FOR IMMEDIATE RELEASE
Arkona Contact: CCG Investor Relations Contact:
Dave Jenkins Mark Collinson
ARKONA, Inc. CCG Investor Relations
801-501-7109 310-477-9800
dave.jenkins@ARKONA.com mark.collinson@ccgir.com
ARKONA POSTS THIRD QUARTER FISCAL 2007 RESULTS
Pace of Sales Wins Increased During the Quarter
Conference Call Scheduled for Today, 12:00 noon Eastern Time
Salt Lake City, Utah. February 13, 2007. Arkona, Inc. (OTCBB: ARKN), a leader in
supplying fully integrated on-demand business management solutions to automotive
and powersports dealerships, today announced financial results for its fiscal
third quarter ending December 31, 2006. Financial information for the third
quarter of fiscal year ending December 31, 2005 contained in this press release
has been restated as described on Form 8-K, filed August 11, 2006.
Highlights for the third fiscal quarter and nine months ended December 31, 2006
included:
o Sales increased 30% over the quarter ended December 31, 2005, as the
Company's sales funnel yielded increased business wins at a faster pace
than during the previous quarter;
o Gross profit rose to $1.7 million from $1.3 million during the same
quarter in the prior year;
o Operating cash flows increased to $1.2 million for the nine month
period ending December 31, 2006 from $0.6 million in the nine month
period ending December 31, 2005. Cash and cash equivalents totaled $1.1
million at December 31, 2006 compared to $0.6 million at March 31,
2006.
o The Arkona ASP solution was installed at 736 U.S. dealer "rooftops"
(defined as a single dealer location that may include dealership
franchises for one or more manufacturers) at the end of December 2006,
up from 539 at the end of December last year. Sixty-five new rooftops
were added in the December quarter.
o High-margin, reoccurring support revenues accounted for 57% of total
revenues for the quarter compared to 56% of revenues for the same
quarter in the prior year.
o The Company completed its integration and certification process with
VW/Audi, enhancing its dealer management system available to over 1,000
VW/Audi dealers. The Company also developed integration with Gulf
States Toyota and its more than 150 affiliated dealerships. The Company
also won a contract to provide management software and services for two
BMW service centers.
o The Company launched its eMail Sync and Reflections software that add
customer email relationship management and document management
solutions respectively to the Arkona suite of services.
Third Quarter Ended December 31, 2006
For the quarter ending December 31, 2006, total revenues increased to $3.5
million compared to $2.7 million in the quarter ending December 31, 2005. The
increase reflects Arkona's further penetration of the dealer management system
market and the resulting increase in installation, maintenance and service,
consulting and hardware sales revenue streams. Gross profit increased 33%, from
$1.3 million in the quarter ended December 31, 2005 to $1.7 million in the third
quarter ended December 31, 2006.
Total operating expenses increased 35% in the third quarter ending December 31,
2006, to $1.2 million compared to $0.9 million in the corresponding 2005 period.
The increases in operating costs compared to the prior year were due to a number
of factors including increases in the Company's sales and marketing expenses,
research and development expenses related to software development, and the costs
of stock option compensation in compliance with SFAS 123(R).
Net income before taxes for the quarter was $0.35 million compared to $0.17
million in the same period a year ago. After accounting for income tax benefits
of $.12 million and $0.24 million in the quarters ended December 31, 2006 and
2005, respectively, net income was $0.48 million in the quarter ending December
31, 2006, compared to $0.41 million in the same quarter in the prior year. Fully
diluted earnings per share were $0.012 for the quarter ended December 31, 2006
compared to $0.010 in the same quarter last year.
Nine Months Ended December 31, 2006
For the nine months ending December 31, 2006, total revenues increased to $9.6
million from $7.9 million in the nine months ending December 31, 2005, an
increase of 21%. Gross profit increased 22%, from $3.8 million in the nine
months ended December 31, 2005 to $4.6 million in the nine months ended December
31, 2006. Total operating expenses increased 34% in the nine months ending
December 31, 2006, to $4.2 million compared to $3.2 million in the corresponding
2005 period. Income before taxes for the nine month period was $0.42 million
compared to $0.63 million in the same period a year ago. After accounting for
income tax benefits of $.16 million in the nine month period ending December 31,
2006, and $0.86 million in the nine month period ended December 31, 2005,
respectively, net income was $0.59 million in the nine month period ending
December 31, 2006, a decrease from $1.5 million posted in the same nine month
period in the prior year. Fully diluted earnings per share were $0.015 for the
nine months ended December 31, 2006 compared to $0.038 in the same period last
year.
