Exhibit 99.1
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________________________________________________________________________________________For Immediate Release
PLATO LEARNING REPORTS FOURTH QUARTER AND FISCAL
YEAR 2007 RESULTS
YEAR 2007 RESULTS
• | Order Trend Turns Positive as Total Orders Grow 1% | ||
• | Rapid Growth in Orders for Subscription Courseware Products Continues, Increasing 90% | ||
• | Total Revenues Decrease, Net Loss Excluding Charges Increases on Perpetual to Subscription Transition | ||
• | Deferred Revenue Balance Grows 17% to $49.1 million |
MINNEAPOLIS, MN — December 11, 2007— PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of K—adult computer-based e-learning solutions, today announced total orders of $25.9 million in its fourth quarter ended October 31, 2007, an increase of 1% over the same period last year. The increase marks the first quarter of total order growth for the Company since launching its new online learning management system, the PLATO Learning Environment™ (PLE™), in the third quarter of fiscal year 2006, and is a significant change from the 22% decline in total orders the Company experienced through the first three quarters of fiscal year 2007.
Mike Morache, PLATO Learning President and CEO said, “Order growth in the quarter was another significant milestone in PLATO Learning’s transformation. We are very pleased with the progress our sales organization made over the last six months and are excited about our momentum and the potential for growth in 2008.”
Total revenues were $18.2 million in the fourth quarter of 2007, compared to $23.8 million for the fourth quarter of fiscal 2006. Subscription revenues grew to $7.1 million, an increase of 32% over the fourth quarter of 2006, and 9% over the third quarter of 2007. The decline in total revenues was due to a decline in license fees from legacy perpetual products as the Company continues its transition from a perpetual software licensing model, for which revenue is recognized upon delivery, to a software-as-a-service model in which revenue is recognized over a subscription period.
The Company’s net loss for the fourth quarter declined to ($4.0) million, or ($0.17) per share, compared to ($11.6) million, or ($0.49) per share in the same period last year. Restructuring and impairment charges declined to $0.8 million, or $0.04 per share, in the fourth quarter of 2007, compared to $9.8 million, or $0.42 per share, in the fourth quarter of 2006. Excluding these charges, the Company’s fourth quarter net loss was ($3.2) million, or ($0.13) per share in 2007 compared to ($1.8) million, or ($0.07) per share in 2006. Cash balances increased $1.9 million during the quarter to $24.3 million.
Mr. Morache continued, “In addition to order growth, healthy gains occurred in the other key metrics we monitor to measure our strategic progress. Orders for subscription courseware products were up 90% for both the fourth quarter and full year compared to 2006. During the quarter we added 176 school districts and community colleges as subscribers to PLE, including 57 districts and colleges that are new PLATO Learning customers. At the end of the quarter, 490,000 users in 719 school districts, community colleges and other learning institutions across the U.S. were registered to use PLE. The user base has increased by more than 400% since the end of fiscal 2006 and by 90% since the third quarter of this year. In addition, our deferred revenue balance, a key forward looking indicator of revenue, increased 17% during the quarter to $49.1 million.”
Gross margins in the fourth quarter of 2007 were 43% compared to 53% in the same period last year, reflecting a decline in higher margin perpetual license fees, which have a relatively fixed cost base, and a decline in subscription margins from 52% in 2006 to 37% in 2007. The decline in subscription
margin reflects a reallocation of customer support resources from legacy to new subscription products in response to the growth in subscription customers and, to a lesser degree, higher royalty costs from increased sales of solutions that include bundled third party products.
Operating expenses in the quarter declined $12.6 million, consisting of an $8.4 million decline in restructuring and impairment costs and a $4.2 million, or 27% decline in other operating expenses. The decline in restructuring and impairment costs primarily reflects a one-time impairment charge in the fourth quarter of 2006 of $7.0 million on purchased intangible assets acquired in previous acquisitions. The decline in other operating expenses reflects the Company’s cost reduction and restructuring activities in fiscal year 2006 and early 2007.
