FY15 Q2 ARI Network Services, Inc. investor.arinet.com Statements - - PowerPoint PPT Presentation

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Dec 06, 2023 119 likes •465 views

FY15 Q2 ARI Network Services, Inc. investor.arinet.com Statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. The forward-looking statements can generally

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FY15 Q2 ARI Network Services, Inc. │ investor.arinet.com

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Statements in this presentation 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 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

nly 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. During this presentation, we will discuss GAAP measure such as net income, as well as certain non-GAAP measures such as EBITDA. We have posted on www.investor.arinet.com, a reconciliation of these non-GAAP financial measures to the most comparable financial measures under GAAP. 1

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Unique Business Model & Value Proposition

– STRONG MARGIN PROFILE – Gross margin and EBITDA margin between 77% – 81% and 12% – 24%, respectively, over last 5 years – HIGH BARRIERS TO ENTRY – ARI owns and manages the largest content library of whole goods and Parts, Garments & Accessories (“PG&A”) – SIGNIFICANT GROWTH OPPORTUNITIES – CUSTOMER CONCENTRATION – No customer accounts for more than 3% of revenue – INSIDERS OWN 8.5%

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120+ Manufacturers
500K Models
10MParts

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1,400+ Manufacturers
500K Parts

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315 Manufacturers
176 Models

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1,400+ Manufacturers 500K Parts 315 Manufacturers 176K Models 120+ Manufacturers 500K Models 10MParts

Lead Gen Websites eCommerce Websites DaaS Digital Marketing Mobile Apps Business Management

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In-Store

Dealer Business Management System
OEM parts lookup
Aftermarket Parts, Garments &

accessories (PG&A) lookup

Lead Management

Online

Lead Generation
eCommerce
OEM Parts
Aftermarket PG&A
Digital Marketing Services

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Dealers Distributors Manufacturers (OEM)

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10 120+ Manufacturers 500K Models 10MParts 1,400+ Manufacturers 500K Parts 315 Manufacturers 176K Models

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Business Mgmt. eCatalogs Lead Gen + eCommerce Websites Digital Marketing

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Appliances Marine & RV Outdoor Power Wheel & Tire Powersports

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40% 90% 10% 66% 40% 90% 10% 2% 17% 0%

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2015 data estimated based off first half FY15 run-rate.

In FY13 Q3 we made a change to our lead generation service business model, eliminating the pass-through cost of purchased ad words from the search engine providers on behalf

f our customers.

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Historical Revenue

Other Catalog Website Digital Marketing POS

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Roy W. Olivier

President & CEO

Marv Berg

V.P. of Operations

Rob A. Ostermann

Chief Technology Officer

Bill Nurthen

Chief Financial Officer

Brad Smith

V.P. Product Management

Management & Insiders own 8.5%

Robert Jones

V.P. of Sales

Joined ARI September 2006 as Vice President of Global Sales and Marketing / Appointed as President and CEO in May 2008 / Director since 2008 / Previously worked for three Fortune 500 companies before starting his first software company in 1989 focused

n developing multi-media CD-ROM titles. Sold that company in 1993 to start a software company focused on developing software to

help dealers in the construction, material handling, mining, and outdoor power vertical markets which was sold to ProQuest (now Snap-On) in 2000. Joined ARI as Chief Financial Officer in November 2013 / CFO of Cabrera Capital Markets, LLC 2011-2013 / CFO of bioLytical Laboratories 2008 to 2011 / Vice President of Finance and then CFO of Inforte Corp., NASDAQ (INFT) 1999 to 2007 / Financial

perations roles at Platinum Technology International NASDAQ (PLAT) / MBA from The Kellogg School of Management at

Northwestern University / BBA undergraduate degree from The University of Notre Dame. Appointed Chief Technology Officer of ARI in August 2012 having served as Executive Director of Technology since November 2011 and Director of Product Engineering since joining the Company in June 2008 / Served in various technology management and development roles at Parcel Pro Inc. in Torrance, California and The California Breath Clinics in Los Angeles, California from 2003- 2008 / Lead developer at OC-Net, Inc. in Cypress, California / B.S. in Business Administration, Computer Information Systems from California State University. Appointed Vice President of Sales in August 2014 / Most recently served as ARI’s Executive Director of Sales and served as Director

f Dealer Sales following ARI’s November 2012 acquisition of Duluth, Minn.-based 50 Below / Joined 50 Below as supervisor of the

