Ariba Reports Results for First Quarter and Fiscal Year 2010

Posted February 9th, 2011 by Ariba

Company posts 15% year-over-year growth in subscription software revenue

SUNNYVALE, Calif., January 28, 2010

— Ariba, Inc. (Nasdaq: ARBA), the leading spend management solutions provider, today announced results for the first quarter of fiscal year 2010 ended December 31.

Quarterly Financial and Operational Highlights:

Total revenues of $85.7 million
GAAP EPS of $0.03 and non-GAAP EPS of $0.19 per fully-diluted share
Subscription software revenue of $41.2 million, up 15% year-over-year
12-month subscription software backlog of $139 million, up 10% year-over-year
Cash flow from operations of $10.5 million, ending cash and investments of $199.5 million
On-demand deals up 76% year-over-year

“As evidenced by our strong first quarter results, Ariba is delivering solutions that meet customer demands for fast results, low risk and more variable cost structures,” said Bob Calderoni, Chairman and CEO, Ariba. "Customers are increasingly turning to Ariba for their business needs and our solutions are helping to drive their recovery."

Results for the First Quarter of Fiscal Year 2010

Revenue:

Total revenues for the first quarter of fiscal year 2010 were $85.7 million, as compared to $86.1 million for the first quarter of fiscal year 2009. Subscription and maintenance revenues for the quarter were $58.4 million, as compared to $54.1 million for the first quarter of fiscal year 2009. Within subscription and maintenance revenues, subscription software revenue was $41.2

million for the first quarter of fiscal year 2010, as compared to $35.9 million for the first quarter of fiscal year 2009. Services and other revenues were $27.3 million, as compared to $32.0million for the first quarter of fiscal year 2009.

Earnings Per Share:

Net income for the first quarter of fiscal year 2010 was $2.2 million, or $0.03 per fully-diluted share as compared to net income for the first quarter of fiscal year 2009 of $3.4 million, or $0.04 per fully-diluted share. Net income for the first quarter of fiscal year 2010 included charges of $1.4 million for amortization of intangible assets and $13.5 million for stock-based compensation. Excluding these items, Non-GAAP net income for the quarter was $17.2 million, or $0.19 per diluted share.

Balance Sheet and Cash:

Total cash, investments and restricted cash were $199.5 million at December 31, 2009, up $4.1 million from September 30, 2009. Net cash flow from operations for the three months ended December 31, 2009 was $10.5 million, as compared to $10.8 million for the three months ended December 31, 2008. Accounts receivable, on an average days-sales-outstanding basis, were 21 days for the first quarter of fiscal year 2010, as compared to 29 days for the first quarter of fiscal year 2009, and down two days from the previous quarter. Total deferred revenues were $119.5 million at December 31, 2009, up $9.0 million from September 30, 2009.

Customer Acquisition and Transactions for the Quarter:

During the quarter, 248 companies of all sizes purchased Ariba solutions, including: Avon Products, Inc., Brocade Communications Systems, Inc., Coach, Inc., ConocoPhillips Company, Pfizer Inc., PTT Public Limited Company, The Royal Bank of Scotland Group plc, Sempra Energy and Tyco International Ltd. Ariba added 30 new customers in the first quarter of fiscal year 2010 and closed 11 transactions over $1 million, including

six deals with a software component of greater than $1 million. On-demand product deals totalled 192.

Conference Call Information

Ariba will hold a conference call today at 5:00 p.m. ET / 2:00 p.m. PT to discuss its results for the first quarter of fiscal year 2010. To join the call, please dial (877) 407-8031 in the United States and Canada, or(201) 689-8031if calling internationally. The conference call also will be webcast live and can be accessed on the investor relations section of the company’s website at

www.ariba.com

A replay of the conference call will be available for two weeks by calling (877) 660-6853 in the United States and Canada or (201) 612-7415 internationally and entering account number: 286 and conference ID number: 341721.

About Ariba, Inc.

