Ariba Reports Results for the Third Quarter of Fiscal Year 2006; On-Demand Spend Management Solutions Gain Traction
Total revenues for the third quarter of fiscal year 2006 were $73.6 million, as compared to $77.7 million for the third quarter of fiscal year 2005. Software license revenues for the quarter were $6.1 million, as compared to $10.1 million for the third quarter of fiscal year 2005. Subscription and maintenance revenues for the quarter were $31.6 million, as compared to $30.2 million for the third quarter of fiscal year 2005. Within subscription and maintenance revenues, subscription software revenue was $13.3 million for the quarter, as compared to $11.8 million for the third quarter of fiscal year 2005. Services and other revenues for the quarter were $35.9 million, as compared to $37.4 million for the third quarter of fiscal year 2005.
Net loss for the third quarter of fiscal year 2006 was $31.5 million, or $0.48 per share, as compared to a net loss for the third quarter of fiscal year 2005 of $288.7 million, or $4.52 per share. The net loss for the third quarter of fiscal year 2006 included charges of $3.9 million for amortization of intangible assets, $11.4 million for stock-based compensation, and $24.4 million for lease-related restructuring costs. Excluding these items, non-GAAP net income was $8.2 million, or $0.12 per share.
"A year ago, Ariba embarked on an aggressive strategy to shift to an on-demand, subscription-based business model. It's been a significant undertaking on the part of our entire organization. But as evidenced by the growth in our on-demand customer base and subscription software revenue, we are beginning to realize the benefits," said Bob Calderoni, CEO, Ariba. "We expect to see further on-demand growth as we continue to expand our solution set to enable large enterprises to transform their cost structures and businesses through spend management initiatives and reach further into the mid-market to provide companies just getting started in spend management with the technology, expertise and services they need to drive bottom-line results."
Ariba Spend Management -- The Solution of Choice
Companies around the world currently use Ariba solutions to manage their spend, including seven of the Fortune 10. According to a recent research report published by the Aberdeen Group, Ariba customers are leading the way when it comes to cost reduction, compliance and total spend under management.
During the third quarter, Ariba added 24 new customers, as companies of all sizes adopted Ariba spend management solutions. Overall, nearly 180 companies purchased Ariba Spend Management(TM) solutions during the third quarter, including: Caterpillar Inc., Commerzbank AG, Chevron Corporation, E*TRADE Bank, H.B. Fuller Company, Jindal Stainless, Metropolitan Government of Nashville and Davidson County, Tennessee, Novelis Inc., Payless Shoes, Pfizer Inc., Punjab Tractors Limited, Samsonite Corporation, Shared Healthcare Supply Services Ltd, Singer SVP Worldwide, Societe Generale, Sterlite Industries Limited, Target Corporation, The First American Corporation and Wal-Mart.
Ariba On-Demand -- Expanding the Footprint
Ariba continued to innovate and expand its on-demand portfolio during the third quarter with the release of additional offerings that provide companies with the most comprehensive solutions available for managing the entire spend management process. In addition to Ariba Sourcing(TM) and Ariba Spend Visibility(TM) on-demand solutions, Ariba now offers Ariba Procure-to-Pay(TM), Ariba Electronic Invoice Presentment and Payment(TM), Ariba Travel and Expense(TM) and Ariba Contract Management(TM) in multi-tenant versions for its Basic and Professional customers.
The company also enhanced the sourcing and event engineering capabilities in its comprehensive portfolio of spend management services.
Ariba Supplier Network -- Enhancing Connectivity
As part of its continued efforts to help companies manage the challenge of connecting and transacting business with their suppliers, Ariba released the Ariba Supplier Connectivity(TM) Adapter for the SAP NetWeaver platform at the end of the third quarter. The adapter is the latest in a series of off-the-shelf products designed to enable companies using ERP and other non-Ariba procurement systems to fully leverage Ariba Supplier Network(TM). Approximately 140,000 registered suppliers in 115 countries engaging in transactions worth more than $90 billion a year, Ariba Supplier Network is the world's largest business transaction networks.
