EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

Ariba Reports Results for Second Quarter of Fiscal Year 2008

Company posts record subscription software and backlog growth for second consecutive quarter

SUNNYVALE, Calif., April 24, 2008 — Ariba, Inc. (Nasdaq: ARBA), the leading spend management solutions provider, today announced results for the second quarter of fiscal year 2008 ended March 31.

Quarterly Financial and Operational Highlights:

 

   

Total Non-GAAP revenues of $82.8 million and Non-GAAP EPS of $0.09

 

   

Non-GAAP subscription software revenue of $31 million, up 97% year-over-year

 

   

Total subscription software backlog of $202 million, up 98% year-over-year

 

   

12-month subscription software backlog of $101 million, up 89% year-over-year

 

   

Release of Ariba 9s5, the first enterprise-class on-demand spend management suite

“Despite a slowing global economy, Ariba executed well,” said Bob Calderoni, Chairman and CEO, Ariba. “For the second consecutive quarter, we posted record year-over-year growth in both subscription software revenue and backlog, a testament to the strength of our on-demand strategy,” Calderoni continued. “With the release of Ariba 9s5, we have raised the bar for on-demand spend management solutions, providing similar enterprise-class functionality as our CD-based products, and positioned ourselves well to maintain our market position.”

Results for the Second Quarter of Fiscal Year 2008

Revenue:

Total GAAP revenues for the second quarter of fiscal year 2008 were $80.5 million, as compared to $73.4 million for the second quarter of fiscal year 2007. Subscription and maintenance revenues for the quarter were $46.8 million, as compared to $34.2 million for the second quarter of fiscal year 2007. Within subscription and maintenance revenues, subscription software revenue was $28.6 million for the quarter, as compared to $15.7 million for the second quarter of fiscal year 2007. Services and other revenues for the quarter were $33.7 million, as compared to $39.2 million for the second quarter of fiscal year 2007. On a Non-GAAP basis, total revenues for the second quarter of fiscal year 2008 were $82.8 million with subscription software revenue at $30.8 million. The difference between GAAP and Non-GAAP is $2.3 million of revenue that was not recognized due to the impact of purchase accounting on contracts acquired through the acquisition of Procuri, Inc.

Earnings Per Share:

Net loss for the second quarter of fiscal year 2008 was $12.4 million, or $0.16 per share, as compared to a net loss for the second quarter of fiscal year 2007 of $5.1 million, or $0.07 per share. In addition to the revenue that was not recognized due to the impact of purchase accounting on contracts acquired through the acquisition of Procuri, Inc., the net loss for the first quarter of fiscal year 2008 included charges of $4.9 million for amortization of intangible assets, $690,000 for restructuring related to the Procuri integration, and $11.5 million for stock-based compensation. Excluding these items, non-GAAP net income for the second quarter of fiscal 2008 was $6.9 million, or $0.09 per diluted share, compared to non-GAAP net income for the second quarter of fiscal 2007 of $7.1 million or $0.10 per share.


Balance Sheet and Cash:

Total cash, cash equivalents, marketable securities and investments were $125 million at March 31, 2008, down $58 million from September 30, 2007. The primary reason for the decrease in cash was due to the cash paid in conjunction with the acquisition of Procuri, which was completed in the quarter ended December 31, 2007. Positive net cash flow from operations for the three months ended March 31, 2008 was $1.5 million, as compared to $2.5 million for the three months ended March 31, 2007. Accounts receivable, on a days-sales-outstanding basis, were 33 days for the second quarter of fiscal year 2008, as compared to 43 days for the second quarter of fiscal year 2007, and down from 34 days from the previous quarter. Total deferred revenues were $95.1 million at March 31, 2008, up $8 million from December 31, 2007.

Customer Acquisition and Transactions for the Quarter:

During the quarter, 226 companies of all sizes across geographies purchased Ariba solutions to drive their spend management strategies, including: BNP Paribas, The Kroger Co., National City Corporation, Nissan Motor Co. LTD, Sodexho, and The Thomson Corporation. The company also added 22 new customers, and closed 20 transactions over $1 million, including 13 software deals over $1 million, and 135 on-demand product deals.

Conference Call Information

Ariba will hold a conference call today at 2:00 p.m. PT / 5:00 p.m. ET to discuss its results for the second quarter of fiscal year 2008. To join the call, please dial (877) 407-8031 in the United States and Canada, or (201) 689-8031 if calling internationally. The conference call also will be webcast live, and can be accessed on the investor relations section of the company’s website at www.ariba.com or by logging in at www.vcall.com.

