Ariba Reports Results For Third Quarter Of Fiscal Year 2012

Our non-GAAP financial measures generally exclude expenses or benefits for (i) amortization of intangible assets related to acquisitions, (ii) stock-based compensation, (iii) tax accrual reversal, (iv) restructuring costs, (v) transaction related costs and (vi) discontinued operations. 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 certain restructuring costs or benefits, transaction related costs and discontinued operations, these items are non-cash items that do not affect cash flows.

(1) 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.

(2) Stock-based compensation expenses. We exclude stock-based compensation expense associated with stock granted to employees and non-employee 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.

(3) Tax accrual reversal. We released tax reserves in the nine months ended June 30, 2011. We exclude these from our non-GAAP financial measures because they are unrelated to our ongoing operations. We believe excluding the tax reserve releases helps investors compare our operating performance with that of other companies.

(4) Restructuring cost. We recorded a restructuring cost related to lease abandonment accruals and asset impairment in the three and nine months ended June 30, 2011. We exclude these from our non-GAAP financial measures because they are unrelated to our ongoing operations and are significantly impacted by factors outside our control. We believe excluding restructuring costs helps investors compare our operating performance with that of other companies. We recognize, however, that restructuring costs will impact cash flows and that we and investors should carefully consider the impact of these costs on future cash flows.

(5) Transaction related costs. We recorded transaction related costs in the three and nine months ended June 30, 2012 and nine months ended June 30, 2011. We exclude these from our non-GAAP financial measures because they are unrelated to our ongoing operations. We believe excluding the transaction related costs helps investors compare our operating performance with that of other companies. We recognize, however, that the transaction related costs impact cash flow and that we and investors should carefully consider the impact of this on cash flow.

(6) Discontinued operations. We exclude the results of discontinued operations from our non-GAAP financial measures because they are unrelated to our ongoing operations. We believe excluding the results of discontinued operations helps investors compare our operating performance with that of other companies. We recognize, however, that the discontinued operations impact cash flow and that we and investors should carefully consider the impact of this on cash flow.

Ariba, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
		Three Months Ended												Three Months Ended
		June 30,												June 30,
		2012Reported				Adj				2012 Non-GAAP				2011Reported				Adj				2011 Non-GAAP
Revenues:
Subscription and maintenance		$	108,011			$	-			$	108,011			$	91,017			$	-			$	91,017
Services and other			28,953				-				28,953				30,900				-				30,900
Total revenues			136,964				-				136,964				121,917				-				121,917
Cost of revenues:
Subscription and maintenance (2)			21,171				(1,555	)			19,616				19,507				(927	)			18,580
Services and other (2)			23,961				(1,759	)			22,202				22,274				(1,062	)			21,212
Amortization of acquired technology and customer intangible assets (1)			4,326				(4,326	)			-				3,954				(3,954	)			-
Total cost of revenues			49,458				(7,640	)			41,818				45,735				(5,943	)			39,792
Gross profit			87,506				7,640				95,146				76,182				5,943				82,125
Operating expenses:
Sales and marketing (2)			47,515				(8,402	)			39,113				43,019				(6,911	)			36,108
Research and development (2)			18,321				(2,758	)			15,563				16,661				(2,118	)			14,543
General and administrative (2) (5)			18,604				(6,982	)			11,622				13,708				(2,981	)			10,727
Amortization of other intangible assets (1)			394				(394	)			-				331				(331	)			-
Restructuring costs (4)			-				-				-				13,396				(13,396	)			-
Total operating expenses			84,834				(18,536	)			66,298				87,115				(25,737	)			61,378
Operating income (loss)			2,672				26,176				28,848				(10,933	)			31,680				20,747
Interest and other (expense) income, net			(351	)			-				(351	)			671				-				671
Income (loss) from continuing operations before income taxes			2,321				26,176				28,497				(10,262	)			31,680				21,418
Provision for income taxes			3,411				-				3,411				2,021				-				2,021
Income (loss) from continuing operations			(1,090	)			26,176				25,086				(12,283	)			31,680				19,397
Discontinued operations, net of tax:
Income from discontinued operations (6)			330				(330	)			-				349				(349	)			-
Total discontinued operations			330				(330	)			-				349				(349	)			-
Net (loss) income		$	(760	)		$	25,846			$	25,086			$	(11,934	)		$	31,331			$	19,397
Basic (loss) earnings per share:
(Loss) income from continuing operations		$	(0.01	)						$	0.26			$	(0.13	)						$	0.21
Discontinued operations, net of tax			0.00								0.00				0.00								0.00
Net (loss) income per basic common share		$	(0.01	)						$	0.26			$	(0.13	)						$	0.21
Diluted (loss) earnings per share:
(Loss) income from continuing operations		$	(0.01	)						$	0.25			$	(0.13	)						$	0.20
Discontinued operations, net of tax			0.00								0.00				0.00								0.00
Net (loss) income per diluted common share		$	(0.01	)						$	0.25			$	(0.13	)						$	0.20
Weighted average shares - basic			96,244								96,244				93,101								93,101
Weighted average shares - diluted			96,244								100,196				93,101								96,721