For the full fiscal year 2007, revenues totaled $69.6 million compared to $90.7 million in fiscal year 2006. The revenue decline reflects a $19.6 million decrease in license fee revenues derived from the sale of the Company’s legacy perpetual license products. Revenues from these products are expected to decline further as the Company’s shift to subscription-based products continues. Total cost of revenue and operating expenses in fiscal 2007 were $85.1 million, an improvement of $29.2 million, or 26% over fiscal 2006. The improvement consists of a $10.1 million reduction in impairment and restructuring charges and a $19.1 million, or 18% decline in other costs of revenue and operating expenses. Net loss for fiscal year 2007 improved to ($14.9) million, or ($0.63) per share, compared to ($22.5) million, or ($0.95) per share, in fiscal 2006. Net loss excluding restructure and impairment charges for the fiscal year increased to ($14.8) million, or ($0.62) per share in 2007 compared to ($12.3 million), or ($0.52) per share in 2006.
Use of Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release either exclude the impact of restructuring and impairment charges from our operating results or represent our free cash flow. These non-GAAP financial measures 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 as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We view these non-GAAP financial measures to be helpful in assessing the Company’s ongoing operating results and use them to facilitate our internal comparisons to historical operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency related to supplemental information we use in our financial and operational analysis. Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures as provided with the financial statements attached to this press release.
Conference Call
A conference call to discuss this announcement is scheduled for today, December 11, 2007, at 3:45 p.m. CDT (Central 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 8:15 p.m. CDT on December 11, 2007, until midnight on December 18, 2007. 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 855099.
Additionally, investors have the opportunity to listen to the conference call over the Internet through PLATO Learning’s web site athttp://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 educational software is delivered via the Internet, CD-ROM, and private intranets, and is primarily marketed to K—12 schools and colleges. The Company also sells to job training programs, correctional institutions, military education programs and corporations.
PLATO Learning is headquartered at 10801 Nesbitt Avenue South, Bloomington, Minnesota 55437, 952.832.1000 or 800.869.2000. The Company has offices throughout North America and Puerto Rico, as well as international distributors in the United Kingdom and South Africa. For more information, please visithttp://www.plato.com.
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®, Straight Curve®, and Academic Systems® 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)
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended | Twelve Months Ended | |||||||||||||||
October 31, | October 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
REVENUES | ||||||||||||||||
Subscriptions | $ | 7,128 | $ | 5,393 | $ | 24,173 | $ | 18,176 | ||||||||
License fees | 4,060 | 9,664 | 17,712 | 37,322 | ||||||||||||
Services | 7,002 | 8,745 | 27,747 | 35,221 | ||||||||||||
Total revenues | 18,190 | 23,802 | 69,632 | 90,719 | ||||||||||||
COST OF REVENUES | ||||||||||||||||
Subscriptions | 4,465 | 2,564 | 15,540 | 9,000 | ||||||||||||