A replay of the conference will be available at approximately 5:00 p.m. PT / 8:00 p.m. ET today through Thursday, May 1, 2008 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: 279522.

About Ariba, Inc.

Ariba, Inc. is the leading provider of spend management solutions to help companies realize rapid and sustainable bottom line results. Successful companies around the world in every industry use Ariba Spend Management™ software and services. Ariba can be contacted in the U.S. at 1.650.390.1000 or at www.ariba.com.

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Copyright © 1996 – 2008 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,

 

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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. 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 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, including Procuri which Ariba acquired on December 17, 2007; long and unpredictable sales cycles and the deferrals of anticipated orders; declining economic conditions, including the impact of a recession; 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-Q filed with the SEC on February 6, 2008.

Investor Contact:

John Duncan

Ariba, Inc.

(650) 390-1200

Investor@ariba.com

Media Contact:

Karen Master

Ariba, Inc.

(412) 297-8177

kmaster@ariba.com

 

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Ariba, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited; in thousands)

 

     March 31,
2008
    September 30,
2007
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 72,529     $ 61,311  

Marketable securities

     —         83,667  

Restricted cash

     315       820  

Accounts receivable, net

     30,055       29,130  

Prepaid expenses and other current assets

     8,731       10,743  
                

Total current assets

     111,630       185,671  

Property and equipment, net

     19,908       20,230  

Long-term investments

     22,107       8,048  

Restricted cash, less current portion

     29,560       29,200  

Goodwill

     406,321       326,101  

Other intangible assets, net

     30,448       10,461  

Other assets

     3,014       3,875  
                

Total assets

   $ 622,988     $ 583,586  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 9,992     $ 10,882  

Accrued compensation and related liabilities

     23,064       24,192  

Accrued liabilities

     16,622       18,976  

Restructuring obligations

     20,638       19,065  

Deferred revenue

     88,414       76,110  

Deferred income - Softbank

     —         566  
                

Total current liabilities

     158,730       149,791  

Deferred rent obligations

     20,472       22,628  

Restructuring obligations, less current portion

     47,394       52,106  

Deferred revenue, less current portion

     6,702       7,917  

Other long-term liabilities

     6,567       —    
                

Total liabilities

     239,865       232,442  
                

Stockholders’ equity:

    

Common stock

     171       157  

Additional paid-in capital

     5,135,677       5,067,993  

Accumulated other comprehensive (loss) income

     (2,870 )     1,112  

Accumulated deficit

     (4,749,855 )     (4,718,118 )
                

Total stockholders’ equity

     383,123       351,144  
                

Total liabilities and stockholders’ equity

   $ 622,988     $ 583,586  
                

 

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Ariba, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited; in thousands, except per share data)

 

     Three Months Ended
March 31,
    Six Months Ended
March 31,
 
     2008     2007     2008     2007  

Revenues:

        

Subscription and maintenance

   $ 46,798     $ 34,219     $ 86,824     $ 68,238  

Services and other

     33,740       39,200       70,688       82,348  
                                

Total revenues

     80,538       73,419       157,512       150,586  
                                

Cost of revenues:

        

Subscription and maintenance

     10,454       8,195       19,322       16,044  

Services and other

     24,029       29,196       48,635       59,526  

Amortization of acquired technology and customer intangible assets

     4,685       3,734       8,194       7,430  
                                

Total cost of revenues

     39,168       41,125       76,151       83,000  
                                

Gross profit

     41,370       32,294       81,361       67,586  
                                

Operating expenses:

        

Sales and marketing

     29,432       23,096       54,544       46,072  

Research and development

     13,944       13,033       27,261       25,591  

General and administrative

     11,806       8,714       25,308       18,286  

Other income - Softbank

     —         (3,389 )     (566 )     (6,783 )

Amortization of other intangible assets

     210       124       319       324  

Restructuring and integration costs

     690       —         4,528       —    

Litigation provision

     —         —         5,900       —    
                                

Total operating expenses

     56,082       41,578       117,294       83,490  
                                

Loss from operations

     (14,712 )     (9,284 )     (35,933 )     (15,904 )

Interest and other income, net

     2,863       4,896       6,207       8,006  
                                

Loss before income taxes

     (11,849 )     (4,388 )     (29,726 )     (7,898 )

Provision for income taxes

     549       684       992       1,261  
                                

Net loss

   $ (12,398 )   $ (5,072 )   $ (30,718 )   $ (9,159 )
                                