Ariba, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
		Nine Months Ended												Nine Months Ended
		June 30,												June 30,
		2012Reported				Adj				2012 Non-GAAP				2011Reported				Adj				2011 Non-GAAP
Revenues:
Subscription and maintenance		$	307,283			$	-			$	307,283			$	239,724			$	-			$	239,724
Services and other			86,805				-				86,805				81,378				-				81,378
Total revenues			394,088				-				394,088				321,102				-				321,102
Cost of revenues:
Subscription and maintenance (2)			64,068				(4,828	)			59,240				51,477				(2,612	)			48,865
Services and other (2)			69,775				(5,248	)			64,527				56,798				(3,055	)			53,743
Amortization of acquired technology and customer intangible assets (1)			12,942				(12,942	)			-				8,054				(8,054	)			-
Total cost of revenues			146,785				(23,018	)			123,767				116,329				(13,721	)			102,608
Gross profit			247,303				23,018				270,321				204,773				13,721				218,494
Operating expenses:
Sales and marketing (2)			138,095				(24,614	)			113,481				118,566				(20,372	)			98,194
Research and development (2)			52,605				(8,440	)			44,165				44,157				(6,199	)			37,958
General and administrative (2) (5)			47,941				(14,622	)			33,319				38,859				(11,277	)			27,582
Amortization of other intangible assets (1)			1,175				(1,175	)			-				573				(573	)			-
Restructuring costs (4)			-				-				-				10,704				(10,704	)			-
Total operating expenses			239,816				(48,851	)			190,965				212,859				(49,125	)			163,734
Operating income			7,487				71,869				79,356				(8,086	)			62,846				54,760
Interest and other (expense) income, net			(437	)			-				(437	)			1,766				-				1,766
Income (loss) from continuing operations before income taxes			7,050				71,869				78,919				(6,320	)			62,846				56,526
Provision for (benefit from) income taxes (3)			7,018				-				7,018				(930	)			3,942				3,012
Income (loss) from continuing operations			32				71,869				71,901				(5,390	)			58,904				53,514
Discontinued operations, net of tax:
Income (loss) from discontinued operations (6)			1,702				(1,702	)			-				(3,608	)			3,608				-
Gain on sale of discontinued operations (6)			-				-				-				39,164				(39,164	)			-
Total discontinued operations			1,702				(1,702	)			-				35,556				(35,556	)			-
Net income		$	1,734			$	70,167			$	71,901			$	30,166			$	23,348			$	53,514
Basic earnings (loss) per share:
Income (loss) from continuing operations		$	0.00							$	0.75			$	(0.06	)						$	0.59
Discontinued operations, net of tax			0.02								0.00				0.39								0.00
Net income per basic common share		$	0.02							$	0.75			$	0.33							$	0.59
Diluted earnings (loss) per share:
Income (loss) from continuing operations		$	0.00							$	0.73			$	(0.06	)						$	0.57
Discontinued operations, net of tax			0.02								0.00				0.39								0.00
Net income per diluted common share		$	0.02							$	0.73			$	0.33							$	0.57
Weighted average shares - basic			95,284								95,284				91,193								91,193
Weighted average shares - diluted			98,694								98,694				91,193								94,697

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