| [September 04, 2008] |
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PLATO Learning Reports Order Growth for Second Consecutive Quarter
MINNEAPOLIS --(Business Wire)-- PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of K-adult e-learning solutions, today announced that total orders grew 5% to $27.7 million for the third quarter ended July 31, 2008, compared to $26.3 million for the third quarter of fiscal 2007. Subscription orders for the quarter increased 42% to $17.7 million as orders for the Company's new generation online learning management platform, the PLATO Learning Environment(TM) (PLE(TM)), more than doubled to $14.2 million. Subscription revenues grew by more than 40% to $9.2 million. Total revenue for the quarter was down slightly to $18.6 million, from $19.2 million in the third quarter of 2007, on lower perpetual license fees and maintenance revenues from legacy products.
Mike Morache, PLATO Learning President and CEO said, "Achieving total order growth for two consecutive quarters, and for three out of the last four quarters, is a significant indication of progress in our transition from perpetual license sales to subscription sales. We are especially pleased by continued strong growth in orders for subscription products delivered on PLE(TM), which have nearly doubled on a quarter-over-quarter basis since we introduced PLE in 2006. PLE renewal orders, which still make up a small, but growing portion of total PLE orders, nearly tripled compared to the second quarter of this year despite a decline in the renewal rate to slightly below our 2008 target of 85%. The strong growth in PLE orders resulted in deferred revenues of over $50 million at the end of the quarter. Deferred revenues will continue to grow for the remainder of the year."
During the quarter, an additional 219 school districts and community colleges became new subscribers to PLE(TM), pushing the total PLE(TM) customer base to more than 1,100 educational institutions across the U.S., a 93% increase over the third quarter of 2007. New PLATO Learning customers accounted for more than half of the total PLE(TM) customers added in the quarter. PLE(TM) registered user growth was also strong. At the end of the quarter 816,000 users were registered to use PLE(TM), a 217% increase compared to this time last year.
The Company's third quarter net loss excluding restructuring charges, improved to ($1.3) million, or ($0.05) per share in 2008, compared to ($1.8) million, or ($0.08) per share in 2007. Subscription margins in the third quarter improved 13 percentage points to over 50% on the strong growth in subscription revenues. Total gross margins for the period improved to 50% from 49% as the effect on gross margin of lower perpetual license fee revenues offset some of the gains in subscription margins. Operating expenses, excluding amounts related to restructuring activities, declined to $10.4 million in the third quarter of 2008 from $11.4 million in third quarter of 2007.
Mr. Morache continued, "The transition from perpetual-to-subscription sales is nearly behind us. Total order activity is stabilizing and becoming more predictable. The PLE(TM) customer base is growing each quarter resulting in deferred revenue growth and increasing opportunities for future renewals and license expansions. These trends will continue to drive subscription revenue growth in the future. On the cost side of our business, subscription margins continue to increase as subscription revenue growth exceeds the rate of growth in delivery and product investment costs, and we continue to carefully manage operating expenses. Taken together, these positive trends continue to move us toward our goal of profitability in fiscal 2009."
Cash balances were $11.8 million at the end of the third quarter, down $1.1 million during the period, and were affected by cash outlays of $1.8 million related to restructuring activities announced earlier in the quarter. Cash balances are expected to grow significantly by the end of the fiscal year as the Company continues to move through the primary buying season for the K-12 market and realizes the full effect of the operating efficiencies implemented during the third quarter.
Conference Call
A conference call to discuss this announcement is scheduled for today, September 4, 2008, at 3:45 p.m. CDT (Central Daylight Time). The dial-in number for this call is 1.888.276.0007 in the U.S. and Canada, and 1.612.332.0107 internationally. Attendees should call 10 minutes prior to the start of the call and inform the operator they are participating in PLATO Learning's call. A recording of the call will be available from 6:00 p.m. CDT on September 4, 2008, until midnight on September 11, 2008. To access the recording, call 1.800.475.6701 in the U.S. and Canada and 1.320.365.3844 internationally. At the prompt, enter pass code number 878951.
Additionally, investors have the opportunity to listen to the conference call over the Internet through PLATO Learning's web site at http://www.plato.com/Investor-Relations/Conference-Calls.aspx.
About PLATO Learning
PLATO Learning is a leading provider of computer-based and e-learning instruction for kindergarten through adult learners, offering curricula in reading, writing, math, science, social studies, and life and job skills. The Company also offers innovative online assessment and accountability solutions and standards-based professional development services. With over 6,000 hours of objective-based, problem-solving courseware, plus assessment, alignment and curriculum management tools, we create standards-based curricula that facilitate learning and school improvement.
PLATO Learning is a publicly held company traded as TUTR on the NASDAQ market. PLATO Learning's online educational software is primarily marketed to K-12 schools and colleges. The Company also sells to job training programs, correctional institutions, military education programs, corporations, and individuals.