Ariba, Inc. is the leading provider of on-demand spend management solutions. Our mission is to transform the way companies of all sizes, across all industries, and geographies operate by delivering software, service, and network solutions that enable them to holistically source, contract, procure, pay, manage, and analyze their spend and supplier relationships. Delivered on demand, our enterprise-class offerings empower companies to achieve greater control of their spend and drive continuous improvements in financial and supply chain performance. More than 1,000 companies, including more than half of the companies on the Fortune 500, use Ariba solutions to manage their spend from sourcing and orders through invoicing and payment. For more information, visit

www.ariba.com

###

Ariba, the Ariba logo, AribaLIVE, SupplyWatch, Ariba.com, Ariba.com Network and Ariba Spend Management. Find it. Get it. Keep it. are registered trademarks of Ariba, Inc. Ariba Spend Management, Ariba. This is Spend Management, Ariba Solutions Delivery, Ariba Analysis, Ariba Buyer, Ariba Category Management, Ariba Category Procurement, Ariba Contract Compliance, Ariba Contracts, Ariba Contract Management, Ariba Contract Workbench, Ariba Data Enrichment, Ariba eForms, Ariba Invoice, Ariba Payment, Ariba Sourcing, Ariba Spend Visibility, Ariba Travel and Expense, Ariba Procure-to-Pay, Ariba Workforce, Ariba Supplier Network, Ariba Supplier Connectivity, Ariba Supplier Performance Management, Ariba Content Procurement, Ariba PunchOut, Ariba QuickSource, PO-Flip, Ariba Spend Management Knowledge Base, Ariba Ready, Ariba Supply Lines, Ariba Supply Manager, Ariba LIVE, It’s Time for Spend Management and Supplier Lifecycle Management are trademarks or service marks of Ariba, Inc. All other brand or product names may be trademarks or registered trademarks of their respective companies or organizations in the United States and/or other countries.

Ariba Safe Harbor

Safe Harbor Statement under the Private Securities Litigation Reform Act 1995: Information and announcements in this release involve Ariba's expectations, beliefs, hopes, plans, intentions or strategies regarding the future and are forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to Ariba as of the date of the release, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to Ariba's operating and financial results to differ materially from current expectations include, but are not limited to: the impact of the credit crises on Ariba’s results of operations and financial condition; delays in development or shipment of new versions of Ariba's products and services; lack of market acceptance of Ariba's existing or future products or services; inability to continue to develop competitive new products and services on a timely basis; introduction of new products or services by major competitors; the ability to attract and retain qualified employees; difficulties in assimilating acquired companies, long and unpredictable sales cycles and the deferrals of anticipated orders; declining economic conditions, including the impact of a recession; inability to control costs; changes in the company's pricing or compensation policies; significant fluctuations in our stock price; the outcome of and costs associated with pending or potential future regulatory or legal proceedings; the impact of our acquisitions, including the disruption or loss of customer, business partner, supplier or employee relationships; and the level of costs and expenses incurred by Ariba as a result of such transactions. Factors and risks associated with its business, including a number of the factors and risks described above, are discussed in Ariba's Form 10-K filed with the SEC on November 25, 2009.

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style="height:15.0pt; width:418pt">Ariba, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited; in thousands)

	December 31,	September 30,
	2009	2009
ASSETS
Current assets:
Â Â Â Â Cash and cash equivalents	Â $Â Â Â 127,333	Â $Â Â Â 130,881
Â Â Â Â Short-term investments	Â Â Â Â Â Â Â 16,813	Â Â Â Â Â Â Â 12,169
Â Â Â Â Accounts receivable, net	Â Â Â Â Â Â Â 19,666	Â Â Â Â Â Â Â 19,660
Â Â Â Â Prepaid expenses and other current assets	Â Â Â Â Â Â Â 12,084	Â Â Â Â Â Â Â 11,235
Â Â Â Â Â Â Â Â Â Total current assets	Â Â Â Â Â 175,896	Â Â Â Â Â 173,945

Property and equipment, net	Â Â Â Â Â Â Â 13,965	Â Â Â Â Â Â Â 14,418
Long-term investments	Â Â Â Â Â Â Â 26,118	Â Â Â Â Â Â Â 23,155
Restricted cash, less current portion	Â Â Â Â Â Â Â 29,241	Â Â Â Â Â Â Â 29,241
Goodwill	Â Â Â Â Â 406,507	Â Â Â Â Â 406,507
Other intangible assets, net	Â Â Â Â Â Â Â 16,229	Â Â Â Â Â Â Â 17,660
Other assets	Â Â Â Â Â Â Â Â Â 3,199	Â Â Â Â Â Â Â Â Â 3,245
Â Â Â Â Â Â Â Â Â Total assets	Â $Â Â Â 671,155	Â $Â Â Â 668,171