Ariba Tenth Anniversary -- A Decade of Procurement Revolution
In September, Ariba will celebrate ten years since its founding. "Over the last decade, we have worked closely with companies who had the vision to embrace spend management to change the way business is done globally," Calderoni said. "In many ways, we have succeeded. Procurement has been elevated from a back office function to a strategic business imperative leading the drive in savings but also operational excellence and business improvement. But we've only scratched the surface. As we look to the future, we will continue to innovate and provide companies with integrated solutions that address their most pressing business challenges and endeavor to strengthen our position as the leading provider of spend management solutions."
Conference Call Information
Ariba will hold a conference call today at 2:00 p.m. PDT / 5:00 p.m. EDT to discuss its results for the third quarter of fiscal year 2006. To join the call, please dial (877) 407-8031 in the United States and Canada, or (201) 689-8031 if calling internationally. There will also be a live web broadcast available on the investor relations section of the company's website at www.ariba.com or at www.vcall.com. A replay of this call will be available from approximately 5:00 p.m. PDT / 8:00 p.m. EDT today through Tuesday, August 1, 2006 by calling (877) 660-6853 in the United States and Canada or (201) 612-7415 internationally and entering account number: 286 and conference ID number: 208048.
Copyright (C) 1996 - 2006 Ariba, Inc.
Ariba, the Ariba logo, AribaLIVE and SupplyWatch are registered trademarks of Ariba, Inc. Ariba Spend Management, Ariba Spend Management. Find it. Get it. Keep it., Ariba. This is Spend Management, Ariba Solutions Delivery, Ariba Analysis, Ariba Buyer, Ariba Category Management, Ariba Category Procurement, Ariba Contract Compliance, Ariba Contracts, Ariba Contract Management, Ariba Contract Workbench, Ariba Data Enrichment, Ariba eForms, Ariba Electronic Invoice Presentment and Payment, Ariba Invoice, Ariba Sourcing, Ariba Spend Visibility, Ariba Travel and Expense, Ariba Procure-to-Pay, Ariba Workforce, Ariba Supplier Network, Ariba Supplier Connectivity, Ariba Supplier Performance Management, Ariba PunchOut, Ariba QuickSource, PO-Flip, Ariba Settlement, Ariba Spend Management Knowledge Base, Ariba Ready, Ariba Supply Lines, Ariba Supply Manager, Ariba LIVE and It's Time for Spend Management are trademarks or service marks of Ariba, Inc. Ariba Proprietary and Confidential. All rights reserved. Patents pending. All other trademarks are property of their respective owners.
Ariba Safe Harbor
Safe Harbor Statement under the Private Securities Litigation Reform Act 1995: Information and announcements in this release involve Ariba's expectations, beliefs, hopes, plans, intentions or strategies regarding the future and are forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to Ariba as of the date of the release, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to Ariba's operating and financial results to differ materially from its current expectations include, but are not limited to: delays in development or shipment of new versions of Ariba's products and services; lack of market acceptance of Ariba's existing or future products or services; inability to continue to develop competitive new products and services on a timely basis; introduction of new products or services by major competitors; the ability to attract and retain qualified employees; difficulties in assimilating acquired companies; long and unpredictable sales cycles and the deferrals of anticipated orders; declining economic conditions; inability to control costs; changes in the company's pricing or compensation policies; significant fluctuations in our stock price; the outcome of and costs associated with pending or potential future regulatory or legal proceedings; the impact of our acquisitions, including the disruption or loss of customer, business partner, supplier or employee relationships; and the level of costs and expenses incurred by Ariba as a result of such transactions. Factors and risks associated with its business, including a number of the factors and risks described above, are discussed in Ariba's Form 10-K filed December 7, 2005 and in its Form 10-Q filed May 15, 2006.
