Message #52 From:
NewsBot Date: November 30, 2006 03:00:00 AM
ARIS News ARI Reports First Quarter Results
MILWAUKEE--(BUSINESS WIRE)--ARI (OTCBB:ARIS), a leading provider of technology-enabled business
solutions that help equipment dealers, distributors and manufacturers
build sales and profits, today reported financial results for the first
quarter ended October 31, 2006.
First Quarter Fiscal 2007 Highlights
Revenues were $3.50 million for the first quarter of fiscal 2007,
compared to revenues of $3.49 million for the first quarter of fiscal
2006.
Operating income was $229,000 for the first quarter of fiscal 2007,
compared to operating income of $524,000 for the same period in the
prior year.
Net income was $225,000 or $0.03 per diluted share for the first
quarter of fiscal 2007, compared to net income of $498,000 or $0.07
per diluted share for the first quarter of fiscal 2006.
Operations Review
“Revenues increased in two key areas in the
first quarter. Recurring revenues from our core electronic catalog
business were up and our Dealer Marketing Services (DMS) business
continues to grow rapidly. DMS revenues drove the slight overall
increase in first-quarter revenues and have now eclipsed revenues from
our historical communications business,” said
Brian E. Dearing, chairman and chief executive officer of ARI.
Dearing said the Company’s European operations
were still not performing up to expectations. “We
are still in a transition phase for this business as we continue to
implement the dealer-direct business model that has been so successful
for us in the U.S. Roy W. Olivier, our new vice president of global
sales and marketing, has made it a priority to improve our European
operations by expanding our relationships with current and potential OEM
customers,” said Dearing.
Dearing said the lower operating income in the first quarter of fiscal
2007 reflected the lower margins of the DMS business and increased
investments in developing and marketing these new products. “Even
though our Dealer Marketing Services area is our fastest-growing product
area, it is still a relatively small, young business. While our
investments in this business affected operating income in the first
quarter, we believe it has excellent potential to increase our profits
over the long term,” said Dearing.
Dearing said other factors that contributed to the decrease in operating
income for the quarter were increased costs to support newly deployed
products and accounting for employee stock options under FAS 123.
“Our first quarter cash flow is traditionally
lower than in the second and third quarters due to the timing of large
contract renewals,” added Dearing. “Nevertheless,
our cash flow remains strong and we continue to pay down debt. We
reduced our debt by an additional $350,000 in the first quarter, with
our final payments scheduled for December 2007.”
Summary
“Our first quarter results were mixed: Our
new DMS business is continuing to grow rapidly, but is not yet large
enough to create significant overall revenue growth,”
said Dearing. “We are holding our own in the
core U.S. catalog market, but Europe is a continuing challenge. Our cash
flow, cash balance and debt repayments remain strong, but our income was
reduced by continuing investments in our newer businesses.”
Outlook
“We made good progress in executing on our
growth strategies in the first quarter. We are continuing to enhance our
base business. We are beginning to see results from our investments in
the Dealer Marketing Services area, which bodes well for our future.
There are still some challenges in Europe, but we remain confident our
dealer-direct strategy is the correct approach. With the addition of Roy
W. Olivier, we believe we are on the right track to generate profitable
organic growth worldwide. We also continue to pursue synergistic
acquisitions for accretive growth,” said
Dearing.
About ARI
ARI is a leading provider of electronic parts catalogs and related
technology and services to increase sales and profits for dealers,
distributors and manufacturers in the manufactured equipment markets.
ARI currently provides approximately 99 parts catalogs (many of which
contain multiple lines of equipment) for approximately 77 equipment
manufacturers in the U.S. and Europe. Approximately 76,000 catalog
subscriptions are provided through ARI to more than 25,000 dealers and
distributors in approximately 89 countries in a dozen segments of the
worldwide equipment market including outdoor power, power sports, ag
equipment, recreation vehicle, floor maintenance, auto and truck parts
aftermarket, marine and construction. The Company builds and supports a
full suite of multi-media electronic catalog publishing and viewing
software for the Web or CD and provides expert catalog publishing and
consulting services. ARI also provides dealer marketing services,
including technology-enabled direct mail, email and a award-winning
dealer website service that makes it quick and easy for an equipment
dealer to have a professional and attractive website. In addition, ARI
e-Catalog systems support a variety of electronic pathways for parts
orders, warranty claims and other transactions between manufacturers and
their networks of sales and service points. ARI currently operates three
offices in the United States and one in Europe and has sales and service
agents in England and France providing marketing and support of its
products and services.