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Â Â Â Â Accounts payable	Â $Â Â Â Â Â Â 7,802	Â $Â Â Â Â Â Â 7,758
Â Â Â Â Accrued compensation and related liabilities	Â Â Â Â Â Â Â 16,273	Â Â Â Â Â Â Â 29,010
Â Â Â Â Accrued liabilities	Â Â Â Â Â Â Â 18,168	Â Â Â Â Â Â Â 17,010
Â Â Â Â Restructuring obligations	Â Â Â Â Â Â Â 16,921	Â Â Â Â Â Â Â 17,964
Â Â Â Â Deferred revenue	Â Â Â Â Â 111,315	Â Â Â Â Â 101,172
Â Â Â Â Â Â Â Â Â Total current liabilities	Â Â Â Â Â 170,479	Â Â Â Â Â 172,914

Deferred rent obligations	Â Â Â Â Â Â Â 13,560	Â Â Â Â Â Â Â 14,539
Restructuring obligations, less current portion	Â Â Â Â Â Â Â 27,815	Â Â Â Â Â Â Â 31,098
Deferred revenue, less current portion	Â Â Â Â Â Â Â Â Â 8,177	Â Â Â Â Â Â Â Â Â 9,288
Other long-term liabilities	Â Â Â Â Â Â Â Â Â 5,985	Â Â Â Â Â Â Â Â Â 6,281
Â Â Â Â Â Â Â Â Â Total liabilities	Â Â Â Â Â 226,016	Â Â Â Â Â 234,120

Stockholders' equity:
Â Â Â Â Common stock	Â Â Â Â Â Â Â Â Â Â Â Â 179	Â Â Â Â Â Â Â Â Â Â Â Â 179
Â Â Â Â Additional paid-in capital	Â Â Â 5,198,060	Â Â Â 5,189,566
Â Â Â Â Accumulated other comprehensive loss	Â Â Â Â Â Â Â Â (3,319)	Â Â Â Â Â Â Â Â (3,688)
Â Â Â Â Accumulated deficit	Â Â (4,749,781)	Â Â (4,752,006)
Â Â Â Â Â Â Â Â Â Total stockholders' equity	Â Â Â Â Â 445,139	Â Â Â Â Â 434,051
Â Â Â Â Â Â Â Â Â Total liabilities and stockholders' equity	Â $Â Â Â 671,155	Â $Â Â Â 668,171

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style="height:15.0pt; width:511pt">Ariba, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited; in thousands, except per share data)

Â Three Months EndedÂ

Â December 31,Â

2009

2008

Revenues:

Â Â Â Â Subscription and maintenance

Â $Â Â Â Â 58,373

Â $Â Â Â Â 54,081

Â Â Â Â Services and other

Â Â Â Â Â Â Â 27,298

Â Â Â Â Â Â Â 32,006

Â Â Â Â Â Â Â Â Â Total revenues

Â Â Â Â Â Â Â 85,671

Â Â Â Â Â Â Â 86,087

Cost of revenues:

Â Â Â Â Subscription and maintenance

Â Â Â Â Â Â Â 12,674

Â Â Â Â Â Â Â 11,648

Â Â Â Â Services and other

Â Â Â Â Â Â Â 19,462

Â Â Â Â Â Â Â 19,798

Â Â Â Â Amortization of acquired technology and customer intangible assets

Â Â Â Â Â Â Â Â Â 1,327

Â Â Â Â Â Â Â Â Â 1,388

Â Â Â Â Â Â Â Â Â Total cost of revenues

Â Â Â Â Â Â Â 33,463

Â Â Â Â Â Â Â 32,834

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Gross profit

Â Â Â Â Â Â Â 52,208

Â Â Â Â Â Â Â 53,253

Operating expenses:

