UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarter Ended December 31, 2003
Commission File Number 000-26299
ARIBA, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0439730 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
807 11th Avenue
Sunnyvale, California 94089
(Address of principal executive offices)
(650) 390-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as described in Exchange Act Rule 12b-2).
Yes x No ¨
On January 31, 2004, approximately 272.6 million shares of the registrant’s common stock were issued and outstanding.
INDEX
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| December 31, 2003 |
September 30, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 73,042 | $ | 70,819 | ||||
| Short-term investments |
49,627 | 56,323 | ||||||
| Restricted cash |
28,126 | 1,123 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $1,191 and $1,356 as of December 31, 2003 and September 30, 2003, respectively |
10,368 | 8,669 | ||||||
| Prepaid expenses and other current assets |
11,115 | 10,747 | ||||||
| Total current assets |
172,278 | 147,681 | ||||||
| Property and equipment, net |
20,537 | 21,767 | ||||||
| Long-term investments |
76,208 | 78,329 | ||||||
| Restricted cash, less current portion |
27,367 | 28,579 | ||||||
| Goodwill, net |
181,033 | 181,033 | ||||||
| Other assets |
1,725 | 1,741 | ||||||
| Total assets |
$ | 479,148 | $ | 459,130 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 10,293 | $ | 10,767 | ||||
| Accrued compensation and related liabilities |
25,452 | 26,674 | ||||||
| Accrued liabilities |
63,568 | 35,513 | ||||||
| Restructuring obligations |
11,710 | 13,764 | ||||||
| Deferred revenue |
55,876 | 57,470 | ||||||
| Total current liabilities |
166,899 | 144,188 | ||||||
| Restructuring obligations, less current portion |
32,282 | 34,112 | ||||||
| Deferred revenue, less current portion |
35,658 | 43,954 | ||||||
| Total liabilities |
234,839 | 222,254 | ||||||
| Minority interests |
21,090 | 20,019 | ||||||
| Commitments and contingencies (Note 4) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock |
541 | 540 | ||||||
| Additional paid-in capital |
4,500,913 | 4,500,974 | ||||||
| Deferred stock-based compensation |
(194 | ) | (314 | ) | ||||
| Accumulated other comprehensive income |
3,067 | 2,856 | ||||||
| Accumulated deficit |
(4,281,108 | ) | (4,287,199 | ) | ||||
| Total stockholders’ equity |
223,219 | 216,857 | ||||||
| Total liabilities and stockholders’ equity |
$ | 479,148 | $ | 459,130 | ||||
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues: |
||||||||
| License |
$ | 18,676 | $ | 30,449 | ||||
| Maintenance and service |
34,055 | 31,280 | ||||||
| Total revenues |
52,731 | 61,729 | ||||||
| Cost of revenues: |
||||||||
| License |
1,444 | 749 | ||||||
| Maintenance and service |
11,484 | 10,137 | ||||||
| Amortization of acquired core technology |
— | 2,837 | ||||||
| Total cost of revenues |
12,928 | 13,723 | ||||||
| Gross profit |
39,803 | 48,006 | ||||||
| Operating expenses: |
||||||||
| Sales and marketing |
17,539 | 20,589 | ||||||
| Research and development |
12,277 | 13,958 | ||||||
| General and administrative |
4,543 | 7,064 | ||||||
| Amortization of other intangible assets |
— | 65,677 | ||||||
| Stock-based compensation(1) |
30 | 275 | ||||||
| Total operating expenses |
34,389 | 107,563 | ||||||
| Income (loss) from operations |
5,414 | (59,557 | ) | |||||
| Interest income |
938 | 1,577 | ||||||
| Interest expense |
(2 | ) | (10 | ) | ||||
| Other income (expense) |
(118 | ) | 194 | |||||
| Net income (loss) before income taxes |
6,232 | (57,796 | ) | |||||
| Provision (benefit) for income taxes |
(272 | ) | 338 | |||||
| Minority interests in net income of consolidated subsidiaries |
413 | 528 | ||||||
| Net income (loss) |
$ | 6,091 | $ | (58,662 | ) | |||
| Net income (loss) per share—basic |
$ | 0.02 | $ | (0.22 | ) | |||
| Weighted average shares used in computing net income (loss) per share—basic |
269,998 | 264,053 | ||||||
| Net income (loss) per share—diluted |
$ | 0.02 | $ | (0.22 | ) | |||
| Weighted average shares used in computing net income (loss) per share—diluted |
