Ariba Reports First Quarter Results; Company Continues to Progress as

    Business Editors/High-Tech Editors

    SUNNYVALE, Calif.--(BUSINESS WIRE)--Jan. 31, 2005--Ariba(R), Inc. (Nasdaq: ARBA), the leading spend management solutions provider, today announced results for the first quarter of fiscal year 2005 ended December 31, 2004.
    Total revenues for the quarter were $86.9 million, as compared to $52.7 million for the first quarter of fiscal year 2004. Software license revenues for the quarter were $17.1 million, as compared to $18.7 million for the first quarter of fiscal year 2004. Subscription and maintenance revenues were $31.4 million, as compared to $22.1 million for the first quarter of fiscal year 2004. Services and other revenues for the quarter were $38.4 million, as compared to $12.0 million for the first quarter of fiscal year 2004.
    Net loss for the quarter was $9.8 million, or a loss of $0.16 per share, as compared to net income for the first quarter of 2004 of $6.1 million, or $0.13 per share. The net loss for the quarter included charges of $4.9 million for amortization of intangible assets, $4.4 million for stock-based compensation and $1.8 million for restructuring and integration costs. Excluding these items,non-GAAP net income was $1.3 million, or $0.02 per share.
    The results for the first quarter include the results from FreeMarkets, Inc., with which Ariba merged on July 1, 2004. Results for the quarter include certain expenses associated with Ariba's recent settlement of its dispute with Softbank, but exclude any potential increase in net income for the quarter that may be associated with the settlement.
    "We continued to make progress in the marketplace during the first quarter, as leading companies around the globe deployed and advanced spend management initiatives using Ariba solutions," said Bob Calderoni, CEO, Ariba. "We signed a number of deals with new and existing customers, as companies leveraged both our software and services to drive lower costs, increase margins and accelerate bottom line results."

    Continued Momentum and Global Execution

    Seeking innovative and proven ways to achieve their spend management goals, a number of companies in North America, Europe and Asia selected Ariba's comprehensive portfolio of solutions as the platform to drive their initiatives. During the quarter, Ariba signed agreements with 19 new customers, including leading global companies such as a large insurance company and a leading financial services company. In addition, the company renewed or expanded agreements with a number of existing customers, including Unilever, ABN AMRO, Merck, Shell Oil, and ConocoPhillips.

    Market-Leading Spend Management Technology

    As companies expanded their spend management initiatives, they selected offerings from Ariba that could not only meet their immediate needs, but scale to accommodate future growth. During the quarter, customers adopted the recently released Ariba Sourcing Solution, which provides robust sourcing expertise, broad category experience, full closed-loop process coverage and deep penetration in global markets to deliver sustainable sourcing results. In addition, customers from Covisint, which FreeMarkets acquired in January 2004, successfully transitioned to the Ariba Spend Management platform, gaining access to greater features and functionality they can leverage to enhance their sourcing activities.

    Conference Call Information

    Ariba will hold a conference call today at 1:30 p.m. PDT/4:30 p.m. EDT to discuss the quarterly and year-end results. To join the call, please dial (877) 375-2162 in the United States and Canada, or (973) 582-2734 if calling internationally. There will also be a live web broadcast available on the investor relations section of the company's website at www.ariba.com or at www.vcall.com. A replay of this call will be available approximately 3:00 p.m. PDT/6:00 p.m. EDT today through Monday, February 7, 2005 by dialing (877) 519-4471 in the United States and Canada or (973) 341-3080 internationally and entering ID #: 5574264.

    About Ariba, Inc.

    Ariba, Inc. is the leading provider of Spend Management solutions. Ariba helps companies realize rapid and sustainable bottom-line results. Successful companies around the world in every industry use Ariba Spend Management software and services. Ariba can be contacted in the U.S. at 1.650.390.1000 or at www.ariba.com.

    Copyright (C) 1996 - 2005 Ariba, Inc.

    Ariba and the Ariba logo are registered trademarks of Ariba, Inc. Ariba Spend Management, Ariba Spend Management. Find it. Get it. Keep it., 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 Sourcing, Ariba Invoice, Ariba Travel & Expense, Ariba Workforce, Ariba Supplier Network, Ariba Supplier Performance Management, Ariba PunchOut, Ariba QuickSource, PO-Flip, Ariba Settlement and Ariba Spend Management Knowledge Base are trademarks or service marks of Ariba, Inc. Ariba Proprietary and Confidential. All rights reserved. Patents pending. All other trademarks are property of their respective owners.
    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 its current expectations include, but are not limited to: 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; 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 December 14, 2004.

