INVESTOR PRESENTATION NASDAQ: ARIS FY17 Q2 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.
COMPANY OVERVIEW Roy W. Olivier, President & CEO
ARI’S INVESTMENT HIGHLIGHTS Strategic Financial • • Industry-leading provider of software tools and marketing Consistent track record of growth and profitability services • 17.5% revenue CAGR over last five years • #1 or #2 in all core markets served • In FY16, Adjusted EBITDA and cash flow growth outpaced • Manage largest content library in markets served revenue growth • • Profitable past 12 years Data both a moat and a growth driver • • Attractive market opportunity Strong recurring revenue profile • Over 90% of revenue is recurring • Strong consumer spending, health care trends, and online shopping trends • Market dynamics driving online lead generation and eCommerce • Highly diversified customer base • 25,000+ customers • Multiple growth opportunities • Largest Customer is <5% of Revenue • Grown the number of markets served from 4 to 8 • Grown the number of products/services from 2 to 4 • Profitable and Cash Flow Positive • Raised the ARPD on new products • FY17 Q2 Adjusted EBITDA margins of 16.7% • Raised TAM from $100M to over $2.0B • Operational cash flow inline with Adjusted EBITDA • Europe and Asia remain largely untapped
DURABLE GOODS BECOMING MORE COMPLEX – NOT LESS 1957 BMW offered 7 Models; 10 Trims 2017 BMW offers 20 Models; 85 Trims 1957 BMW 600: ~15,000 Parts 2017 BMW i3: ~50,000 Parts 1976 Honda offered 32 Models 2016 Honda offered 60 Models 2016 Honda Gold Wing: ~4,700 Parts 1976 Honda Gold Wing: ~2,000 Parts
AN UNMATCHED PRODUCT CONTENT NETWORK AT THE CORE OF OMNI-CHANNEL DEALER COMMERCE ECOSYSTEM Dealers of complex goods require robust, up to date networks of data from manufactures in order to sell, rent and service goods. However, multiline dealerships, which are the most common type of dealerships in our core markets, are faced with the challenge of accessing and curating data for thousands of SKUs from multiple OEMs. ARI solves that problem for its customer base by establishing a product content network, enriched by thousands of manufacturer partners and tens of thousands of OEM, dealer and distributor customers. B2C (Dealer-to to-Consumer) systems: B2B (Distributor-to to-Dealer) systems: 8,000 • Lead Generation Websites • Parts Counter • Mobile Dealer Apps • E-commerce Websites • In-store POS PRODUCT DATA CONSUMERS B2C INTEGRATIONS (DISTRIBUTORS & RETAILERS) • Mobile Apps B2B Data Ac Access Ag Agreements Al Allow AR ARI to Integration 18,000 publish multiline OEM and Aftermarket Data Through Its B2B INTEGRATIONS Proprietary Product Content Repository >10 MILLION SKUs >2,200 (ORIGINAL EQUIPMENT AND AFTERMARKET MAJOR UNIT OEMs PRODUCT DATA SOURCES MANUFACTURERS) 3,200 AFTERMARKET PARTS MANUFACTURERS 165 165 PARTS OEMs
CONSUMER SHOPPING TRENDS CONSUME MER SHOP OPPING G TRE RENDS Start with a Search Buy In-Store Become a Loyal Customer 80% 80% of small business 85% 85% say they’d be more purchases are made in- likely to shop in places that 87% of customers 37% are desktop 63% are store offer personalized coupons research online before browsers mobile/tablet and excusive offers in-store visiting a store browsers • Email marketing Visit In-Store • Apps • Text message marketing • Pay-per- click (“PPC”) Research Online 79% of in-store 79% 6 4 % Search engines 4 6 % Retailers site/app customers research 3 0 % Other retailer’s site/app online while in-stores 2 6 % Another type of site Review Sites Social Media using: 61% read online 36% said reviews before interaction on social Visit a Retailer’s Website making a media led them to purchase decision buy more from that What are your customers looking for? company eBay & Craigslist YouTube • Price of the item at the store and Generate 10x 90% find videos promotions • Details about store hours more leads than helpful when by traditional researching online • If the item they’re looking for is in stock methods • Map showing item’s location in the store • Location of the store • Additional and related inventory Sources: Think with Google, Baynote, Data-Charts, eConsultancy, Search Engine Land, Business News Daily, Retailing Today, YouTube, Company
WHAT DO WE DO? We provide software and related services to help our customers Sell More Stuff™ ONLINE IN-STORE Websites Management Systems Mobile Apps Digital Marketing POS Systems Proximity Marketing Channel Marketing Kiosk Software Mobile Search E-Commerce Parts Lookup Software Product Information Customer Insights & Trends Analytics & Attribution
WHO ARE OUR CUSTOMERS Our Customers are: Dealers Distributors Manufacturers (OEM) What “Stuff”? Aftermarket Parts, Service & Tire Whole Goods OEM Parts Garments & (Tires, Bike, Boat, RV) Accessories (PG&A) Markets We Serve: Aftermarket Outdoor Power Appliances Tire & Wheel HME Powersports Marine RV Auto Service GROWTH CORE
CONTENT THAT DRIVES COMMERCE OEM Parts Aftermarket PG&A Whole Goods 7,160 Brands > 3,200 Brands > 2,200 Brands 500K Models 500K Parts 176K Models 10M Parts Business Lead Gen & eCatalogs Digital Marketing Management eCommerce Websites Drive traffic to dealership POS / Inventory Mgmt. Increases sales in Dealership Leads for major units & Accounting • Leads Improves customer satisfaction eCommerce sales Improves productivity • eCommerce and profitability at Web Presence Dealership SaaS SaaS or SaaS or Perpetual License Subscription + Maintenance Subscription or SaaS
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 (8,000+ Dealer Sites). - We intend to integrate or own in-store systems (Business Management/Point of Sale).
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.
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.
FOUR POINT GROWTH STRATEGY • More Markets 25K Dealers 40% 66% 90% 10% ¹To tal addressable m arket represented by the green bars . Percentages represent ARI’s m arket share , or the percentage of U.S. dealers that currently use 1 or m ore of our products. For exam ple, ARI currently has 40% arket- share of the OPE vertical; with 40% of those dealers using 1 or m ore of ARI’s products. m
GROWTH DRIVERS • More Markets • More Products • eCatalog • Lead Gen & eCommerce • Point of Sale / Dealer Business Mgmt. Systems (POS/DBMS) • Digital Marketing Services (DIGMS) • Cross- Selling Opportunities
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