[PLATO LEARNING LOGO]
__________________________________________________________ FOR IMMEDIATE RELEASE
CONTACT: JOHN MURRAY - CHAIRMAN, PRESIDENT & CEO
GREG MELSEN -- CFO
STEVE SCHUSTER - VP & TREASURER
952.832.1000
PLATO LEARNING, INC. REPORTS
SECOND QUARTER FISCAL YEAR 2004 RESULTS
SOLID REVENUE GROWTH
LIGHTSPAN INTEGRATION ON TRACK
PROVIDING INCREASED OPERATING LEVERAGE
MINNEAPOLIS, MN -- MAY 27, 2004 -- PLATO Learning, Inc. (NASDAQ: TUTR), a
leading provider of K-Adult computer-based and e-learning solutions, today
announced revenues for its second quarter ended April 30, 2004, totaling $32.3
million, a $14.8 million or an 85% increase versus the $17.5 million reported
for the comparable period of fiscal 2003. The Company's acquisition of
Lightspan, Inc. in November 2003 significantly contributed to the revenue growth
for the quarter and year-to-date ended April 30, 2004.
Reported Revenues Quarter Ended April 30, Six Months Ended April 30,
------------------------------ ------------------------------
(000's) 2004 2003 Growth 2004 2003 Growth
-------------- --------------- ------------- -------------- --------------- -------------
PLATO Learning $ 32,320 $ 17,467 85% $ 58,768 $ 30,924 90%
Lightspan (1) - 10,489 969 22,892
-------------- --------------- -------------- ---------------
$ 32,320 $ 27,956 16% $ 59,737 $ 53,816 11%
============== =============== ============== ===============
(1) Lightspan revenues prior to acquisition.
The net loss for the second quarter of 2004 was $3.2 million, or $0.14 per
diluted share, as compared to a loss of $1.8 million, or $0.11 per diluted
share, for the same period of 2003. The second quarter results for the period
ended April 30, 2003 included a tax benefit of $1.4 million, or $0.09 per
diluted share. No tax benefit was recorded for the quarter ended April 30, 2004,
consistent with the full valuation allowance we provided against our deferred
tax assets in connection with the acquisition of Lightspan.
Adjusted Net Loss Quarter Ended April 30, Six Months Ended April 30,
------------------------------ ------------------------------
(000's, except per share amounts) 2004 2003 2004 2003
-------------- --------------- --------------- --------------
Net loss (GAAP) $ (3,230) $ (1,821) $ (10,765) $ (5,228)
Exclude:
Income tax expense (benefit) 150 (1,435) 300 (3,785)
-------------- --------------- --------------- --------------
Net loss (Non-GAAP) $ (3,080) $ (3,256) $ (10,465) $ (9,013)
============== =============== =============== ==============
Weighted average common shares outstanding 22,989 16,534 22,236 16,657
============== =============== =============== ==============
Loss per basic and diluted share (Non-GAAP) $ (0.13) $ (0.20) $ (0.47) $ (0.54)
============== =============== =============== ==============
1
The acquisition of Lightspan also added significant expenses to the Company's
operations.
Reported Operating Expenses Quarter Ended April 30, Six Months Ended April 30,
------------------------------ ------------------------------
(000's) 2004 2003 2004 2003
-------------- --------------- --------------- --------------
Operating expenses:
PLATO Learning (1) 23,281 13,755 46,144 26,977
Lightspan (2) - 14,980 1,941 29,228
-------------- --------------- --------------- --------------
Total 23,281 28,735 48,085 56,205
============== =============== =============== ==============
As a percentage of revenues 72.0% 102.8% 80.5% 104.4%
============== =============== =============== ==============
(1) PLATO operating expenses for the six months in 2003 exclude $380 of
restructuring charges.
(2) Lightspan operating expenses prior to acquisition.