277,677 | 264,053 | ||||||
| (1) | For the three months ended December 31, 2003 and 2002, stock-based compensation expense (benefit), net of the effects of cancellations, is attributable to various operating expense categories as follows (in thousands): |
| Three months ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cost of revenues |
$ | 39 | $ | (743 | ) | |||
| Sales and marketing |
(20 | ) | 500 | |||||
| Research and development |
1 | 118 | ||||||
| General and administrative |
10 | 400 | ||||||
| Total |
$ | 30 | $ | 275 | ||||
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Operating activities: | ||||||||
| Net income (loss) |
$ | 6,091 | $ | (58,662 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Recovery of doubtful accounts |
(190 | ) | (319 | ) | ||||
| Depreciation and amortization |
1,701 | 72,177 | ||||||
| Amortization of stock-based compensation |
30 | 275 | ||||||
| Minority interests in net income of consolidated subsidiaries |
413 | 528 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(1,509 | ) | (3,251 | ) | ||||
| Prepaid expenses and other assets |
(352 | ) | 146 | |||||
| Accounts payable |
(474 | ) | 378 | |||||
| Accrued compensation and related liabilities |
(1,222 | ) | (447 | ) | ||||
| Accrued liabilities |
27,675 | (3,428 | ) | |||||
| Restructuring obligations |
(3,884 | ) | (6,816 | ) | ||||
| Deferred revenue |
(9,890 | ) | (6,447 | ) | ||||
| Net cash provided by (used in) operating activities |
18,389 | (5,866 | ) | |||||
| Investing activities: | ||||||||
| Purchases of property and equipment |
(471 | ) | (568 | ) | ||||
| Sales of investments, net of purchases |
7,975 | 12,586 | ||||||
| Allocation from (to) restricted cash, net |
(25,791 | ) | 826 | |||||
| Net cash provided by (used in) investing activities |
(18,287 | ) | 12,844 | |||||
| Financing activities: | ||||||||
| Repayments of capital lease obligations |
— | (106 | ) | |||||
| Proceeds from issuance of common stock |
410 | 2,140 | ||||||
| Net cash provided by financing activities |
410 | 2,034 | ||||||
| Effect of foreign exchange rate changes on cash and cash equivalents |
1,711 | 787 | ||||||
| Net increase in cash and cash equivalents |
512 | 9,012 | ||||||
| Cash and cash equivalents at beginning of period |
70,819 | 86,935 | ||||||
| Cash and cash equivalents at end of period |
$ | 73,042 | $ | 96,734 | ||||
See accompanying notes to condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1—Description of Business and Summary of Significant Accounting Policies
Description of business
Ariba, Inc., along with its subsidiaries (collectively referred to herein as the “Company”), provides Enterprise Spend Management solutions that allow enterprises to efficiently manage the purchasing of all non-payroll goods and services required to run their business. The Company refers to these non-payroll expenses as “spend.” The Company’s solutions, which include software applications, services and network access, are designed to provide corporations with technology and business process improvements to better manage their corporate spending and, in turn, save money. The Company’s software applications and services streamline and improve the business processes related to the identification of suppliers of goods and services, the negotiation of the terms of purchases, and ultimately the management of ongoing purchasing and settlement activities. These goods and services include commodities, raw materials, operating resources, services, temporary labor, travel, maintenance, repair and operations equipment.
The Company was incorporated in Delaware in September 1996 and currently markets its products and related services in North America, Europe, Latin America, Middle East, Asia and Australia primarily through its direct sales force and indirect sales channels.
Basis of presentation
The unaudited condensed consolidated financial statements of the Company have been prepared by the management of the Company and reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending September 30, 2004. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States