Net loss per share - basic and diluted

   $ (0.16 )   $ (0.07 )   $ (0.41 )   $ (0.13 )

Weighted average shares - basic and diluted

     77,648       69,704       75,426       69,213  

 

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Ariba, Inc. and Subsidiaries

Cash Flows

(Unaudited; in thousands)

 

     Three Months Ended
March 31,
 
     2008     2007  

Operating activities:

    

Net loss

   $ (12,398 )   $ (5,072 )

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Provision for doubtful accounts

     15       274  

Depreciation

     1,955       1,707  

Amortization of intangible assets

     4,895       3,858  

Stock-based compensation

     11,489       8,361  

Restructuring charge

     690       —    

Realized gain - currency translation adjustment

     —         (2,200 )

Changes in operating assets and liabilities:

    

Accounts receivable

     (1,093 )     4,441  

Prepaid expense and other assets

     3,913       (528 )

Accounts payable

     (971 )     (245 )

Accrued compensation and related liabilities

     3,194       (292 )

Accrued liabilities

     (11,535 )     (4,460 )

Deferred income - Softbank

     —         (3,389 )

Deferred revenue

     7,652       7,847  

Restructuring obligations

     (6,327 )     (7,788 )
                

Net cash provided by operating activities

     1,479       2,514  
                

Investing activities:

    

Cash paid for acquisitions, net of cash acquired

     (921 )     —    

Purchases of property and equipment

     (1,776 )     (1,758 )

Sales of investments, net of purchases

     35,131       (13,224 )

Allocation from restricted cash, net

     96       400  
                

Net cash provided by (used in) investing activities

     32,530       (14,582 )
                

Financing activities:

    

Proceeds from issuance of common stock, net

     2,186       3,239  

Repurchase of common stock

     (992 )     (1,386 )
                

Net cash provided by financing activities

     1,194       1,853  
                

Effect of exchange rates on cash and cash equivalents

     178       75  

Net change in cash and cash equivalents

     35,381       (10,140 )

Cash and cash equivalents at beginning of period

     37,148       49,776  
                

Cash and cash equivalents at end of period

   $ 72,529     $ 39,636  
                

 

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Non-GAAP Financial Measures

The accompanying press release dated April 24, 2008 contains non-GAAP financial measures. The following table reconciles the non-GAAP financial measures in the press release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP measures include non-GAAP revenues, non-GAAP cost of revenues, gross profit, operating expenses, (loss) income from operations, net (loss) income and net (loss) income per share amounts.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, GAAP financial measures, which should be considered as the primary financial metrics for evaluating our financial performance. Significantly, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Instead, they are based on subjective determinations by management designed to supplement our GAAP financial measures. They are subject to a number of important limitations and should be considered only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For example, our non-GAAP financial measures have the effect of excluding a purchase accounting adjustment, costs and expenses from our operating results that should be properly considered under a system of accrual accounting. In addition, our non-GAAP financial measures differ from GAAP measures with the same names, may vary over time and may differ from non-GAAP financial measures with the same or similar names used by other companies. Accordingly, investors should exercise caution when evaluating our non-GAAP financial measures.

Despite these limitations, we believe our non-GAAP financial measures provide meaningful supplemental information about our operating results, primarily because they exclude a purchase accounting adjustment and costs and expenses that we do not believe are indicative of the ongoing operating performance of our business and our senior management. Although these items should properly be considered in our GAAP financial measures, we believe they should be excluded when evaluating our current operating performance. The non-GAAP financial measures disclosed in the accompanying press release are used by our Board of Directors and senior management to evaluate our current operating performance, are used in evaluating the performance of our senior management, and are used in our budget and planning processes. We believe that our non-GAAP financial measures are helpful to investors by facilitating comparisons of our current and prior operating results and by facilitating comparisons of our operating results with those of other software companies.

 

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Ariba, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Operating Results

(Unaudited; in thousands, except per share data)

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP operating results for the period indicated below:

 

     Three Months Ended
March 31, 2008
    Three Months Ended
March 31, 2007
 

Revenue reconciliation:

    

GAAP revenue

   $ 80,538     $ 73,419  

Purchase accounting adjustment

     2,260       —    
                

Total non-GAAP revenues

   $ 82,798     $ 73,419  
                
     Three Months Ended
March 31, 2008
    Three Months Ended
March 31, 2007
 

Expense reconciliation:

    

GAAP revenue

   $ 80,538     $ 73,419  

GAAP net loss

     12,398       5,072  
                

Total GAAP expenses

     92,936       78,491  

Amortization of intangible assets

     (4,895 )     (3,858 )