John Murray, Chairman, President and CEO, said, "We are delighted with our
strong second quarter financial performance and the progress we are making with
the integration of Lightspan. Achieving double-digit growth in a tough market
demonstrates the power of the combined entity and the breadth and depth of the
solutions we offer our customers. While we see the funding environment for
education to be slowly and consistently improving, our ability to gain market
share has again allowed us to grow revenues faster than overall market growth."
Mr. Murray continued, "We also demonstrated improved operating leverage as
evidenced by the significant operating margin improvement over the first quarter
of fiscal 2004 and the comparable combined operating margin of the second
quarter of fiscal 2003. Our plan to extract costs from the combined PLATO
Learning and Lightspan entities has been closely followed. We remain on track to
meet our fiscal 2004 operational and financial goals."
Mr. Murray highlighted additional key financial information:
o Earnings Before Interest Taxes Depreciation and Amortization (EBITDA),
calculated as operating income (loss) before depreciation,
amortization and restructuring charges, was $11.7 million for the
twelve month period ended April 30, 2004 as compared to $1.3 million
for the twelve month period ended April 30, 2003.
o Cash and marketable securities were $21.7 million at April 30, 2004,
compared to $27.7 million at October 31, 2003 and $24.2 million at
April 30, 2003. There were no bank borrowings outstanding at April 30,
2004.
o Deferred revenue was $38.3 million at April 30, 2004, versus $19.5
million at April 30, 2003. Lightspan had deferred revenue of $11.2
million at April 30, 2003.
o Stockholders' equity was $150.1 million at April 30, 2004, compared to
$109.9 million at October 31, 2003 and $106.3 million at April 30,
2003.
2
USE OF NON-GAAP FINANCIAL MEASURES
The non-GAAP financial measures used in this press release exclude the impact of
an income tax benefit in 2003, and a 2003 restructuring charge on PLATO
Learning's operating results, as well as present EBITDA and certain combined
operations as if Lightspan had been acquired as of November 1, 2002. 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. PLATO Learning's management views
these non-GAAP financial measures to be helpful in assessing the Company's
progress in integrating the operations of Lightspan. In addition, these non-GAAP
financial measures facilitate management's internal comparisons to PLATO
Learning's historical operating results and comparisons to competitors'
operating results. PLATO Learning includes these non-GAAP financial measures in
its earnings announcement because the Company believes they are useful to
investors in allowing for greater transparency related to supplemental
information used by management in its financial and operational analysis.
Investors are encouraged to review the reconciliation 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.
QUARTERLY CONFERENCE CALL
A conference call to discuss this announcement is scheduled for today at 3:45 PM
(CST). The dial-in number for this call is 1-877-775-1746. Please call ten
minutes prior to the start of the call and inform the operator you are
participating in PLATO Learning's call. Should you be unable to attend the live
conference call, a recording will be available to you from 6:00 p.m. on May 27,
2004, through midnight June 3, 2004. To access the recording call:
1-800-642-1687. At the prompt, enter pass code number 6846438.
ABOUT PLATO LEARNING
PLATO Learning, Inc. 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.
With trailing 12-month revenues of approximately $110 million, PLATO Learning,
Inc. is a publicly held company traded as TUTR on the NASDAQ-NMS. PLATO(R)
Learning educational software is marketed to K-12 schools and colleges. We also
sell to job training programs, correctional institutions, military education
programs, corporations and individuals and delivered via networks, CD-ROM, the
Internet and private intranets.
PLATO Learning is headquartered at 10801 Nesbitt Avenue South, Bloomington,
Minnesota 55437, (952) 832-1000 or (800) 869-2000. The Company has domestic
offices throughout the United States and international offices in the United
Kingdom and Canada. International distributors are located in Puerto Rico,
Singapore, South Africa and the United Arab Emirates. The Company's Web address
is http://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
Annual Report on Form 10-K for the year ended October 31, 2003. Actual results
may differ materially from anticipated results.
(R) PLATO is a registered trademark of PLATO Learning, Inc. PLATO Learning is a
trademark of PLATO Learning, Inc.
