quarter, we took action to reduce our headcount as we continue to see cost saving opportunities from the ongoing integration of our recent acquisitions. This action was in line with our goal of increasing EBITDA and profitability in the back half of our fiscal year while at the same time preserving our ability to continue making investments in sales and marketing.”

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