UPS Program in the Financial Services Division in 2011 / Promoted to Sales Manager of the Powersports division in January 2012 and Director of Sales and Service in May 2012. Appointed Vice President of Operations in April 2012 / Named an executive officer in August 2012 / Served as Director of Planning & Operations since August 2011 and Director of Finance since joining the Company in March 2010 / Served in various financial positions for Time Warner Cable, Inc. and Norlight Telecommunications, both located in Milwaukee, WI / Successful business

wner/operator in Milwaukee, WI from 2001 to 2005 /Licensed stock broker from 1997 to 2000 / B.A. in Finance from Michigan State

University. Appointed Vice President of Product Management in January 2014 / Joined ARI in 2007 and most recently served as Director of Product Management and General Manager of Aftermarket / Double B.A. in Web/Technology Development and Spanish from the University of Wisconsin-Stevens Point / MBA from the University of Wisconsin-Eau Claire in 2012 / In conjunction with MBA program, consulted on an East Asian supply-chain consultancy for a Fortune 500 marine manufacturer.

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Total Revenue $10.1M
90.2% Recurring Revenue
81.6% Gross Margin
Dealer Sales Bookings Up 31.5%³
Operating Cash Flow of $1.1M
Total CAC² ‐ 9.3 months
EBITDA Margin of 16.1%

Millions

Quarterly Recurring Revenue (QRR)

Most Recent Quarter highlights1

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

QRR

FY 13 FY 14 FY 15

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$0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 FY2011 FY2012 FY2013 FY2014 TTM

Millions 18

FY = Fiscal Year Ending July 31

Recurring Revenue Total Revenue

$21.3 $22.5 $30.1 $36.0 81.7% $33.0 83.2% 89.7% 93.6% 91.1%

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$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 FY2011 FY2012 FY2013 FY2014 TTM

$4.4 $3.5 $3.9 $5.5

Millions

23.6% 19.3% 11.6%

FY = Fiscal Year Ending July 31

11.7% 15.2%

Includes $1.2M

f acquisition-

related costs. Integration related cost- reduction in FY14Q2, $2.5M annualized

$5.0

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$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 FY2011 FY2012 FY2013 FY2014 TTM

Integration related cost- reduction in FY14Q2, $2.5M annualized

Millions

$3.5 $3.5 $2.4

FY = Fiscal Year Ending July 31

$2.4

Notes:

FY14 Q3 & Q4 cash flows combined were $2.4M
FY15 Q1 & Q2 cash flow of $2.7M

$5.1

Impact of two acquisitions

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Last Reported

Pre-May 7. 2015 Offering

Pro Forma

Post-May 7, 2015 Offering

Cash and Investments: $1.7M¹ $5.1M Federal NOLs of $5.8M Total Debt and Lease Obligations: $10.0M¹* $9.1M Shares Outstanding: 14.4M³ 16.9M Stock Price: $3.19² Market Cap.: $45.8M² Enterprise Value: $54.1M² TTM Enterprise Value/EBITDA: 9.9x² TTM Enterprise Value/Revenues: 1.5x²

¹ as of and for the quarter ending January 31, 2015 ² as of Market Close May 6, 2015 ³ as of March 1, 2015 *Includes $5.9M of SVB Term Note @ 3.75% refinanced as part of TCS transaction. Also includes $2.9M of Seller Note @ 5.0% associated with TCS transaction.

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ARI intends to use the net proceeds from the offering to invest in or to acquire, from time to time, businesses that align with ARI’s core acquisition strategy, to repay the outstanding balance of $1,750,000 on its line of credit which was incurred in connection with its recent acquisition of the assets of TASCO Corporation, thus making it fully available for additional transactions, and for general corporate purposes.

Date: 5/7/2015 Shares: 1,760,000 Price: $3.00 Gross Proceeds: $5.3M Net Proceeds: $4.7M

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TASCO Corporation (“TASCO”), is a leading provider of business management, point of sale and other software exclusively designed for automotive tire and wheel dealers (“T&W”).

Date: 4/28/15 Consideration: $1.75M cash at closing $800K equity (242,424 shares ARI Common Stock) $200K cash payment on anniversary of transaction (subject to set-

ff & working capital adjustment)

Funded: Cash from operations & Line of Credit with Silicon Valley Bank Revenue Expectation: Expected to add $2M to FY16 revenue and accretive to FY16 EBITDA.

Consolidates two industry-leading business management software platforms cementing ARI’s position as the most complete technology provider in the T&W market.

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Tire Company Solutions, LLC (“TCS”), a leading provider of software, websites and marketing services designed exclusively for automotive tire and wheel dealers.

