ARI Network Services grows revenue in fiscal ‘14

News Release

ARI Network Services (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 fourth quarter and fiscal year ended July 31, 2014.

Highlights for the fiscal year 2014 included:

• The company reported record revenues of $33.0 million, a 9.7% increase over fiscal year 2013.
• Recurring revenues for fiscal 2014 were $30.9 million, a 14.4% increase over fiscal year 2013. As a percentage of total revenues, recurring revenues were 93.6% in fiscal year 2014 versus 89.7% in fiscal year 2013.
• EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $3.9 million, or 11.7% of revenue in fiscal year 2014, an increase of 10.4% from fiscal year 2013.

Highlights for the fourth quarter of fiscal year 2014 included:

• Revenues for the fourth quarter were $8.5 million, an increase of 4.5% over 3Q14 and 1.1% over the same period last year.
• Gross margin was 81.6% in the fourth quarter compared with 80.9% in 3Q14 and 80.8% in the same period last year.
• EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $1.4 million or 16.1% of revenue in the fourth quarter. This compares with EBITDA of $1.3 million or 15.4% of revenue in 3Q14 and $1.5 million or 17.7% of revenue in the same period last year.
• Cash generated from operations was $1.3 million for the fourth quarter of fiscal 2014, compared with $1.0 million in 3Q14 and $0.9 million for the same period last year.

Fiscal Year 2014 Financials

Fiscal 2014 was a record year for ARI, with revenues of more than $33 million. Total revenue increased 9.7% or $2.9 million during fiscal 2014. Recurring revenues were $30.9 million, a $3.9 million increase over the prior year. The increase in revenue and recurring revenue was primarily driven by growth in the company’s website solution offerings, which in fiscal 2014 accounted for 51% of the firm’s revenues.

Gross margin for fiscal year 2014 was 80.7% versus 78.0% last year, with the increase being largely attributable to the growth in the firm’s recurring revenues which have a higher gross profit.

The company recorded an operating profit of $0.4 million in fiscal 2014 versus an operating loss of $0.2 million in fiscal 2013. Net loss for the fiscal year was $102,000 or ($0.01) per share, compared with a net loss of $753,000 or ($0.08) per share last year.

Management Discussion

Roy W. Olivier, President and Chief Executive Officer of ARI, commented, “Fiscal 2014 was a year of growth and accomplishments for ARI. We recorded the highest revenue in company history and were able to grow EBITDA 10% versus the prior year. In the early part of our fiscal year, we acquired DUO Web Solutions and through that were able to re-launch our Digital Marketing Services offering, which we expect to be one of our key drivers of organic growth in fiscal 2015. In December of 2013, we successfully re-listed on the Nasdaq Capital Market and recently were added to the Russell Microcap Index. Throughout the year, we were also able to enhance our product offerings and expand our customer base in our primary growth verticals of automotive tire and wheel and home medical equipment, which we entered during fiscal 2013.”

Mr. Olivier continued, “Subsequent to the end of our fiscal year, we completed the acquisition of TCS Technologies. This acquisition further solidifies our leadership position in the automotive tire and wheel industry and expands our product offerings. We are excited about the growth prospects of this acquisition as we look ahead to fiscal 2015.”

William Nurthen, Chief Financial Officer of ARI, commented, “The company experienced marked improvement in profitability and cash flow in the back half of fiscal 2014. EBITDA for the third and fourth quarters of fiscal 2014 were 15.4% and 16.1%, respectively, and the fourth quarter performance was inclusive of more than $100,000 in charges related to the company’s acquisition of TCS. In addition, cash flow from operations for the last two quarters combined was $2.4 million which was the best six-month performance in the company’s history.”