1. business and industrial
2. company
3. merger and acquisition

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 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
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.
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
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
– INSIDERS OWN 8.5%
3
• 120+ Manufacturers
• 500K Models
• 10MParts
4
• 1,400+ Manufacturers
• 500K Parts
5
• 315 Manufacturers
• 176 Models
6
120+ Manufacturers
1,400+ Manufacturers
315 Manufacturers
500K Models
500K Parts
176K Models
10MParts
Lead Gen
Websites
eCommerce
Websites
DaaS
Digital
Marketing
Mobile
Apps
Business
Management
7
• Dealer Business Management System
In-Store
• OEM parts lookup
• Aftermarket Parts, Garments &
accessories (PG&A) lookup
• Lead Management
• Lead Generation
Online
• eCommerce
• OEM Parts
• Aftermarket PG&A
• Digital Marketing Services
8
Dealers
Distributors
Manufacturers (OEM)
9
120+ Manufacturers
1,400+ Manufacturers
315 Manufacturers
500K Models
500K Parts
176K Models
10MParts
10
Websites
eCatalogs
Business Mgmt.
Digital Marketing
11
Appliances
Marine & RV
Outdoor Power
Wheel & Tire
Powersports
12
0%
•
•
•
•
²
40%
66%
90%
•
•
•
³
2%
10%
17%
40%
66%
90%
10%
13
Management & Insiders own 8.5%
Roy W. Olivier
President & CEO
Bill Nurthen
Chief Financial Officer
Rob A. Ostermann
Chief Technology Officer
Robert Jones
V.P. of Sales
Marv Berg
V.P. of Operations
Brad Smith
V.P. Product Management
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
on 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
operations 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 20032008 / 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
of 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
owner/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.
14
Most Recent Quarter highlights1
Quarterly Recurring Revenue (QRR) and Churn
• Total Revenue $10.1M
$10.0
-4.5%
QRR
$9.0
• 90.2% Recurring Revenue
• 81.6% Gross Margin
Churn %
-4.0%
$8.0
-3.5%
$7.0
-3.0%
• Operating Cash Flow of $1.1M
• Total CAC² ‐ 9.3 months
• EBITDA Margin of 16.1%
$6.0
Millions
• Dealer Sales Bookings Up 31.5%³
-2.5%
$5.0
-2.0%
$4.0
-1.5%
$3.0
-1.0%
$2.0
-0.5%
$1.0
$0.0
0.0%
Q2 FY13
Q3 FY13
Q4 FY13
Q1 FY14
Q2 FY14
Q3 FY14
Q4 FY14
Q1 FY15
Q2 FY15
16
$40.0
$33.0
$35.0
$36.0
$30.1
Millions
$30.0
$25.0
$21.3
$22.5
$20.0
$15.0
$10.0
81.7%
83.2%
89.7%
93.6%
FY2011
FY2012
FY2013
FY2014
91.1%
$5.0
$0.0
TTM
FY = Fiscal Year Ending July 31
Recurring Revenue
Total Revenue
17
$6.0
$5.0
$5.0
$4.4
Includes $1.2M
of acquisitionrelated costs.
$5.5
$3.9
$4.0
Millions
Integration
related costreduction in
FY14Q2, $2.5M
annualized
$3.5
$3.0
$2.0
23.6%
19.3%
11.6%
FY2011
FY2012
FY2013
11.7%
15.2%
$1.0
$0.0
FY2014
TTM
FY = Fiscal Year Ending July 31
18
$6.0
$5.1
$5.0
Millions
$4.0
$3.5
$3.5
Impact of two
acquisitions
Integration
related costreduction in
FY14Q2, $2.5M
annualized
$3.0
$2.4
$2.4
$2.0
$1.0
$0.0
FY2011
FY2012
FY2013
FY2014
TTM
FY = Fiscal Year Ending July 31
Notes:
•
•
FY14 Q3 & Q4 cash flows combined were $2.4M
FY15 Q1 & Q2 cash flow of $2.7M
19
Cash and Investments:
Federal NOLs of
$1.688M¹
$5.834M
Total Debt and Lease Obligations:
$10.0M¹*
Shares Outstanding:
$14.35M³
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.
20
On May 7, 2015, the Company announced that it priced an
underwritten offering of 1,530,435 shares of its common stock at a
price of $3.00 per share. Including the over-allotment, gross
proceeds are expected to be approximately $5.3M and net
proceeds $4.7M.
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.
As part of the offering, ARI disclosed estimates for its fiscal third quarter
ending April 30, 2015. The Company estimates revenue for the quarter will be
in the range of $10.1 million to $10.3 million and earnings per share (EPS) in
the range of $0.01 to $0.02. This unaudited preliminary financial data is
based on the Company’s estimates and subject to completion of the
Company’s final closing procedures.
22
TASCO Corporation (“TASCO”), a leading provider of business
management, point of sale and other software exclusively
designed for automotive tire and wheel dealers (“T&W”).
TASCO is expected to add $2M to ARI’s FY16 revenue numbers. We also
expect TASCO to be profitable and cash flow positive, and ARI expects the
transaction to be accretive to its FY16 EBITDA.
Consideration for the transaction was $1.75M cash paid at closing and
$800,000 of equity (242,424 shares of ARI Common Stock) issued at closing.
There is also a $200,000 cash payment on the anniversary of the transaction
subject to set-off and a working capital adjustment.
The acquisition was funded through our Line of Credit with Silicon Valley
Bank and cash from operations.
The acquisition of TASCO consolidates two industry-leading business
management software platforms cementing ARI’s position as the most
complete technology provider in the T&W market. This will result in an
immediate increase in market share and we expect it to serve as a catalyst
for growth allowing current customers and prospects to benefit from our
expanded product portfolio.
23
Tire Company Solutions, LLC (“TCS”), a leading provider
of software, websites and marketing services designed
exclusively for automotive tire and wheel dealers.
TCS is expected to add $5M to ARI’s FY15 revenue numbers and
projects that the transaction will produce $6M in incremental revenue
over the next 12 months. Also, TCS is profitable and cash flow
positive, and ARI expects the transaction to be accretive to its FY15
EBITDA.
ARI paid approximately $4.2 million in cash at closing subject to a
post-closing adjustment based upon a target closing net asset value.
ARI agreed to pay a $3.0 million seller note, and $1.9 million in equity
(619K shares of ARI common stock), as well as an additional “earnout” to be paid contingent upon specified revenue goals.
The acquisition was funded through a combination of refinancing our
Senior Debt with Silicon Valley Bank, our Line of Credit and cash
from operations.
24
YEAR
COMPANY
PRODUCT
VERTICAL
2015
TASCO Corporation
Business Management Systems (“DMS”)
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
Empart Technologies
eCat
RV
1996
CD*\.IMG
eCat
Outdoor Power, Powersports, Marine
26
# 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
0
ARI
eCatalog
Customers
3,350*
4,081
3,000*
1,890
135
N/A
N/A
0
*total number is approximate and includes a large bulk customer’s estimates
** includes TCS acquisition
27
• OEM Sales
• Dealer Inside Sales
• International Sales
350
*
Employees
*includes TCS & TASCO acquisition
Over
100
Countries Served
Americas & EMEA
eCatalog Installs
Website Installs
28
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%
795,861
5.35%
Grand Slam Asset Management, LLC (8)
¹As 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.
29
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%
¹As 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.
30
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