Â Â Â Â Sales and marketing

Â Â Â Â Â Â Â 28,302

Â Â Â Â Â Â Â 27,577

Â Â Â Â Research and development

Â Â Â Â Â Â Â 11,146

Â Â Â Â Â Â Â 10,904

Â Â Â Â General and administrative

Â Â Â Â Â Â Â 10,697

Â Â Â Â Â Â Â 11,603

Â Â Â Â Insurance reimbursement

Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â (7,527)

Â Â Â Â Amortization of other intangible assets

Â Â Â Â Â Â Â Â Â Â Â Â 104

Â Â Â Â Â Â Â Â Â Â Â Â 210

Â Â Â Â Restructuring and integration costs

Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â 1,701

Â Â Â Â Â Â Â Â Â Total operating expenses

Â Â Â Â Â Â Â 50,249

Â Â Â Â Â Â Â 44,468

Income from operations

Â Â Â Â Â Â Â Â Â 1,959

Â Â Â Â Â Â Â Â Â 8,785

Â Â Â Â Interest and other income (expense), net

Â Â Â Â Â Â Â Â Â Â Â Â 321

Â Â Â Â Â Â Â Â (5,016)

str="Income before income taxes ">Income before income taxesÂ

Â Â Â Â Â Â Â Â Â 2,280

Â Â Â Â Â Â Â Â Â 3,769

Â Â Â Â Provision for income taxes

Â Â Â Â Â Â Â Â Â Â Â Â Â 55

Â Â Â Â Â Â Â Â Â Â Â Â 342

Net income

Â $Â Â Â Â Â Â 2,225

Â $Â Â Â Â Â Â 3,427

str="Net income loss per share - basic ">Net income loss per share - basicÂ

Â $Â Â Â Â Â Â Â Â 0.03

Â $Â Â Â Â Â Â Â Â 0.04

Net income loss per share - diluted

Â $Â Â Â Â Â Â Â Â 0.03

Â $Â Â Â Â Â Â Â Â 0.04

str="Weighted average shares - basic ">Weighted average shares - basicÂ

Â Â Â Â Â Â Â 85,161

Â Â Â Â Â Â Â 80,947

str="Weighted average shares - diluted ">Weighted average shares - dilutedÂ

Â Â Â Â Â Â Â 88,262

Â Â Â Â Â Â Â 84,044

Â $Â Â Â Â Â Â Â Â 0.03

Â $Â Â Â Â Â Â Â Â 0.04

Weighted average shares - basic and dilutedÂ

Â Â Â Â Â Â Â 85,161

Â Â Â Â Â Â Â 80,947

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style="height:15.0pt; width:503pt">Ariba, Inc. and Subsidiaries
Cash Flows
(Unaudited; in thousands)

		Â Three Months EndedÂ
		Â December 31,Â
		2009	2008
Operating activities:
str="Net income ">Net incomeÂ		Â $Â Â Â Â Â Â Â Â Â Â 2,225	Â $Â Â Â Â 3,427
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for doubtful accounts	Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 46	Â Â Â Â Â Â Â Â Â 131
	DepreciationÂ

Â Â Â Â Â Â Â Â Â Â Â Â 1,839

Â Â Â Â Â Â 1,946

Amortization of intangible assets

Â Â Â Â Â Â Â Â Â Â Â Â 1,431

Â Â Â Â Â Â 1,598

Other-than temporary impairment of long-term investments

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 499

Â Â Â Â Â Â 1,414

Stock-based compensationÂ

Â Â Â Â Â Â Â Â Â Â Â 13,523

Â Â Â Â Â Â 9,526

Restructuring costs

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â 1,701

Changes in operating assets and liabilities: Accounts receivable

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (52)

Â Â Â Â Â Â 2,814

Prepaid expense and other assets

Â Â Â Â Â Â Â Â Â Â Â Â Â Â (889)

Â Â Â Â Â Â 1,307

Accounts payable

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 79

Â Â Â Â Â (2,483)

str="Accrued compensation and related liabilities ">Accrued compensation and related liabilitiesÂ Â

Â Â Â Â Â Â Â Â Â Â (12,815)

Â Â Â Â Â (6,711)

Accrued liabilitiesÂ

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (85)

Â Â Â Â Â Â Â Â (755)

