ARKONA Reports Record Sales and Earnings for Fourth Quarter and Fiscal Year 2006
SALT LAKE CITY--June 29, 2006--ARKONA, Inc. (OTCBB:ARKN), a leader in supplying fully integrated on-demand business management solutions to automotive and powersports dealerships, today announced record revenues and earnings for its fourth quarter and full fiscal year ended March 31, 2006.Fourth Quarter Fiscal 2006 Financial Results
Revenues rose 62.4% to $3.3 million in the fourth quarter of fiscal 2006 compared to $2.0 million in fourth quarter fiscal 2005. Gross profit rose to $1.6 million from $756,000 in the same quarter of fiscal 2005. Gross margin rose to 47.9% from 37.7% last year. Income from operations rose to $272,000 from a loss of ($285,000) in the same quarter of fiscal 2005. Income before tax charges and benefits was $268,000 compared to a loss of ($301,000) in the same quarter of fiscal 2005. Net income was $579,000 or $0.015 per fully diluted share in the fourth quarter of fiscal 2006 compared to a loss of ($263,000) or ($0.008) per fully diluted share in the same quarter of fiscal 2005.
Full Year Fiscal 2006 Financial Results
Full year revenues rose 52.3% to $11.1 million in full fiscal year 2006 from $7.3 million in full year fiscal 2005. Gross profit rose to $5.3 million from $3.1 million in fiscal 2005. Gross margin rose to 47.4% from 41.9% last year. Income from operations rose to $830,000 from a loss of ($292,000) in fiscal 2005. Income before tax charges and benefits was $821,000 compared to a loss of ($245,000) in fiscal 2005. Net income was $2.1 million or $5.3 cents per fully diluted share in fiscal 2006 compared to a loss of ($92,000) or ($0.3) cents per fully diluted share in fiscal 2005. Installations of the ARKONA dealer management system grew more than 57% during the fiscal year. Growth in revenues over the five year period, from fiscal 2002 to fiscal 2006, exceeded 375%. At March 31, 2006, the Company's balance sheet included total stockholders' equity of $4.3 million, $571,000 of cash and $279,000 of short and long-term debt.
Fiscal Year 2006 Highlights
During the year ARKONA strengthened its operations and improved its competitive position as follows:
-- ARKONA opened three new sales offices. Together with offices opened in June 2006, ARKONA has opened 11 offices in the last 22 months.
-- Among the sales wins in FY 2006 were additional new contracts with Chapman Automotive, one of the 50 largest retail and service automotive groups in the US. Chapman Group dealers represent 14 different manufacturers. We believe that more than 1,200 Chapman employees now use the ARKONA system.
-- ARKONA achieved a major integration allowing all BMW Motorrad motorcycle dealers throughout the US to use ARKONA systems to communicate with BMW Motorrad corporate offices. Also, ARKONA entered into an agreement to provide software solutions to BMW's West Coast vehicle service center.
-- ARKONA entered into an agreement with two leading hardware distributors to provide ARKONA customers with more competitively priced hardware and computers that come pre-configured with ARKONA software.
"Fiscal 2006 was a record-setting year," said ARKONA Chairman and CEO Alan Rudd. "The increases in revenues were driven by sales of the Company's dealer management software products and by increases in recurring service and support revenues from our expanding base of installed systems. These results were achieved due to the focused efforts of our employees and the momentum that continues to build in the dealer market place for ARKONA solutions."
Conference Call
Alan Rudd, Chairman and Chief Executive Officer and Lee Boardman, Chief Financial Officer are scheduled to discuss these results in a conference call and webcast today, June 29 at 2:30 p.m. Mountain Time (1:30 p.m. Pacific; 4:30 p.m. Eastern).
To participate in ARKONA's first-ever public financial results conference call live by telephone, please dial (800) 475-3716 (toll-free domestic) or (719) 457-2728 (toll/international) approximately ten to fifteen minutes prior to the start time for registration, and reference the conference code 9554322. 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.
For those unable to participate in the live conference call and webcast, an archive of the event will be available by telephone shortly after it ends. In addition, a link to an archive of the webcast will be available shortly following the event on the Company's Web site, on the Investors Information page, at http://www.ARKONA.com/company/investors.php, for ninety days.
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.
This release may contain forward-looking statements as well as historical information. Forward-looking statements, which are included in accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, may involve known or unknown risks, uncertainties and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this release. 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.
ARKONA, INC.