Stock-based compensation

     (11,489 )     (8,361 )

Restructuring and integration

     (690 )     —    
                

Total non-GAAP operating expenses

   $ 75,862     $ 66,272  
                
     Three Months Ended
March 31, 2008
    Three Months Ended
March 31, 2007
 

Net income (loss) reconciliation:

    

GAAP net loss

   $ (12,398 )   $ (5,072 )

Purchase accounting adjustment

     2,260       —    

Amortization of intangible assets

     4,895       3,858  

Stock-based compensation

     11,489       8,361  

Restructuring and integration

     690       —    
                

Non-GAAP net income

   $ 6,936     $ 7,147  
                
     Three Months Ended
March 31, 2008
    Three Months Ended
March 31, 2007
 

Net income (loss) per share reconciliation:

    

GAAP net loss per share - basic

   $ (0.16 )   $ (0.07 )

Purchase accounting adjustment

     0.03       —    

Amortization of intangible assets

     0.06       0.06  

Stock-based compensation

     0.15       0.12  

Restructuring and integration

     0.01       —    
                

Non-GAAP net income per share - basic

   $ 0.09     $ 0.10  
                

Non-GAAP net income per share - diluted

   $ 0.09     $ 0.10  

Weighted average shares - basic

     77,648       69,704  

Weighted average shares - diluted

     81,394       74,109  

See “Discussion of Specific Items Excluded From Non-GAAP Financial Measures” at the end of the reconciliation of GAAP to non-GAAP operating results.

 

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Discussion of Specific Items Excluded From Non-GAAP Financial Measures

Our non-GAAP financial measures include a purchase accounting adjustment related to deferred revenues and generally exclude costs and expenses for (i) amortization of intangible assets related to acquisitions, (ii) stock-based compensation and (iii) restructuring and integration. We exclude these items because we believe they are not closely related to the ongoing operating performance of our business and the performance of our senior management and are generally excluded from our budget and planning process. In addition to these reasons, we believe our non-GAAP financial measures are also helpful to investors by facilitating comparisons of our operating results over different time periods and by facilitating comparisons of our financial performance with that of other companies. In addition, except for costs and expenses related to restructuring and integration, these items are non-cash items that do not affect cash flows.

(1) Purchase accounting adjustment – deferred revenue. As announced on December 17, 2007, Ariba acquired Procuri, Inc. In accordance with the fair value provisions of EITF 01-3, Accounting in a Business Combination for Deferred Revenue of an Acquiree, acquired deferred revenue of approximately $4.5 million was recorded on the opening balance sheet, which was approximately $5.9 million lower than the historical carrying value. Although this purchase accounting requirement has no impact on the Company's business or cash flow, it adversely impacts the Company's reported GAAP revenue primarily for the first twelve months post- acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company has provided non-GAAP financial measures which exclude the impact of the purchase accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making and (b) compare past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related subscription terms are renewed in future periods.

(2) Amortization of Acquired Intangible Assets. In accordance with GAAP, we amortize intangible assets acquired in connection with acquisitions over the estimated useful lives of the assets. We exclude these amortization costs in our non-GAAP financial measures because they (i) result from prior acquisitions, rather than the ongoing operating performance of our business, and (ii) absent additional acquisitions, are expected to decline over time as the remaining carrying amounts of these assets are amortized. We believe excluding these costs helps investors compare our financial performance with that of other companies with different acquisition histories. However, as with impairment charges, we recognize that amortization costs provide a helpful measure of the financial impact and performance of prior acquisitions and consider our non-GAAP financial measures in conjunction with our GAAP financial results that include amortization costs.

 

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(3) Stock-Based Compensation Expenses. We exclude stock-based compensation expense associated with stock options and stock granted to employees and non-executive directors in our non-GAAP financial measures. While stock-based compensation is a significant component of our expenses, we believe that investors wish to be able to exclude the effects of stock-based compensation expense in comparing our financial performance with that of other companies.

(4) Restructuring and integration. We recorded restructuring related to lease abandonment accruals and severance and related benefits in the three months ended March 31, 2008. We exclude this from our non-GAAP financial measures because it is unrelated to our ongoing operations and is significantly impacted by factors outside our control. We believe excluding restructuring and integration helps investors compare our operating performance with that of other companies. We recognize, however, that restructuring and integration will impact cash flows and that we and investors should carefully consider the impact of these costs on future cash flows.

 

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