Deferred revenue

Â Â Â Â Â Â Â Â Â Â Â Â 9,030

Â Â Â Â Â Â 2,626

Restructuring obligations

Â Â Â Â Â Â Â Â Â Â Â (4,326)

Â Â Â Â Â (5,706)

Net cash provided by operating activities

Â Â Â Â Â Â Â Â Â Â Â 10,505

Â Â Â Â Â 10,835

Investing activities: Purchases of property and equipment

Â Â Â Â Â Â Â Â Â Â Â (1,386)

Â Â Â Â Â (2,253)

Purchases of investments, net of sales

Â Â Â Â Â Â Â Â Â Â Â (7,631)

Â Â Â Â Â Â Â Â Â 726

Net cash used in investing activities

Â Â Â Â Â Â Â Â Â Â Â (9,017)

Â Â Â Â Â (1,527)

Financing activities: Proceeds from issuance of common stock, net

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 27

Â Â Â Â Â Â Â Â Â Â Â 45

Repurchase of common stock

Â Â Â Â Â Â Â Â Â Â Â (5,056)

Â Â Â Â Â Â Â Â (678)

Net cash used in financing activities

Â Â Â Â Â Â Â Â Â Â Â (5,029)

Â Â Â Â Â Â Â Â (633)

Effect of exchange rates on cash and cash equivalents

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (7)

Â Â Â Â Â Â Â Â Â Â Â 66

Net change in cash and cash equivalents

Â Â Â Â Â Â Â Â Â Â Â (3,548)

Â Â Â Â Â Â 8,741

Cash and cash equivalents at beginning of period

Â Â Â Â Â Â Â Â Â 130,881

Â Â Â Â Â 86,804

Cash and cash equivalents at end of period

Â $Â Â Â Â Â Â 127,333

Â $Â Â 95,545

Non-GAAP Financial Measures

The accompanying press release dated January 28, 2010 contains non-GAAP financial measures. The following table reconciles the non-GAAP financial measures in the press release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP revenues, non-GAAP cost of revenues, gross profit, operating expenses, income from operations, net income and net income per share amounts.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, GAAP financial measures, which should be considered as the primary financial metrics for evaluating our financial performance. Significantly, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Instead, they are based on subjective determinations by management designed to supplement our GAAP financial measures. They are subject to a number of important limitations and should be considered only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For example, our non-GAAP financial measures have the effect of excluding a purchase accounting adjustment, costs and expenses from our operating results that should be properly considered under a system of accrual accounting. In addition, our non-GAAP financial measures differ from GAAP measures with the same names, may vary over time and may differ from non-GAAP financial measures with the same or similar names used by other companies. Accordingly, investors should exercise caution when evaluating our non-GAAP financial measures.

Despite these limitations, we believe our non-GAAP financial measures provide meaningful supplemental information about our operating results, primarily because they exclude a purchase accounting adjustment and costs and expenses that we do not believe are indicative of the ongoing operating performance of our business and our senior management. Although these items should properly be considered in our GAAP financial measures, we believe they should be excluded when evaluating our current operating performance. The non-GAAP financial measures disclosed in the accompanying press release are used by our Board of Directors and senior management to evaluate our current operating performance, are used in evaluating the performance of our senior management, and are used in our budget and planning processes. We believe that our non-GAAP financial measures are helpful to investors by facilitating comparisons of our current and prior operating results and by facilitating comparisons of our operating results with those of other software companies.

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style="height:15.0pt; width:579pt">Ariba, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Operating Results
(Unaudited; in thousands, except per share data)


style="height: 25.5pt;width:427pt" str="The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP operating results for the period indicated below: ">The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP operating results for the period indicated below:Â

	Three Months EndedÂ

Three Months EndedÂ December 31, 2009 December 31, 2008 Revenue reconciliation:

Â Â GAAP revenue

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 85,671

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 86,087

Â Â Purchase accounting adjustment

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 355

Â Â Â Â Â Total non-GAAP revenues

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 85,671

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 86,442

Three Months EndedÂ Three Months EndedÂ December 31, 2009 December 31, 2008 Expense reconciliation:

Â Â GAAP revenue

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 85,671

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 86,087

Â Â Less: GAAP net income

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 2,225

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 3,427

Â Â Â Â Â Total GAAP expenses

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 83,446

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 82,660

Â Â Amortization of intangible assets

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (1,431)

