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INVESTOR PRESENTATION NASDAQ: ARIS FY16 Q1 ARI Network Services, Inc. | investor.arinet.com
INVESTOR PRESENTATION
NASDAQ: ARIS
FY16 Q1 ARI Network Services, Inc. | investor.arinet.com
SAFE HARBOR STATEMENT
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
COMPANY OVERVIEW
Roy W. Olivier, President & CEO
ARI’S INVESTMENT HIGHLIGHTS
Strategic Financial
• Industry-leading provider of software tools and
marketing services
• #1 or #2 in all core markets served
• Manage largest content library in markets served
• Data both a moat and a growth driver
• Attractive market opportunity
• Strong consumer spending, health care trends, and
online shopping trends
• Market dynamics driving online lead generation and
eCommerce
• Multiple growth opportunities
• Grown the number of markets served from 4 to 8
• Grown the number of products/services from 2 to 4
• Raised the ARPD on new products
• Raised TAM from $100M to over $1.5B
• Europe and Asia remain largely untapped
• Consistent track record of growth and
profitability
• 22% revenue CAGR over last three years
• In FY15, Adjusted EBITDA and cash flow growth
outpaced revenue growth
• Profitable past 12 years
• Strong recurring revenue profile• Over 90% of revenue is recurring
• Highly diversified customer base
• 22,000+ customers
• Largest Customer is <3% of Revenue
• Profitable and Cash Flow Positive
• FY16 Q1 Adjusted EBITDA margins of 17.2%
• Operational cash flow inline with Adjusted EBITDA
3
WHAT DO WE DO?
4
We provide software and related services to help our
customers Sell More Stuff™
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
IT Expertise• Customers have limited access to IT expertise
• Customers rely on our expertise
WHO ARE OUR CUSTOMERS
5
Dealers Distributors Manufacturers (OEM)
Our Customers are:
PowersportsOutdoor Power Marine RVAppliances
CORE
Tire & Wheel HME
Markets We Serve:
GROWTH
Aftermarket
Auto Service
What “Stuff”?Whole Goods
(Tires, Bike, Boat,
RV)
OEM PartsAftermarket Parts,
Garments &
Accessories (PG&A)
Service & Tire
CONTENT THAT DRIVES COMMERCE
6
OEM Parts120+ Manufacturers
500K Models
10MParts
Aftermarket PG&A1,400+ Manufacturers
500K Parts
Whole Goods315 Manufacturers
176K Models
Improves productivity and
profitability at Dealership
Business
Management
POS / Inventory Mgmt.
& Accounting
Drive traffic to dealership
• Leads
• eCommerce
Digital Marketing
Leads for major units
eCommerce sales
Web Presence
Lead Gen &
eCommerce WebsiteseCatalogs
Increases sales in Dealership
Improves customer satisfaction
SaaS or
Subscription
Perpetual License
+ Maintenance
or
SaaS
SaaS or
SubscriptionSaaS
STRATEGIC GOALS - BACKGROUND
• To be the leader in providing software and services that help our customers Sell More Stuff™.
– Complex equipment will continue to be sold primarily through a dealer network.
– Approximately 7 out of 10 units sold originate as web leads.
– Online shopping is growing faster than in-store.
– Search is now over 50% mobile.
– ARI has a strong online footprint with supporting analytics (7,000+ Dealer Sites).
– We intend to integrate or own in-store systems (Business Management/Point of Sale).
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STRATEGIC GOALS – THE FUTURE
• We intend to be the leader in helping dealers
capitalize on the convergence of online and in-
store purchases and research.
– Integrate customer search with the dealership’s
location via mobile
– Integrate the customer in-store experience with search
and purchasing history via mobile
– Create personalized shopping experiences based on
models owned, history, etc.
8
STRATEGIC FOUNDATIONS
• Nurture and retain existing customers through world
class customer service and product feature upgrades.
• Drive organic growth through innovative new service
offerings, differentiated content and geographic
expansion.
• Lead the market with open integration to related
platforms.
• Successfully execute acquisitions that align with our core
strategy.
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FOUR POINT GROWTH STRATEGY
10
• More Markets
¹Total addressable market represented by the green bars . Percentages represent ARI’s market share , or the percentage of U.S. dealers that currently use 1 or more of our products. For example, ARI currently has
40% market-share of the OPE vertical; with 40% of those dealers using 1 or more of ARI’s products.