PLATO Learning is headquartered at 10801 Nesbitt Avenue South, Bloomington, Minnesota 55437, 952.832.1000 or 800.869.2000. The Company has sales representatives located throughout the U.S., as well as international distributors in Canada, the United Kingdom and South Africa. For more information, please visit http://www.plato.com.
The announcement includes the use of non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures have been used in this announcement because the Company believes they are useful to investors by providing greater transparency to supplemental information used in the Company's internal financial and operational analysis. Investors are encouraged to review the reconciliations attached to this announcement of the non-GAAP financial measures used in this announcement to their most directly comparable GAAP financial measures.
This announcement includes forward-looking statements. PLATO Learning has based these forward-looking statements on its current expectations and projections about future events. Although PLATO Learning believes that its assumptions made in connection with the forward-looking statements are reasonable, no assurances can be given that its assumptions and expectations will prove to have been correct. These forward-looking statements are subject to various risks, uncertainties and assumptions. PLATO Learning undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward looking statements made are subject to the risks and uncertainties as those described in the Company's most recent filings with the Securities and Exchange Commission on Forms 10-K and 10-Q. Actual results may differ materially from anticipated results.
PLATO(R), Straight Curve(R) and Academic Systems(R) are registered trademarks of PLATO Learning, Inc. PLATO Learning is a trademark of PLATO Learning, Inc.
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ -------------------
2008 2007 2008 2007
--------- -------- --------- ---------
REVENUES
Subscriptions $ 9,247 $ 6,532 $ 25,691 $ 17,045
License fees 3,353 5,940 7,113 13,652
Services 6,038 6,731 18,214 20,745
--------- -------- --------- ---------
Total revenues 18,638 19,203 51,018 51,442
--------- -------- --------- ---------
COST OF REVENUES
Subscriptions 4,593 4,140 14,058 11,075
License fees 1,540 2,066 4,060 6,212
Services 3,172 3,496 9,082 9,837
--------- -------- --------- ---------
Total cost of revenues 9,305 9,702 27,200 27,124
--------- -------- --------- ---------
GROSS PROFIT 9,333 9,501 23,818 24,318
--------- -------- --------- ---------
OPERATING EXPENSES
Sales and marketing 6,657 7,579 21,182 22,682
General and administrative 2,258 2,865 7,909 8,983
Product maintenance and
development 1,128 499 3,306 3,412
Amortization of intangibles 388 438 1,163 1,352
Restructuring charges
(benefit) 800 (766) 2,435 (766)
--------- -------- --------- ---------
Total operating expenses 11,231 10,615 35,995 35,663
--------- -------- --------- ---------
OPERATING LOSS (1,898) (1,114) (12,177) (11,345)
Other (loss) income, net (11) 218 188 917
--------- -------- --------- ---------
LOSS BEFORE INCOME TAXES (1,909) (896) (11,989) (10,428)
Income tax expense 152 150 456 450
--------- -------- --------- ---------
NET LOSS $(2,061) $(1,046) $(12,445) $(10,878)
========= ======== ========= =========
LOSS PER SHARE
Basic and diluted $ (0.09) $ (0.04) $ (0.52) $ (0.46)
========= ======== ========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic and diluted 23,881 23,762 23,825 23,747
========= ======== ========= =========
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
-----------------------------------------------------------
-----------
July 31, October 31,
2008 2007
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 11,838 $ 24,297
Accounts receivable, net 16,744 14,479
Other current assets 7,591 7,759
------------ -----------
Total current assets 36,173 46,535
Equipment and leasehold improvements, net 4,241 5,615
Product development costs, net 29,707 30,266
Goodwill 71,865 71,865
Identified intangible assets, net 6,205 7,983
Other long-term assets 6,620 5,039
------------ -----------
Total assets $154,811 $167,303
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,642 $ 4,608
Accrued compensation 4,238 5,453
Other accrued liabilities 4,766 4,245
Deferred revenue 38,852 38,821
------------ -----------
Total current liabilities 50,498 53,127
Long-term deferred revenue 11,796 10,302
Deferred income taxes 3,592 3,139
------------ -----------
Total liabilities 65,886 66,568
------------ -----------
Stockholders' equity:
Common stock 240 238
Additional paid-in capital 170,643 169,927
Treasury stock at cost (315) (205)
Accumulated deficit (80,339) (67,893)
Accumulated other comprehensive loss (1,304) (1,332)
------------ -----------
Total stockholders' equity 88,925 100,735
------------ -----------
Total liabilities and stockholders'
equity $154,811 $167,303
============ ===========
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
-----------------------------------------------------------
-----------
Nine Months Ended
July 31,
-------------------
2008 2007
--------- ---------
OPERATING ACTIVITIES:
Net loss $(12,445) $(10,878)
--------- ---------