25 Date: 10/1/14 Consideration: $4.2M cash at closing $3.0M Seller Note $1.9M equity (619K shares of ARI Common Stock) Earn-out (to be paid contingent upon specified revenue goals) Funded: Combination of refinancing Senior Debt with Silicon Valley Bank,

ur Line of Credit and cash from operations.

Revenue Expectation: Expected to add $5M to FY15 revenue, $6M in incremental revenue over next 12 months (post-acquisition) and accretive to FY15 EBITDA.

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YEAR

COMPANY PRODUCT VERTICAL 2015

TASCO Corporation Business Management Systems (“BMS”) Tire & Wheel

2014

TCS DMS, Lead Gen/eCommerce Tire & Wheel

2013

DUO Web Services Digital Marketing Services Powersports

2012

50 Below Lead Gen/eCommerce Home Medical, Tire & Wheel

2012

Ready2Ride eCat Powersports

2009

Channel Blade Lead Gen/eCommerce Marine

2008

Info Access eCat Appliances

2007

OC-Net Lead Gen/eCommerce Powersports

2003

VertX Commerce Lead Gen/eCommerce Powersports

1999

Network Dynamics eCat Outdoor Power

1998

POWERCOM-2000 eCat Outdoor Power

1997

Empart Technologies eCat RV

1996

CD*\.IMG eCat Outdoor Power, Powersports, Marine 27

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# U.S. Dealers 4,700 11,000 3,100 30,000 2,000 18,000 25,000 80,000

ARI Website Customers

1,900 883 400 N/A 29 3,000** 200

ARI eCatalog Customers

3,350* 4,081 3,000* 1,890 135 N/A N/A

*total number is approximate and includes a large bulk customer’s estimates ** includes TCS acquisition

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OEM Sales
Dealer Inside Sales
International Sales

100

Over Countries Served

Americas & EMEA 29

350

Employees

*includes TCS & TASCO acquisition

eCatalog Installs Website Installs

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Amount of Beneficial Ownership (1) Percent Ownership

Wellington Management Company (2) 1,475,300 9.92% Wynnefield Funds (3) 1,273,435 8.57% Michael D. Sifen, Inc. (4) 1,205,128 8.11% Park City Capital, LLC (5) 1,000,000 6.73% Peter H. Kamin (6) 972,654 6.54% Briggs & Stratton Corporation (7) 840,000 5.65% Grand Slam Asset Management, LLC (8) 795,861 5.35%

¹All data pre-capital raise, as of as of February 28, 2015, unless otherwise noted. (1) Except as otherwise noted, the persons named in the above table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Includes options exercisable within 60 days of February 28, 2015. (2) Ownership information is provided as of December 31, 2014 based upon Schedule 13G amendment filed on February 12, 2015. (3) Ownership information is provided as of the Schedule 13D filed on December 4, 2014 by Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I, Wynnefield Small Cap Value Offshore Fund, Ltd., Wynnefield Capital Management, LLC, Wynnefield Capital, Inc., Nelson Obus and Joshua Landes. (4) Ownership information is provided as of March 15, 2013 based upon Schedule 13G filed on May 22, 2013 by Michael D. Sifen, Inc. Total includes 498,461 shares of common stock held by Michael D. Sifen and 706,667 shares of common stock held by Michael D. Sifen, Inc., an entity controlled by Mr. Sifen. (5) Ownership information is provided as of the Schedule 13D filed December 10, 2014. (6) Ownership information is provided as November 21, 2014 based upon Schedule 13D filed November 21, 2014. (7) Ownership information is provided as of March 16, 2000 based upon Schedule 13D amendment filed April 3, 2000. (8) Ownership information is provided as December 31, 2014, based upon Schedule 13G amendment filed February 11, 2015.

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Name of Officer / Director Amount of Direct Beneficial Ownership (1) Percent Ownership

Roy W. Olivier (7) – President & CEO 741,890 4.99% Chad J. Cooper – Director 108,040 * William C. Mortimore – Director 107,726 *

P. Lee Poseidon – Director

84,554 * William H. Luden, III – Director 85,315 * Robert Y. Newell, IV - Director 66,826 * Marvin A. Berg, III – VP Operations 52,329 * William A. Nurthen – Chief Financial Officer 22,465 * All current executive officers and directors as a group. 1,269,145 8.54%

* Denotes less than 1%

¹All data pre-capital raise, as of as of February 28, 2015, unless otherwise noted. (7) Mr. Olivier’s total includes 193,200 shares held in the Company’s 401(k) plan, of which Mr. Olivier is a trustee with voting power. Mr. Olivier disclaims any beneficial ownership in these shares in excess of his pecuniary interest 13,246 shares.

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eCatalogs Lead Gen eCommerce Websites Business Management DigMS