First Quarter Earnings Conference Call
ARI’s First Quarter Conference Call is
scheduled for Thursday, November 30, 2006 at 3:30 p.m. Central Time/4:30
p.m. Eastern Time.If you would like to participate, please
pre-register at https://www.myrcplus.com/rsvp-index.asp?BWebID=&CID=8300747.At that time you will be provided with the numbers to use to join the
conference call.A replay of ARI’s
conference call, as well as notes and financial information presented in
the call, will also be available on ARI’s
website, www.arinet.com, after 6:00
p.m. Central Time on Friday, December 1, 2006.Click on the “Investor
Relations” tab to access the information.
Statements in this news release are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act. The
forward-looking statements can generally be identified by words such as
"believes," "anticipates," "expects" or words of similar meaning.
Forward-looking statements also include statements relating to the
Company's future performance, such as future prospects, revenues,
profits and cash flows. The forward-looking statements are subject to
risks and uncertainties, which may cause actual results to be materially
different from any future performance suggested in the forward-looking
statements. Such risks and uncertainties include those factors described
under "Forward Looking Statements Disclosure" in Exhibit 99.1 of the
Company’s annual report on Form 10-KSB for
fiscal year ended July 31, 2006 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.
ARI Network Services, Inc.
Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended
October 31
2006
2005
Net revenues:
Subscriptions, support and other services fees
$ 2,663
$ 2,564
Software licenses and renewals
543
518
Professional services
297
409
3,503
3,491
Operating expenses:
Cost of products and services sold:
Subscriptions, support and other services fees
272
181
Software licenses and renewals (a)
196
158
Professional services
78
111
546
450
Depreciation and amortization (exclusive of amortization of
software products included in cost of products and services sold)
106
80
Customer operations and support
268
303
Selling, general and administrative
1,985
1,859
Software development and technical support
369
275
Net operating expenses
3,274
2,967
Operating income
229
524
Other income (expense)
Interest expense
(38)
(49)
Other, net
34
23
Total other expense
(4)
(26)
Income before provision for income taxes
225
498
Income tax benefit (provision)
-
-
Net income
$ 225
$ 498
Average common shares outstanding:
Basic
6,057
6,126
Diluted
6,434
6,729
Basic and diluted net income (loss) per share:
Basic
$0.04
$0.08
Diluted
$0.03
$0.07
(a)
includes amortization of software products of $187 and $145
excluding other depreciation and amortization
shown separately
ARI Network Services, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
October 31
July 31
ASSETS
2006
2006
Current Assets:
Cash
$ 3,191
$ 3,584
Trade receivables, less allowance for doubtful accounts of $89 and
$103 at October 31, 2006 and July 31, 2006, respectively
609
885
Work in Process
143
163
Prepaid expenses and other
245
254
Deferred income taxes
675
675
Total Current Assets
4,863
5,561
Equipment and leasehold improvements:
Computer equipment & software
5,130
5,084
Leasehold improvements
123
116
Furniture and equipment
2,139
2,057
7,392
7,257
Less accumulated depreciation and amortization
6,382
6,275
Net equipment and leasehold improvements
1,010
982
Deferred income taxes
1,419
1,419
Other assets
4
6
Capitalized software product costs
11,635
11,557
Less accumulated amortization
10,276
10,089
Net capitalized software product costs
1,359
1,468
Total Assets
$ 8,655
$ 9,436
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of notes payable
$ 1,400
$ 1,400
Accounts payable
384
500
Deferred revenue
4,990
5,616
Accrued payroll and related liabilities
1,124
1,006
Accrued sales, use and income taxes
8
38
Other accrued liabilities
301
358
Total Current Liabilities
8,207
8,918
Long term liabilities:
Notes payable (net of discount)
219
580
Long term payroll related
202
202
Other long term liabilities
43
48
Capital lease obligations
-
-
Total Long Term Liabilities
464
830
Shareholders' equity (deficit):
Cumulative preferred stock, par value $.001 per share, 1,000,000
shares authorized; 0 shares issued and outstanding at October 31,
2006 and July 31, 2006, respectively
-
-
Common stock, par value $.001 per share, 25,000,000 shares
authorized; 6,227,335 and 6,202,529 shares issued and outstanding
at October 31, 2006 and July 31, 2006, respectively
6
6
Common stock warrants and options
62
36
Additional paid-in-capital
93,883
93,838
Accumulated deficit
(93,967)
(94,192)
Total Shareholders' Equity (Deficit)
(16)
(312)
Total Liabilities and Shareholders' Equity (Deficit)
$ 8,655
$ 9,436
ARI Network Services, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
October 31
2006
2005
Operating activities
Net income
$ 225
$ 498
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of software products
187
145
Amortization of deferred financing costs, debt discount and excess
carrying value over face amount of notes payable