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Deferred income taxes 456 450
Depreciation and amortization 12,868 11,860
Provision for doubtful accounts - (539)
Stock-based compensation 559 888
Other adjustments 105 (26)
Changes in operating assets and liabilities:
Accounts receivable (3,642) 3,895
Other current and long-term assets (238) 742
Accounts payable (1,967) (428)
Other current and long-term liabilities (686) (2,793)
Deferred revenue 1,526 (193)
--------- ---------
Total adjustments 8,981 13,856
--------- ---------
Net cash (used in) provided by operating
activities (3,464) 2,978
--------- ---------
INVESTING ACTIVITIES:
Capitalized internal product development costs (8,741) (11,718)
Purchases of equipment and leasehold
improvements (318) (1,471)
--------- ---------
Net cash used in investing activities (9,059) (13,189)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock, net
of repurchases 60 155
Payment of debt financing fees - (523)
Repayments of capital lease obligations (22) (34)
--------- ---------
Net cash provided by (used in) financing
activities 38 (402)
--------- ---------
EFFECT OF CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 26 (130)
--------- ---------
Net decrease in cash and cash equivalents (12,459) (10,743)
Cash and cash equivalents at beginning of period 24,297 33,094
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,838 $ 22,351
========= =========
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
----------------------------------------------------------
------------
Order Information ($000s)
Three Months Ended July 31, Nine Months Ended July 31,
--------------------------- --------------------------
2008 2007 % Change 2008 2007 % Change
------- ------- ----------- ------- ------- ----------
Order Value:
Subscriptions $17,709 $12,514 42% $30,586 $22,709 35%
License fees 2,457 5,503 (55%) 6,384 12,306 (48%)
Services 7,508 8,276 (9%) 14,401 16,722 (14%)
------- ------- ------- -------
$27,674 $26,293 5% $51,371 $51,737 (1%)
======= ======= ======= =======
---------------------
-------------------------------------------------
Deferred Revenue Balances ($000s)
As of July 31,
-------------------------------------
2008 2007 % Change
------------- ------------ ----------
Subscriptions $ 38,413 $ 26,134 47%
License fees 349 928 (62%)
Services 11,886 14,591 (19%)
------------- ------------
$ 50,648 $ 41,653 22%
============= ============
---------------------------------------------------------
-------------
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
----------------------------------------------------------
------------
Reconciliation of GAAP Net Loss and Loss Per Share to Non-GAAP Net
Loss and Loss Per Share Before Restructuring Charges
($000s, except per share
amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ -------------------
2008 2007 2008 2007
--------- -------- --------- ---------
Net loss, as reported $(2,061) $(1,046) $(12,445) $(10,878)
Restructuring charges (benefit) 800 (766) 2,435 (766)
--------- -------- --------- ---------
Net loss before restructuring
charges $(1,261) $(1,812) $(10,010) $(11,644)
========= ======== ========= =========
Loss per share (basic and
diluted):
Loss per share, as reported $ (0.09) $ (0.04) $ (0.52) $ (0.46)
Restructuring charges
(benefit) 0.04 (0.04) 0.10 (0.03)
--------- -------- --------- ---------
Loss per share before
restructuring charges $ (0.05) $ (0.08) $ (0.42) $ (0.49)
========= ======== ========= =========
Weighted average common shares
outstanding:
Basic and diluted (GAAP) 23,881 23,762 23,825 23,747
========= ======== ========= =========
Diluted (Non-GAAP) 23,881 23,762 23,825 23,747
========= ======== ========= =========
-------------------
---------------------------------------------------
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating
Expenses Before Restructuring Charges ($000s)
Three Months Ended Nine Months Ended
July 31, July 31,
----------------------- -----------------------
% %
2008 2007 Change 2008 2007 Change
------- -------- ------ ------- -------- ------
Total operating
expenses $11,231 $10,615 6% $35,995 $35,663 1%
Restructuring charges
(benefit) 800 (766) NM 2,435 (766) NM
------- -------- ------- --------
Operating expenses
before restructuring
charge $10,431 $11,381 (8%) $33,560 $36,429 (8%)
======= ======== ======= ========
-------------------------------------------------------------
---------
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
----------------------------------------------------------
------------
Reconciliation of GAAP Cash Flow Provided By (Used In) Operating
Activities To Non-GAAP Free Cash Flow ($000)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ -------------------
2008 2007 2008 2007
--------- -------- --------- ---------
Cash flow provided by (used in)
operating activities $ 1,127 $ 6,355 $ (3,464) $ 2,978
Capitalized internal product
development costs (2,062) (4,299) (8,741) (11,718)
Purchases of equipment and
leasehold improvements (95) (234) (318) (1,471)
--------- -------- --------- ---------
Free Cash Flow $(1,030) $ 1,822 $(12,523) $(10,211)
========= ======== ========= =========
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