²Average revenue per dealer
³Home Medical Equipment
66%
40%
90% 10%
25K Dealers
GROWTH DRIVERS
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• More Markets
• More Products• eCatalog
• Lead Gen & eCommerce
• Point of Sale / Dealer
Business Mgmt. Systems (POS/DBMS)
• Digital Marketing Services (DIGMS)
• Cross- Selling Opportunities
GROWTH DRIVERS
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• More Markets
• More Products
• Higher ARPD*
• eCatalog $1,839
• LeadGen/eCommerce $2,936
• POS/DBMS $4,766
• DIGMS $5,065
*Annual Recurring Revenue – annualized as of the quarter ending October 31, 2015
GROWTH DRIVERS
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• More Markets
• More Products
• Higher ARPD
• Acquisitions that align
with our core strategy
• Completed 14
• Fragmented markets with many
small competitors
• We partner with over 90 today
• One of our Core Competencies
• ~50% Future Growth
HISTORICAL GROWTH
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Historical Revenue
Other
Non-Strategic RevenueNon-Recurring Revenue• Pro Svcs• Older Businesses
*2016 data estimated based off first quarter revenue annualized.
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HISTORICAL GROWTH
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Historical Revenue
Other eCatalog*2016 data estimated based off first quarter revenue annualized.
eCatalog• $18M Revenue• 18,000 +Dealers• 100 Countries
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HISTORICAL GROWTH
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
of our customers.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Historical Revenue
Other eCatalog Website
Lead Gen/eCom Websites• $23M Revenue• 7,500 Websites
*2016 data estimated based off first quarter revenue annualized. 16
HISTORICAL GROWTH
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
of our customers.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Historical Revenue
Other eCatalog Website Digital Marketing
Digital Marketing Services• $1M Revenues• 225 Customers
*2016 data estimated based off first quarter revenue annualized. 17
HISTORICAL GROWTH
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
of our customers.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Historical Revenue
Other eCatalog Website Digital Marketing POS
Business Mgmt System/POS• $3M Revenues• 1,500 Locations
*2016 data estimated based off first quarter revenue annualized. 18
HISTORICAL GROWTH
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
of our customers.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Other eCatalog Website Digital Marketing POS
On track to do $47M - $49M in revenue for FY16
*2016 data estimated based off first quarter revenue annualized. 19
GROWTH OPPORTUNITY
Customer
Count
US TAM
# of
Customers
ARPD TAM Dollars
eCatalog 15,901 20,800 $1,839 $38M
Lead Gen &
eCommerce 7,557 143,800 $2,936 $422M
Point of
Sale/DBMS459 143,800 $4,762 $685M
Digital
Marketing228 143,800 $5,065 $728M
Total US $1.9B
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After various adjustments we think TAM is $1.5B
eCat – Total includes “Bulk” license agreements without international dealers. ARPD is for dealers billed directly.
TAM – Total Addressable Market or the number of dealers, service locations or service providers.
ARPD– Average Recurring Revenue per dealer, service locations or service providers. Number for FY16Q1 annualized.
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
FY12 FY13 FY14 FY15 FY16 Low End Est.
Mill
ion
s
FY = Fiscal Year Ending July 31
Total Revenue
3 - 5 Year CAGR: 16 - 17%*
$22.5
$30.1
$47.0
$33.0
REVENUE GROWTH
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$40.4
* Based off FY16 estimate
TARGET OPERATING MODEL
FY15 Act.FY16 Q1
Annualized
3 Years
FY19
5 Years
FY21
Sales $40M $47M ≅ $75M ≅ $100M
Growth CAGR 16.5% 16.5%
Adj. EBITDA % 16.3% 17.2% 18% - 22% 20% - 24%
Adj. EBITDA $ $6.6M $8M $14M - $17M $20M - $24M
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• Scale
• Efficiencies
• Product Mix
FINANCIAL OVERVIEW
Bill Nurthen, CFO
MOST RECENT QUARTER HIGHLIGHTS¹
1 as of and for the quarter ending October 31, 2015
² YoY for the quarter ending October 31, 2015
³ Customer Acquisition Costs
10 years of Positive Adjusted EBITDA & Operating Cash Flows
• Total Revenue $11.7M
• 91.2% Recurring Revenue
• 82.4% Gross Margin
• Dealer Sales Bookings Up 15%²
• Operating Cash Flow of $1.7M
• Total CAC³ ‐ 10.8 months
• Adjusted EBITDA Margin of 17.2%
Mill
ion
s
Quarterly Recurring Revenue (QRR)
FY 14 FY 15
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
QRR
FY
16
24
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
FY12 FY13 FY14 FY15 TTM
Mill
ion
s
FY = For the fiscal year ended July 31TTM = For the period ended October 31, 2015
Recurring Revenue Total Revenue
5-yr Total Company Recurring Revenue Growth CAGR = 16.4%
$22.5
$30.1
$40.4
$33.0
REVENUE GROWTH
83.2% 89.7% 93.6% 90.2%
$43.1
90.5%
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-$1.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
FY12 FY13 FY14 FY15 TTM
Adjusted EBITDA Operating Cash Flow Free Cash Flow
$4.6
$3.8
$4.4
$6.6
$7.3
Mill
ion
s
12.7% 13.4% 16.3%
ADJUSTED EBITDA & CASH FLOW
Includes $1.2M of
acquisition-related costs.