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (1,598)

Â Â Stock-based compensation

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (13,523)

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (9,526)

Â Â Restructuring and integration

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (1,701)

Â Â Other-than-temporary decline in long-term investment

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (1,414)

Â Â Â Â Â Total non-GAAP operating expenses

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 68,492

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 68,421

Three Months EndedÂ Three Months EndedÂ December 31, 2009 December 31, 2008 Net income reconciliation:

Â Â GAAP net incomeÂ

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 2,225

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 3,427

str=" Purchase accounting adjustment ">

Â Â Â Â Â Purchase accounting adjustmentÂ

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 355

Â Â Â Â Â Amortization of intangible assets

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 1,431

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 1,598

Â Â Â Â Â Stock-based compensation

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 13,523

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 9,526

Â Â Â Â Â Restructuring and integration

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 1,701

Â Â Â Â Â Other-than-temporary decline in long-term investment

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 1,414

Â Â Non-GAAP net income

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 17,179

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 18,021

Three Months EndedÂ Three Months EndedÂ December 31, 2009 December 31, 2008 Net income per share reconciliation:

Â Â GAAP net income per share - basic

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.03

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.04

str=" Purchase accounting adjustment ">

Â Â Â Â Â Purchase accounting adjustmentÂ

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.00

Â Â Â Â Â Amortization of intangible assets

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.02

Â Â Â Â Â Stock-based compensation

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.16

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.12

Â Â Â Â Â Restructuring and integration

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.02

Â Â Â Â Â Other-than-temporary decline in long-term investment'

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.02

Â Â Non-GAAP net income per share - basic

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.20

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.22

Â Â Non-GAAP net income per share - diluted

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.19

Â $Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.21

Weighted average shares - basic

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 85,161

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 80,947

Weighted average shares - diluted

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 88,262

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 84,044

style="height:140.25pt;width:579pt"/>

Discussion of Specific Items Excluded From Non-GAAP Financial Measures

Our non-GAAP financial measures include a purchase accounting adjustment related to deferred revenues and generally exclude costs and expenses for (i) amortization of intangible assets related to acquisitions, (ii) stock-based compensation, (iii) restructuring and integration and (iv) other-than-temporary impairment of long-term investments. 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 costs and expenses related to restructuring and integration, these items are non-cash items that do not affect cash flows.

(1) Purchase accounting adjustment â€“ deferred revenue. As announced on December 17, 2007, Ariba acquired Procuri, Inc. In accordance with the fair value provisions of EITF 01-3, Accounting in a Business Combination for Deferred Revenue of an Acquiree, acquired deferred revenue of approximately $4.5 million was recorded on the opening balance sheet, which was approximately $5.9 million lower than the historical carrying value. Although this purchase accounting requirement has no impact on the Company's business or cash flow, it adversely impacts the Company's reported GAAP revenue primarily for the first twelve months post- acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company has provided non-GAAP financial measures which exclude the impact of the purchase accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making and (b) compare past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related subscription terms are renewed in future periods.

(2) 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.

(3) Stock-Based Compensation Expenses. We exclude stock-based compensation expense associated with stock options and stock granted to employees and non-executive 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.

(4) Restructuring and integration. We recorded restructuring related to lease abandonment accruals and/(or) severance and related benefits in the three months ended December 31, 2008. We exclude this from our non-GAAP financial measures because it is unrelated to our ongoing operations and is significantly impacted by factors outside our control. We believe excluding restructuring and integration helps investors compare our operating performance with that of other companies. We recognize, however, that restructuring and integration will impact cash flows and that we and investors should carefully consider the impact of these costs on future cash flows.

(5) Other-than-temporary impairment of long-term investments. We recorded an other-than temporary impairment of a long-term investment in the three months ended December 31, 2008. We exclude this from our non-GAAP financial measures because it is unrelated to our ongoing operations. We believe excluding the other-than-temporary impairment helps investors compare our operating performance with that of other companies. We recognize, however, that the other-than-temporary impairment may impact cash flows and that we and investors should carefully consider the impact of these costs on future cash flows.

News Source : Ariba Reports Results for First Quarter and Fiscal Year 2010

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