License fees | 2,184 | 3,499 | 8,396 | 13,204 | ||||||||||||
Services | 3,215 | 4,054 | 13,052 | 17,490 | ||||||||||||
Impairment charges | 531 | 1,089 | 531 | 1,089 | ||||||||||||
Total cost of revenues | 10,395 | 11,206 | 37,519 | 40,783 | ||||||||||||
GROSS PROFIT | 7,795 | 12,596 | 32,113 | 49,936 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Sales and marketing | 7,167 | 9,749 | 29,849 | 38,598 | ||||||||||||
General and administrative | 3,112 | 3,593 | 12,095 | 16,619 | ||||||||||||
Product maintenance and development | 922 | 1,522 | 4,334 | 5,496 | ||||||||||||
Amortization of intangibles | 388 | 905 | 1,740 | 3,711 | ||||||||||||
Restructuring and impairment | 288 | 8,733 | (478 | ) | 9,093 | |||||||||||
Total operating expenses | 11,877 | 24,502 | 47,540 | 73,517 | ||||||||||||
OPERATING LOSS | (4,082 | ) | (11,906 | ) | (15,427 | ) | (23,581 | ) | ||||||||
Other income, net | 242 | 463 | 1,159 | 1,701 | ||||||||||||
LOSS BEFORE INCOME TAXES | (3,840 | ) | (11,443 | ) | (14,268 | ) | (21,880 | ) | ||||||||
Income tax expense | 158 | 150 | 608 | 600 | ||||||||||||
NET LOSS | $ | (3,998 | ) | $ | (11,593 | ) | $ | (14,876 | ) | $ | (22,480 | ) | ||||
LOSS PER SHARE | ||||||||||||||||
Basic and diluted | $ | (0.17 | ) | $ | (0.49 | ) | $ | (0.63 | ) | $ | (0.95 | ) | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
Basic and diluted | 23,774 | 23,714 | 23,754 | 23,679 | ||||||||||||
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
October 31, | October 31, | |||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 24,297 | $ | 33,094 | ||||
Accounts receivable, net | 14,479 | 18,529 | ||||||
Other current assets | 7,759 | 8,178 | ||||||
Total current assets | 46,535 | 59,801 | ||||||
Equipment and leasehold improvements, net | 5,615 | 6,308 | ||||||
Product development costs, net | 30,266 | 25,363 | ||||||
Goodwill | 71,865 | 71,865 | ||||||
Identified intangible assets, net | 7,983 | 10,545 | ||||||
Other long-term assets | 5,039 | 2,348 | ||||||
Total assets | $ | 167,303 | $ | 176,230 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 4,608 | $ | 4,685 | ||||
Accrued compensation | 5,453 | 5,990 | ||||||
Other accrued liabilities | 4,245 | 6,622 | ||||||
Deferred revenue | 38,821 | 33,736 | ||||||
Total current liabilities | 53,127 | 51,033 | ||||||
Long-term deferred revenue | 10,302 | 8,110 | ||||||
Deferred income taxes | 3,139 | 2,531 | ||||||
Other long-term liabilities | — | 106 | ||||||
Total liabilities | 66,568 | 61,780 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 238 | 237 | ||||||
Additional paid-in capital | 169,927 | 168,597 | ||||||
Treasury stock at cost | (205 | ) | (205 | ) | ||||
Accumulated deficit | (67,893 | ) | (53,017 | ) | ||||
Accumulated other comprehensive loss | (1,332 | ) | (1,162 | ) | ||||
Total stockholders’ equity | 100,735 | 114,450 | ||||||
Total liabilities and stockholders’ equity | $ | 167,303 | $ | 176,230 | ||||
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Twelve Months Ended | ||||||||
October 31, | ||||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (14,876 | ) | $ | (22,480 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Deferred income taxes | 608 | 600 | ||||||
Impairment charges | 531 | 7,044 | ||||||
Depreciation and amortization | 16,150 | 15,363 | ||||||
Provision for doubtful accounts | (553 | ) | (380 | ) | ||||
Stock-based compensation | 1,174 | 1,650 | ||||||
Other adjustments | 3 | 129 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 4,603 | 4,619 | ||||||
Other current and long-term assets | (2,157 | ) | 1,753 | |||||
Accounts payable | (78 | ) | 1,748 | |||||