Integration related cost-reduction in
FY14Q2
$3.5
$2.4 $2.4
$6.3
$1.1
($0.1)
$4.2
Free Cash Flow = cash flow from operations less capital expenditures and capitalized software development
($0.0)
$6.4
$4.116.9%
FY = For the fiscal year ended July 31TTM = For the period ended October 31, 2015
20.5%
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BALANCE SHEET HIGHLIGHTS¹
FY16 Q1
Cash and Investments: $3.2M
Deferred Tax Assets² $5.2M
Total Debt and Lease Obligations: $10.4M
Shares Outstanding: 17.2M
Stock Price³: $4.52
Market Cap.: $77.7M
Enterprise Value: $85.0M
TTM Enterprise Value/Adjusted EBITDA: 11.7x
TTM Enterprise Value/Revenues: 2.0x
¹ As of and for the quarter ending October 31, 2015
² Includes Federal NOL Carryforwards of $4.4M
³As of Market Close 1/5/16
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COMPANY OVERVIEW
Roy W. Olivier, President & CEO
SUMMARY
• We have significantly increased the size of our
addressable market opportunity
• We have a successful track record completing
acquisitions
• We have a successful track record executing
• We are well positioned for continued growth and
improved profitability
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PEER GROUP ANALYSIS
Software Equity Group Multiples1
ARI2 SaaS Index3 Software Index4 Internet Index5
EV/Revenue 2.0 4.0 – 6.2 2.7 – 2.9 1.7 – 2.1
EV/EBITDA 11.7* 20.8 – 37.4 13.3 – 15.3 16.2 – 17.3
1 Based on the Software Equity Group’s Software Industry Financial Report for Q4 15 last four quarters’ data2 As of Market Close 1/5/16*Adjusted EBITDA3 64 Public Companies4 130 Public Companies5 101 Public Companies
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APPENDICES
YEAR COMPANY PRODUCT VERTICAL
2015 DCi eCat Automotive Aftermarket
2015 TASCO Corporation DBMS Tire & Wheel
2014 TCSDealer Business Management System
(“DBMS”), Lead Gen/eCommerceTire & 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
APPENDIX 1: ACQUISITION HISTORY
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3 Sales
Channels• OEM Sales
• Dealer Inside Sales
• International Sales
100Over
Countries Served
2 Geographic
MarketsAmericas & EMEA
Headquarters Milwaukee, WILeiden, The Netherlands
387Employees
APPENDIX 2: LOCATIONS
eCatalog Installs
Website Installs 33
New Delhi, India
APPENDIX 3: BENEFICIAL OWNERSHIP¹
Amount of Beneficial Ownership1
Percent Ownership
Wellington Management Company (2) 1,725,300 9.65%
Michael D. Sifen, Inc. (3) 1,205,128 6.74%
Park City Capital, LLC (4) 1,000,000 5.59%
Grand Slam Asset Management, LLC (5) 945,861 5.29%
All affiliates as a group 4,876,289 27.28%
(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 June 1, 2015.
(2) Ownership information is provided as of December 31, 2014 based upon Schedule 13G amendment filed on February 12, 2015. Includes 250,000 shares acquired in connection with the May 7, 2015 equity
offering.
(3) 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.
(4) Ownership information is provided as of the Schedule 13D filed December 10, 2014.
(5) Ownership information is provided as December 31, 2014, based upon Schedule 13G amendment filed February 11, 2015. Includes 150,000 shares acquired in connection with the May 7, 2015 equity
offering.
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APPENDIX 4: INSIDER OWNERSHIP¹
Name of Officer / Director Amount of Direct Beneficial Ownership Percent Ownership
Roy W. Olivier (2)(3) – President & CEO 856,645 4.79%
William A. Nurthen (3) – Chief Financial Officer 151,215 *
Chad J. Cooper – Director 138,040 *
William C. Mortimore – Director 107,726 *
William H. Luden, III – Director 95,315 *
Robert Y. Newell, IV - Director 80,826 *
P. Lee Poseidon – Director 60,064 *
All current executive officers and directors as a group 1,489,831 8.33%
* Denotes less than 1%
(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 October 21, 2015.
(2) Mr. Olivier’s total includes 172,955 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.
(3) Management team granted 110,000 shares of performance based restricted stock that vests at $6, $7, $8 & $9.
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APPENDIX 5: COMPETITIVE LANDSCAPE
eCatalogs
Lead Gen +
eCommerce Websites
Business Management
Digital Marketing
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APPENDIX 6: MANAGEMENT TEAM
Roy W. Olivier President & CEO
Rob A. Ostermann Chief Technology Officer
Bill Nurthen Chief Financial Officer
Brad Smith V.P. Product Management
Management & Insiders own 8.33%
Robert JonesV.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
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 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
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 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.
*Long-term equity bonus plan aligned with Shareholder interests. Management team granted restricted stock that vests at $6, $7, $8 & $9
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