Arkona's Chief Executive Officer, Alan Rudd, commented, "The rate at which we
continue to add market share increased markedly this quarter. Customers began to
make decisions more rapidly as the competitive environment became clearer and
dealers were able to confirm that the Arkona offering still represented the best
value once they had considered all options. The investment we made in R&D and
sales and marketing infrastructure, particularly during fiscal 2007 has added to
our operating costs, but it was vindicated by our ability to close and execute
on the increased flow of orders. As we enter our fourth fiscal quarter, sales
momentum continues to be strong and we are confident in our ability to service
our increased base of business and prospects."
Conference call and webcast scheduled for today, 12:00 noon Eastern Time
Alan Rudd, Chairman and Chief Executive Officer, and Lee Boardman, Chief
Financial Officer, are scheduled to discuss results for the 2007 third quarter,
ended December 31, 2006, in a conference call and webcast on Tuesday, February
13, at 10:00 a.m. Mountain Time (9:00 a.m. Pacific; 12:00 noon. Eastern).
To participate in Arkona's conference call live by telephone, please dial (800)
262-1292 (toll-free/domestic) or (719) 457-2680 (toll/international)
-2-
approximately ten to fifteen minutes prior to the start time for registration,
and reference the conference code 5374766. A webcast of the event can also be
monitored by clicking on the webcast link on the Company's Web site, on the
Investors Information page, at: http://www.ARKONA.com/company/investors.php.
About Arkona, Inc. Founded in 1996, Arkona is a leading supplier of fully
integrated business management solutions for automotive and powersports
dealerships. The Company's industry-leading application service provider or ASP
model provides state-of-the-art technology and high-level technical support and
training at low cost. The Company serves dealerships representing every major
car manufacturer throughout all regions of the United States. Arkona's Dealer
Management System (DMS) also leads the market in technologically superior
e-business solutions for automotive dealers that fully integrate back-office
systems with a retail Web presence. Arkona's DMS supports all major back-office
functions including accounting, payroll and sales management. The Arkona DMS is
based on flexible, industry standard technology. For more information visit the
company's Web site at www.ARKONA.com.
Forward-Looking Statements
- --------------------------
This news release contains forward-looking statements made in reliance upon the
safe harbor provision of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual results may differ materially
from those indicated by these statements. Forward-looking statements may include
statements addressing future financial and operational results of the company.
The following factors, among others, could cause actual results to differ
materially from those described in any forward-looking statements: the risk that
revenue will not grow in fiscal 2007, as expected, because of the entry of new
competitors into the market or the intensification of competition generally,
continued slowing of our sales cycle, factors harming the economy generally or
automobile dealers specifically, operational or intellectual property issues and
other factors, and the risk that net profits will not expand or that the company
will cease to be profitable because of potential decreases in gross margins as
competition expands, potential increases in travel, labor and hosting expenses,
and unexpected litigation or transactional expenses. In addition, other risks
are identified in the company's most recent Annual Report on Form 10-KSB, as
filed with the SEC. Such forward-looking statements speak only as of the date of
this release. The company expressly disclaims any obligation to update or revise
any forward-looking statements found herein to reflect any changes in company
expectations or results or any change in events.
(financial tables follow)
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ARKONA, INC.
Condensed Balance Sheets
31-Dec-06 31-Mar-06
(Un-audited) (Audited)
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,100,739 $ 570,766
Accounts receivable, net of allowance 994,078 904,001
Prepaid expenses 95,391 73,693
Notes receivable - current portion 104,359 77,324
Other 15,142 1,899
------------ ------------
Total Current Assets 2,309,709 1,627,683
------------ ------------
Property & Equipment, net of
accumulated depreciation 739,065 623,505
------------ ------------
Other Assets:
Deferred tax assets 1,785,000 1,560,000
Capitalized software costs, net of
accumulated amortization 1,495,319 1,215,041
Other intangible assets, net of
accumulated amortization 233,042 233,042
Security deposits 44,400 75,690
Long-term notes receivable 34,955 40,192
------------ ------------
Total Other Assets 3,592,716 3,123,965
------------ ------------
TOTAL ASSETS $ 6,641,490 $ 5,375,153
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 119,369 $ 159,901
Accrued liabilities 460,928 411,230
Deferred revenue - current portion 735,704 434,019
Note payable - related party 50,000 50,000
Notes payable - current portion 108,859 62,563
------------ ------------
Total Current Liabilities 1,474,860 1,117,713
------------ ------------
Long-term Notes Payable 203,423 166,123
Long-term Deferred Revenue 273,562 287,743
------------ ------------
Total Liabilities 1,951,845 1,571,579
------------ ------------
Stockholders' Equity:
Preferred stock ($.001 par value) 575 575
Common stock ($.001 par value) 32,658 32,490
Additional paid in capital 23,773,926 23,479,767
Unearned compensation (5,848)
Accumulated deficit (19,117,514) (19,703,410)
------------ ------------
Total Stockholders' Equity 4,689,645 3,803,574
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,641,490 $ 5,375,153
============ ============
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ARKONA, INC.