Ariba, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited; in thousands)

Dec. 31, Sept. 30, 2004 2004 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $82,466 $74,031 Short-term investments 47,219 37,227 Restricted cash 1,248 45,623 Accounts receivable, net 54,929 48,071 Prepaid expenses and other current assets 7,303 10,795 ----------- ----------- Total current assets 193,165 215,747

Property and equipment, net 21,791 21,909 Long-term investments 29,439 29,676 Restricted cash, less current portion 32,692 26,862 Goodwill 575,820 574,679 Other intangible assets, net 56,795 62,249 Other assets 2,557 2,767 ----------- -----------

Total assets $912,259 $933,889 =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $16,675 $15,433 Accrued compensation and related liabilities 28,928 31,171 Accrued liabilities 81,397 87,522 Restructuring obligations 18,468 16,825 Deferred revenue 45,317 49,664 ----------- ----------- Total current liabilities 190,785 200,615

Accrued liabilities, less current portion 3,023 3,454 Restructuring obligations, less current portion 45,812 41,042 Deferred revenue, less current portion 21,707 22,858 ----------- ----------- Total liabilities 261,327 267,969 ----------- -----------

Minority interests 874 19,547

Stockholders' equity: Common stock 131 125 Additional paid-in capital 4,989,610 4,963,002 Deferred stock-based compensation (23,166) (5,959) Accumulated other comprehensive income 5,664 1,634 Accumulated deficit (4,322,181) (4,312,429) ----------- ----------- Total stockholders' equity 650,058 646,373 ----------- -----------

Total liabilities and stockholders' equity $912,259 $933,889 =========== ===========

Ariba, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited; in thousands, except per share data)

Three Months Ended December 31, 2004 2003 --------- -------- Revenues: License $17,122 $18,676 Subscription and maintenance 31,428 22,067 Services and other 38,379 11,988 --------- -------- Total revenues 86,929 52,731 --------- --------

Cost of revenues (1) 37,057 16,912 Amortization of acquired technology and customer intangible assets 4,700 - --------- -------- Total cost of revenues 41,757 16,912 --------- --------

Gross profit 45,172 35,819 --------- --------

Operating expenses: Sales and marketing (1) 24,673 13,555 Research and development (1) 13,043 12,277 General and administrative 8,614 4,543 Amortization of other intangible assets 185 - Stock-based compensation 4,378 30 Restructuring and integration costs 1,817 - --------- -------- Total operating expenses 52,710 30,405 --------- --------

(Loss) income from operations (7,538) 5,414

Interest and other income, net 2,615 818 --------- -------- Net (loss) income before income taxes and minority interests (4,923) 6,232

Provision (benefit) for income taxes 4,813 (272) Minority interests in net income of consolidated subsidiaries 16 413 --------- --------

Net (loss) income $(9,752) $6,091 ========= ========

Net (loss) income per share - basic (2) $(0.16) $0.14 Weighted average shares - basic (2) 62,707 45,000

Net (loss) income per share - diluted (2) $(0.16) $0.13 Weighted average shares - diluted (2) 62,707 46,280

(1) Certain reclassifications, none of which affected net income or net income per share, have been made to prior period amounts to conform to the current period presentation. Specifically, the company reclassified $4.0 million of certain operating expenses to cost of revenues for the three months ended December 31, 2003.

(2) Reflects the one-for-six reverse split of the company's outstanding common stock effected July 1, 2004.

Ariba, Inc. and Subsidiaries Reconciliation of GAAP Operating Results to Non-GAAP Operating Results (Unaudited; in thousands, except per share data)

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP operating results for the period indicated below:

Three Months Ended December 31, 2004 -------------- Expense reconciliation:

GAAP revenue $86,929 GAAP net loss 9,752 -------------- Total GAAP expenses 96,681

Interest and other income, net and minority interests 2,599 Provision for income taxes (4,813) -------------- Total GAAP operating expenses 94,467

Amortization of acquired technology, customer and other intangible assets (4,885) Stock-based compensation (4,378) Restructuring and integration costs (1,817) -------------- Total non-GAAP operating expenses $83,387 ==============

Three Months Ended December 31, 2004 -------------- Net income (loss) reconciliation:

GAAP net loss $(9,752) Amortization of acquired technology, customer and other intangible assets 4,885 Stock-based compensation 4,378 Restructuring and integration costs 1,817 -------------- Non-GAAP net income $1,328 ==============

Three Months Ended December 31, 2004 -------------- Net income (loss) per share reconciliation:

GAAP net loss per share - basic and diluted $(0.16) Amortization of acquired technology, customer and other intangible assets 0.08 Stock-based compensation 0.07 Restructuring and integration costs 0.03 -------------- Non-GAAP net income per share - basic and diluted $0.02 ==============

Weighted average shares - basic 62,707 Weighted average shares - diluted 65,954

Ariba provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles ("GAAP"). In addition, this press release contains non-GAAP financial information. This non-GAAP financial information excludes the following types of costs and expenses that are included in GAAP: amortization of intangible assets, stock-based compensation, and restructuring and integration costs. Management reviews this non-GAAP financial information in evaluating Ariba's historical and projected financial performance and believes that it may assist investors in assessing its ongoing operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We have provided a reconciliation of the non-GAAP financial information provided in this press release with the comparable financial information reported in accordance with GAAP for the given period.

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CONTACT: Ariba, Inc. John Ederer, 650-390-1617 (Investor) Donna Maurillo, 650-390-1773 (Media) dmaurillo@ariba.com Janet Martin, 650-228-5175 (Media) jmartin@vocecomm.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: Ariba, Inc.

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