Ariba, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited; in thousands)
June 30, September 30,
2006 2005
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 72,405 $ 60,909
Short-term investments 61,235 50,520
Restricted cash 1,550 1,381
Accounts receivable, net 35,015 41,890
Prepaid expenses and other current
assets 12,364 10,080
------------ -------------
Total current assets 182,569 164,780
Property and equipment, net 16,312 17,999
Long-term investments - 2,731
Restricted cash, less current portion 30,300 31,894
Goodwill 326,101 328,692
Other intangible assets, net 28,957 41,562
Other assets 3,282 2,986
------------ -------------
Total assets $ 587,521 $ 590,644
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,030 $ 9,154
Accrued compensation and related
liabilities 22,181 30,046
Accrued liabilities 20,293 22,458
Restructuring obligations 13,310 18,144
Deferred revenue 45,549 39,548
Deferred income - Softbank 13,577 13,368
------------ -------------
Total current liabilities 125,940 132,718
Deferred rent obligations 22,824 22,184
Restructuring obligations, less current
portion 84,989 68,356
Deferred revenue, less current portion 23,733 21,056
Deferred income - Softbank, less current
portion 3,960 13,925
------------ -------------
Total liabilities 261,446 258,239
------------ -------------
Minority interests - -
Stockholders' equity:
Common stock 149 143
Additional paid-in capital 5,019,246 5,023,965
Deferred stock-based compensation - (35,537)
Accumulated other comprehensive income 3,595 3,011
Accumulated deficit (4,696,915) (4,659,177)
------------ -------------
Total stockholders' equity 326,075 332,405
------------ -------------
Total liabilities and stockholders'
equity $ 587,521 $ 590,644
============ =============
Ariba, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
Three Months Ended Nine Months Ended
June 30, June 30,
2006 2005 2006 2005
--------- ---------- --------- ----------
Revenues:
License $ 6,075 $ 10,070 $ 18,832 $ 39,807
Subscription and
maintenance 31,619 30,213 94,008 92,865
Services and other 35,939 37,432 110,766 113,240
--------- ---------- --------- ----------
Total revenues 73,633 77,715 223,606 245,912
--------- ---------- --------- ----------
Cost of revenues:
License 306 998 1,373 2,746
Subscription and
maintenance 8,082 7,251 23,491 22,079
Services and other 33,035 31,400 97,330 94,822
Amortization of acquired
technology and customer
intangible assets 3,696 4,907 12,005 14,888
--------- ---------- --------- ----------
Total cost of revenues 45,119 44,556 134,199 134,535
--------- ---------- --------- ----------
Gross profit 28,514 33,159 89,407 111,377
--------- ---------- --------- ----------
Operating expenses:
Sales and marketing 22,330 22,824 55,469 70,690
Research and development 12,333 12,101 37,080 37,683
General and administrative 6,973 7,044 24,138 25,148
Other income - Softbank (3,396) (3,350) (10,190) (6,145)
Amortization of other
intangible assets 200 200 600 598
Restructuring and
integration costs 24,376 34,570 25,379 38,669
Goodwill impairment - 247,830 - 247,830
Litigation provision - - - 37,000
--------- ---------- --------- ----------
Total operating expenses 62,816 321,219 132,476 451,473
--------- ---------- --------- ----------
Loss from operations (34,302) (288,060) (43,069) (340,096)
Interest and other income,
net 3,138 349 5,974 3,604
--------- ---------- --------- ----------
Net loss before income taxes
and minority interests (31,164) (287,711) (37,095) (336,492)
Provision for income taxes 318 1,005 643 5,849
Minority interests in net
income of consolidated
subsidiaries - (1) - 17
--------- ---------- --------- ----------
Net loss $(31,482) $(288,715) $(37,738) $(342,358)
========= ========== ========= ==========
Net loss per share - basic
and diluted $ (0.48) $ (4.52) $ (0.58) $ (5.40)
Weighted average shares -
basic and diluted 65,817 63,839 65,493 63,355
Ariba, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (1)
(Unaudited; in thousands, except per share data)
Three Months Ended
June 30,
2006 2006 Non-
Reported Adj GAAP
---------- ---------- ---------
Revenues:
License $ 6,075 $ - $ 6,075
Subscription and maintenance 31,619 - 31,619
Services and other 35,939 - 35,939
---------- ---------- ---------
Total revenues 73,633 - 73,633
---------- ---------- ---------
Cost of revenues:
License 306 - 306
Subscription and maintenance (2) 8,082 (662) 7,420
Services and other (2) 33,035 (2,642) 30,393
Amortization of acquired technology