Condensed Statements of Operations
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
31-Dec-06 31-Dec-05 31-Dec-06 31-Dec-05
(Un-audited) (Un-audited (Un-audited) (Un-audited
and Restated) and Restated)
------------ ------------ ------------ ------------
Revenues $ 3,472,421 $ 2,663,613 $ 9,578,304 $ 7,945,867
Cost of Sales 1,793,507 1,398,111 4,952,696 4,161,919
------------ ------------ ------------ ------------
Gross Profit 1,678,914 1,265,502 4,625,608 3,783,948
------------ ------------ ------------ ------------
Operating Expenses:
Sales, marketing & general
administrative 1,160,518 862,443 3,576,919 2,423,842
Research and development 170,808 230,212 643,190 728,725
------------ ------------ ------------ ------------
Total Operating Expenses 1,331,326 1,092,655 4,220,109 3,152,567
------------ ------------ ------------ ------------
Operating Income 347,588 172,847 405,499 631,381
Other Income (Expense) 2,956 (1,470) 19,218 (5,155)
------------ ------------ ------------ ------------
Net Income Before Taxes 350,544 171,377 424,717 626,226
Income Tax Benefit 124,779 235,980 161,179 862,292
------------ ------------ ------------ ------------
Net Income $ 475,323 $ 407,357 $ 585,896 $ 1,488,518
============ ============ ============ ============
Basic Earnings per Common Share:
Operating Income $ 0.011 $ 0.005 $ 0.012 $ 0.020
Net Income $ 0.015 $ 0.013 $ 0.018 $ 0.046
Ave. Shares Outstanding 32,577,659 32,321,572 32,527,223 32,241,460
Diluted Earnings per Common Share:
Operating Income $ 0.011 $ 0.004 $ 0.010 $ 0.016
Net Income $ 0.012 $ 0.010 $ 0.015 $ 0.038
Ave. Shares Outstanding 39,248,162 39,540,512 39,411,379 39,213,350
-5-
ARKONA, INC.
Condensed Statements of Cash Flows
Nine Months Ended
--------------------------
31-Dec-06 31-Dec-05
(Un-audited) (Un-audited
and
Restated)
----------- -----------
Cash Flows Provided By Operating Activities:
Net income $ 585,896 $ 1,488,518
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 467,726 359,797
Bad debt expense 87,079 20,500
Loss on asset disposition 2,051 623
Stock-based compensation 226,275 3,340
Deferred income tax (225,000) (862,292)
Changes in assets & liabilities:
Accounts receivable (177,156) (243,271)
Prepaid expense (21,698) (57,109)
Security deposits 31,290 13,205
Notes receivable (21,798) (64,951)
Other assets (13,243) 3,499
Accounts payable (40,532) 3,809
Accrued liabilities 49,698 48,396
Deferred revenue 287,504 (67,986)
----------- -----------
Net Cash Provided By Operating Activities 1,238,092 646,078
----------- -----------
Cash Flows Used In Investing Activities:
Additions to equipment (318,205) (320,555)
Software development costs (547,410) (244,457)
----------- -----------
Net Cash Used In Investing Activities (865,615) (565,012)
----------- -----------
Cash Flows Provided By Financing Activities:
Proceeds from issuance of common stock 73,900 48,856
Proceeds from notes payable 83,596 153,641
----------- -----------
Net Cash Provided By Financing Activities 157,496 202,497
----------- -----------
Net Increase in Cash and Cash Equivalents 529,973 283,563
Beginning Cash Balance 570,766 141,179
----------- -----------
Ending Cash Balance $ 1,100,739 $ 424,742
=========== ===========
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