Other current and long-term liabilities | (3,020 | ) | (4,480 | ) | ||||
Deferred revenue | 7,277 | 1,415 | ||||||
Total adjustments | 24,538 | 29,461 | ||||||
Net cash provided by operating activities | 9,662 | 6,981 | ||||||
INVESTING ACTIVITIES: | ||||||||
Capitalized internal product development costs | (15,698 | ) | (15,316 | ) | ||||
Purchased product development | (475 | ) | (3,000 | ) | ||||
Purchases of equipment and leasehold improvements | (1,750 | ) | (3,172 | ) | ||||
Purchases of marketable securities | — | (11,750 | ) | |||||
Sales of marketable securities | — | 229 | ||||||
Maturities of marketable securities | — | 11,750 | ||||||
Net cash used in investing activities | (17,923 | ) | (21,259 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Net proceeds from issuance of common stock | 203 | 741 | ||||||
Payment of debt financing fees | (523 | ) | — | |||||
Repayments of capital lease obligations | (47 | ) | (90 | ) | ||||
Net cash (used in) provided by financing activities | (367 | ) | 651 | |||||
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (169 | ) | (180 | ) | ||||
Net decrease in cash and cash equivalents | (8,797 | ) | (13,807 | ) | ||||
Cash and cash equivalents at beginning of period | 33,094 | 46,901 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 24,297 | $ | 33,094 | ||||
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Supplemental Financial Information
(Unaudited)
Order Information ($000s)
Three Months Ended October 31, | Twelve Months Ended October 31, | |||||||||||||||||||||||
2007 | 2006* | % Change | 2007 | 2006* | % Change | |||||||||||||||||||
Order Value: | ||||||||||||||||||||||||
Subscriptions | ||||||||||||||||||||||||
Courseware | $ | 12,648 | $ | 6,664 | 90 | % | $ | 32,817 | $ | 17,223 | 91 | % | ||||||||||||
Assessment and other | 1,011 | 2,201 | (54 | %) | 3,551 | 9,036 | (61 | %) | ||||||||||||||||
Total subscriptions | 13,659 | 8,865 | 54 | % | 36,368 | 26,259 | 38 | % | ||||||||||||||||
License fees | 4,625 | 8,557 | (46 | %) | 16,931 | 36,974 | (54 | %) | ||||||||||||||||
Services | 7,654 | 8,280 | (8 | %) | 24,377 | 29,177 | (16 | %) | ||||||||||||||||
$ | 25,938 | $ | 25,702 | 1 | % | $ | 77,676 | $ | 92,410 | (16 | %) | |||||||||||||
Percent of Total Order Value: | ||||||||||||||||||||||||
Subscriptions | ||||||||||||||||||||||||
Courseware | 49 | % | 26 | % | 42 | % | 19 | % | ||||||||||||||||
Assessment and other | 4 | % | 9 | % | 5 | % | 10 | % | ||||||||||||||||
Total subscriptions | 53 | % | 35 | % | 47 | % | 29 | % | ||||||||||||||||
License fees | 18 | % | 33 | % | 22 | % | 40 | % | ||||||||||||||||
Services | 29 | % | 32 | % | 31 | % | 31 | % | ||||||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||
* | Certain 2006 amounts previously reported as assessment orders have been reclassified to courseware orders to conform to the current period presentation. |
Deferred Revenue Balances ($000s)
As of October 31, | ||||||||||||
2007 | 2006 | % Change | ||||||||||
Subscriptions | $ | 32,938 | $ | 20,192 | 63 | % | ||||||
License fees | 622 | 2,282 | (73 | %) | ||||||||
Services | 15,563 | 19,372 | (20 | %) | ||||||||
$ | 49,123 | $ | 41,846 | 17 | % | |||||||
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP Loss Per Share to Non-GAAP Loss Per Share
Before Restructuring and Impairment Charges
($000s, except per share amounts)
Before Restructuring and Impairment Charges
($000s, except per share amounts)
Three Months Ended | Twelve Months Ended | |||||||||||||||
October 31, | October 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net loss, as reported | $ | (3,998 | ) | $ | (11,593 | ) | $ | (14,876 | ) | $ | (22,480 | ) | ||||