and customer intangible assets (3) 3,696 (3,696) -
---------- ---------- ---------
Total cost of revenues 45,119 (7,000) 38,119
---------- ---------- ---------
Gross profit 28,514 7,000 35,514
---------- ---------- ---------
Operating expenses:
Sales and marketing (2) 22,330 (3,950) 18,380
Research and development (2) 12,333 (1,750) 10,583
General and administrative (2) 6,973 (2,427) 4,546
Other income - Softbank (3,396) - (3,396)
Amortization of other intangible
assets (3) 200 (200) -
Restructuring and integration
costs (4) 24,376 (24,376) -
Goodwill impairment (5) - - -
---------- ---------- ---------
Total operating expenses 62,816 (32,703) 30,113
---------- ---------- ---------
(Loss) income from operations (34,302) 39,703 5,401
Interest and other income, net 3,138 - 3,138
---------- ---------- ---------
(Loss) income before income taxes and
minority interests (31,164) 39,703 8,539
Provision for income taxes 318 - 318
Minority interests in net income of
consolidated subsidiaries - - -
---------- ---------- ---------
Net (loss) income $ (31,482) $ 39,703 $ 8,221
========== ========== =========
Net (loss) income per share
Basic $ (0.48) $ 0.12
Diluted $ (0.48) $ 0.12
Weighted average shares
Basic 65,817 65,817
Diluted 65,817 70,745
Three Months Ended
June 30,
2005 2005 Non-
Reported Adj GAAP
---------- ---------- ---------
Revenues:
License $ 10,070 $ - $ 10,070
Subscription and maintenance 30,213 - 30,213
Services and other 37,432 - 37,432
---------- ---------- ---------
Total revenues 77,715 - 77,715
---------- ---------- ---------
Cost of revenues:
License 998 - 998
Subscription and maintenance (2) 7,251 (212) 7,039
Services and other (2) 31,400 (917) 30,483
Amortization of acquired technology
and customer intangible assets (3) 4,907 (4,907) -
---------- ---------- ---------
Total cost of revenues 44,556 (6,036) 38,520
---------- ---------- ---------
Gross profit 33,159 6,036 39,195
---------- ---------- ---------
Operating expenses:
Sales and marketing (2) 22,824 (1,284) 21,540
Research and development (2) 12,101 (329) 11,772
General and administrative (2) 7,044 (680) 6,364
Other income - Softbank (3,350) - (3,350)
Amortization of other intangible
assets (3) 200 (200) -
Restructuring and integration
costs (4) 34,570 (34,570) -
Goodwill impairment (5) 247,830 (247,830) -
---------- ---------- ---------
Total operating expenses 321,219 (284,893) 36,326
---------- ---------- ---------
(Loss) income from operations (288,060) 290,929 2,869
Interest and other income, net 349 - 349
---------- ---------- ---------
(Loss) income before income taxes and
minority interests (287,711) 290,929 3,218
Provision for income taxes 1,005 - 1,005
Minority interests in net income of
consolidated subsidiaries (1) - (1)
---------- ---------- ---------
Net (loss) income $(288,715) $ 290,929 $ 2,214
========== ========== =========
Net (loss) income per share
Basic $ (4.52) $ 0.03
Diluted $ (4.52) $ 0.03
Weighted average shares
Basic 63,839 63,839
Diluted 63,839 63,839
(1) To supplement our financial results presented on a GAAP basis, we
use non-GAAP measures of net income and earnings per share, which
exclude expenses that we believe are helpful in understanding our
past financial performance and prospects for the future.
Management uses the non-GAAP financial results as one factor in
its planning and forecasting of future periods. The non-GAAP
financial results are presented here with the intent of providing
additional information about our operating results and trends. We
believe the non-GAAP measures are useful in that they enable
investors to compare our results to our performance in periods
prior to our acquisitions. The presentation of non-GAAP financial
results is not meant to be considered in isolation or as a
substitute for net income or earnings per share prepared in
accordance with GAAP. Investors should be aware that non-GAAP
measures have inherent limitations and should be read only on
conjunction with our consolidated financial statements prepared in
accordance with GAAP.
(2) Non-GAAP adjustment represents stock-based compensation associated
with stock options and restricted shares issued to executive
officers and employees.
(3) Non-GAAP adjustment represents the amortization of intangible
assets in connection with our acquisitions.
(4) Non-GAAP adjustment primarily reflects adjustments to lease
abandonments and severance and related benefits.
(5) Non-GAAP adjustment represents the impairment of Goodwill.
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