Statements of Operations
For the Years Ended March 31,
2006 2005
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Revenues:
Installation Services $ 3,735,327 $ 2,697,467
Post-Installation Services 5,783,424 3,997,133
Hardware Sales 1,026,373 335,648
Consulting Services 578,525 264,435
Other 6,149 14,247
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Total Revenues 11,129,798 7,308,930
Cost of Sales 5,858,545 4,249,865
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Gross Profit 5,271,253 3,059,065
Operating Expenses:
Sales, Marketing & General Administrative 3,478,072 2,690,208
Research & Development 962,708 660,760
----------- -----------
Total Operating Expenses 4,440,780 3,350,968
----------- -----------
Income (loss) from operations 803,473 (291,903)
Other (Expense) Income - net (9,411) 46,847
----------- -----------
Income (Loss) Before Income Taxes 821,062 (245,056)
Income Tax Benefit 1,244,000 152,682
----------- -----------
Net Income (Loss) $ 2,065,062 $ (92,374)
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Basic Earnings per Common Share
Income (Loss) from Operations $ 0.026 $ (0.009)
Net Income (Loss) $ 0.064 $ (0.003)
Average Number of Shares Outstanding 32,278,717 31,956,688
Diluted Earnings per Common Share:
Income (Loss) from Operations $ 0.021 $ (0.009)
Net Income (Loss) $ 0.053 $ (0.003)
Average Number of Shares Outstanding 39,236,273 31,956,688
Please see the Company's filings with the SEC on Forms 10K for the
fiscal years ended March 31, 2005 (as restated) and 2006.
ARKONA, INC.
Balance Sheet
As of March 31, 2006
March 31,
2006
-----------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 570,766
Accounts Receivable, including unbilled
amounts of $111,470 (less allowance for
doubtful accounts of $25,000) 902,060
Prepaid Expenses 73,693
Notes Receivable - current portion 77,324
Other 4,170
-----------
Total Current Assets 1,628,013
-----------
Property and Equipment - net 623,505
-----------
Other Assets:
Deferred Tax Asset 1,560,000
Capitalized Software Costs - net 1,215,041
Goodwill 156,622
Intellectual Property 76,420
Security Deposits 75,690
Notes Receivable 40,192
-----------
Total Other Assets 3,123,965
-----------
Total Assets $ 5,375,483
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LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 159,901
Accrued Liabilities 411,560
Deferred Contract Revenue 207,417
Note Payable to Related Party 50,000
Current Portion Long-Term Notes Payable 62,563
-----------
Total Current Liabilities 891,441
-----------
Long-Term Notes Payable 166,123
-----------
ARKONA, INC.
Balance Sheet
As of March 31, 2006, continued
March 31,
2006
-----------
Total Liabilities 1,057,564
-----------
Stockholders' Equity:
Preferred Stock ($.001 par value; authorized
10,000,000 shares; issued and outstanding
575,000 shares) 575
Common Stock ($.001 par value; authorized
75,000,000 shares; issued and outstanding
32,489,670) 32,490
Additional Paid-In Capital 23,479,767
Unearned compensation - stock options (5,848)
Accumulated Deficit (19,189,065)
-----------
Total Stockholders' Equity 4,317,919
-----------
Total Liabilities & Stockholders' Equity $ 5,375,483
===========
Please see the Company's filings with the SEC on Forms 10K for the
fiscal years ended March 31, 2005 (as restated) and 2006.
ARKONA, INC.
Statements of Cash Flows
For the Years Ended March 31, 2006 and 2005
March 31, March 31,
2006 2005
---------- -----------
Cash Flows from Operating Activities
Net Income (Loss) $ 2,065,062 $ (92,374)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating
Activities:
Depreciation Expense 195,620 115,760
Amortization Expense 302,678 248,181
Bad Debt (Write Offs) (50,000) (10,134)
Loss on Asset Disposition 323
Stock Compensation Expense
(Income) 634 6,918
Realized Gain on Investments (55,973)
Deferred Income Tax Benefit (1,248,000) (156,000)
Decrease (Increase) in Accounts
Receivable (387,634) (19,690)
Decrease (Increase) in Prepaid
Expenses (73,693) 11,621
Decrease (Increase) in Other 16,421 21,077
Decrease (Increase) in Notes
Receivable (117,516)
Decrease (Increase) in Security
Deposits 46,390 (42,500)
Increase (Decrease) in Accounts
Payable 3,825 (1,703)
Increase (Decrease) in Accrued
Liabilities 169,792 45,292
Increase (Decrease) in Deferred
Revenue 7,091 61,307
----------- ---------
Net Cash Provided by Operating Activities 920,993 131,782
----------- ---------
Cash Flows from Investing Activities:
Acquisition of Property and Equipment (459,638) (254,792)
Cash from Sale of Intangible Asset 100,000
Software Development Costs (368,784) (378,400)
----------- ---------
Net Cash Used in Investing Activities (828,422) (533,192)
----------- ---------
Cash Flows from Financing Activities:
Net increase in Notes Payable 228,686
Proceeds from Issuance of Common Stock 98,330 180,750
----------- ---------
Net Cash Provided by Financing Activities 327,016 180,750
----------- ---------
Net Increase (Decrease) in Cash 429,587 (220,660)
Beginning Cash Balance 141,179 361,839
----------- ---------
Ending Cash Balance $ 570,766 $ 141,179
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Please see the Company's filings with the SEC on Forms 10K for the
fiscal years ended March 31, 2005 (as restated) and 2006.