Ariba Inc. Earnings: Higher Expenses Shrinks Margins, Profit Declines

The Cheat Sheet

Rising costs hurt Ariba, Inc. in the first quarter as profit dropped from a year earlier. Ariba is a provider of collaborative business commerce solutions for buying and selling goods and services.

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Ariba Earnings Cheat Sheet for the First Quarter

Results: Net income for Ariba, Inc. fell to $143,000 (0 cents per share) vs. $42.1 million (45 cents per share) a year earlier. This is a decline of 99.7% from the year earlier quarter.

Revenue: Rose 39% to $125.7 million from the year earlier quarter.

Actual vs. Wall St. Expectations: ARBA reported adjusted net income of 23 cents per share. By that measure, the company beat the mean estimate of 5 cents per share. Analysts were expecting revenue of $124.6 million.

Quoting Management: “Ariba’s strong momentum continued during the first quarter, leading to strong revenue growth and profitability,” said Bob Calderoni, Chairman and CEO, Ariba. “We continue to solidify Ariba as the world’s largest and most global web-based business trading community and the value of our trading community continues to grow, making the Ariba Network an increasingly vital way for our customers to collaborate and conduct commerce through the cloud.”

Key Stats:

Gross margin shrank 4.6 percentage points to 61.5%. The contraction appeared to be driven by increased costs, which rose 57.9% from the year earlier quarter while revenue rose 39%.

Revenue has risen the past four quarters. Revenue increased 29.1% to $122.7 million in the fourth quarter of the last fiscal year. The figure rose 30.7% in the third quarter of the last fiscal year from the year earlier and climbed 24.8% in the second quarter of the last fiscal year from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the fourth quarter of the last fiscal year with net income of 7 cents versus a mean estimate of net income of 8 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from 8 cents a share to 7 cents over the last ninety days. The average estimate for the fiscal year is 32 cents per share, down from 37 cents ninety days ago.

Competitors to Watch: SciQuest, Inc. , Oracle Corporation , Intl. Business Machines Corp. , Bottomline Technologies , Manhattan Associates, Inc. , Vocus, Inc. , American Software, Inc. , Deltek Inc. , Selectica, Inc. , and MER Telemanagement Solutions Ltd. .

Stock Performance: Shares of ARBA were down 1% from the previous close.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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