Restructuring and impairment charges | 819 | 9,822 | 53 | 10,182 | ||||||||||||
Net loss before restructuring and impairment charges | $ | (3,179 | ) | $ | (1,771 | ) | $ | (14,823 | ) | $ | (12,298 | ) | ||||
Loss per share (basic and diluted): | ||||||||||||||||
Loss per share, as reported | $ | (0.17 | ) | $ | (0.49 | ) | $ | (0.63 | ) | $ | (0.95 | ) | ||||
Restructuring and impairment charges | 0.04 | 0.42 | $ | 0.01 | 0.43 | |||||||||||
Loss per share before restructuring and impairment charges | $ | (0.13 | ) | $ | (0.07 | ) | $ | (0.62 | ) | $ | (0.52 | ) | ||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic and diluted (GAAP) | 23,774 | 23,714 | 23,754 | 23,679 | ||||||||||||
Diluted (Non-GAAP) | 23,774 | 23,714 | 23,754 | 23,679 | ||||||||||||
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
Before Restructuring Charges ($000s)
Before Restructuring Charges ($000s)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
October 31, | October 31, | |||||||||||||||||||||||
2007 | 2006 | % Change | 2007 | 2006 | % Change | |||||||||||||||||||
Total operating expenses | $ | 11,877 | $ | 24,502 | (52 | %) | $ | 47,540 | $ | 73,517 | (35 | %) | ||||||||||||
Restructuring charges | (288 | ) | (8,733 | ) | (97 | %) | 478 | (9,093 | ) | (105 | %) | |||||||||||||
Operating expenses before restructuring charges | $ | 11,589 | $ | 15,769 | (27 | %) | $ | 48,018 | $ | 64,424 | (25 | %) | ||||||||||||
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit
Before Impairment Charges ($000s)
Before Impairment Charges ($000s)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
October 31, | October 31, | |||||||||||||||||||||||
% | % | |||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||
Gross profit, as reported | $ | 7,795 | $ | 12,596 | (38 | %) | $ | 32,113 | $ | 49,936 | (36 | %) | ||||||||||||
Impairment charges | (531 | ) | (1,089 | ) | (51 | %) | (531 | ) | (1,089 | ) | (51 | %) | ||||||||||||
Gross profit before impairment charges | $ | 8,326 | $ | 13,685 | (39 | %) | $ | 32,644 | $ | 51,025 | (36 | %) | ||||||||||||
Gross margin, as reported | 43 | % | 53 | % | 46 | % | 55 | % | ||||||||||||||||
Gross margin effect of impairment charges | 3 | % | 4 | % | 1 | % | 1 | % | ||||||||||||||||
Gross margin, excluding impairment charges | 46 | % | 57 | % | 47 | % | 56 | % |
Reconciliation of GAAP Cash Flow Provided By Operations
To Non-GAAP Free Cash Flow ($000)
To Non-GAAP Free Cash Flow ($000)
Three Months Ended | Twelve Months Ended | |||||||||||||||
October 31, | October 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Cash flow provided by operating activities | $ | 6,684 | $ | 7,564 | $ | 9,662 | $ | 6,981 | ||||||||
Capitalized internal product development costs | (3,980 | ) | (4,651 | ) | (15,698 | ) | (15,316 | ) | ||||||||
Purchased product development | (475 | ) | — | (475 | ) | (3,000 | ) | |||||||||
Purchases of equipment and leasehold improvements | (279 | ) | (1,490 | ) | (1,750 | ) | (3,172 | ) | ||||||||
Free Cash Flow | $ | 1,950 | $ | 1,423 | $ | (8,261 | ) | $ | (14,507 | ) | ||||||
Company Contacts:
Mike Morache
President and Chief Executive Officer
PLATO Learning, Inc.
952.832.1000
Mike Morache
President and Chief Executive Officer
PLATO Learning, Inc.
952.832.1000
Rob Rueckl
Vice President and Chief Financial Officer
PLATO Learning, Inc.
952.832.1000
Vice President and Chief Financial Officer
PLATO Learning, Inc.
952.832.1000
Steve Schuster
Vice President and Treasurer
PLATO Learning, Inc.
952.832.1000
Vice President and Treasurer
PLATO Learning, Inc.
952.832.1000