3
PLATO LEARNING, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
------------------------------- -------------------------------
2004 2003 2004 2003
-------------- -------------- --------------- --------------
Revenues:
License fees $ 17,213 $ 9,752 $ 30,272 $ 17,197
Subscriptions 5,325 1,767 9,833 3,391
Services 7,197 4,296 13,534 7,679
Other 2,585 1,652 5,129 2,657
-------------- -------------- --------------- --------------
Total revenues 32,320 17,467 58,768 30,924
-------------- -------------- --------------- --------------
Cost of revenues:
License fees 3,234 1,917 6,575 3,674
Subscriptions 2,061 786 3,740 1,355
Services 4,570 3,008 8,334 5,378
Other 2,342 1,311 4,541 2,302
-------------- -------------- --------------- --------------
Total cost of revenues 12,207 7,022 23,190 12,709
-------------- -------------- --------------- --------------
Gross profit 20,113 10,445 35,578 18,215
-------------- -------------- --------------- --------------
Operating expenses:
Sales and marketing 15,793 9,946 30,978 19,184
General and administrative 5,040 3,035 9,532 6,311
Product development 1,346 627 3,549 1,188
Amortization of intangibles 1,102 147 2,085 294
Restructuring charges - - - 380
-------------- -------------- --------------- --------------
Total operating expenses 23,281 13,755 46,144 27,357
-------------- -------------- --------------- --------------
Operating loss (3,168) (3,310) (10,566) (9,142)
Interest income 138 92 257 212
Interest expense (37) (30) (72) (54)
Other expense, net (13) (8) (84) (29)
-------------- -------------- --------------- --------------
Loss before income taxes (3,080) (3,256) (10,465) (9,013)
Income tax expense (benefit) 150 (1,435) 300 (3,785)
-------------- -------------- --------------- --------------
Net loss $ (3,230) $ (1,821) $ (10,765) $ (5,228)
============== ============== =============== ==============
Loss per share:
Basic and diluted $ (0.14) $ (0.11) $ (0.48) $ (0.31)
============== ============== =============== ==============
Weighted average common shares outstanding:
Basic and diluted 22,989 16,534 22,236 16,657
============== ============== =============== ==============
4
PLATO LEARNING, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------
APRIL 30, OCTOBER 31,
2004 2003
---------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 17,942 $ 23,834
Accounts receivable, net 41,183 39,176
Prepaid expenses and other current assets 8,795 4,819
Deferred income taxes - 2,218
---------------- -----------------
Total current assets 67,920 70,047
Long-term marketable securities 3,779 3,862
Equipment and leasehold improvements, net 6,964 5,024
Product development costs, net 15,579 14,738
Goodwill 69,570 39,609
Identified intangible assets, net 43,266 14,707
Other assets 1,820 1,975
---------------- -----------------
Total assets $ 208,898 $ 149,962
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,876 $ 2,876
Accrued employee salaries and benefits 6,110 6,678
Accrued liabilities 9,313 3,600
Deferred revenue 32,292 22,192
---------------- -----------------
Total current liabilities 51,591 35,346
Deferred revenue 6,029 4,372
Deferred income taxes 1,013 -
Other liabilities 209 312
---------------- -----------------
Total liabilities 58,842 40,030
---------------- -----------------
Stockholders' equity:
Common stock, $.01 par value, 50,000 shares authorized; 23,016 shares
issued and 22,996 outstanding at April 30, 2004; 17,671 shares issued
and 16,370 shares outstanding
at October 31, 2003 230 164
Additional paid in capital 162,507 123,135
Treasury stock at cost, 20 and 1,301 shares, respectively (205) (11,652)
Accumulated deficit (11,787) (1,022)
Accumulated other comprehensive loss (689) (693)
---------------- -----------------
Total stockholders' equity 150,056 109,932
---------------- -----------------
Total liabilities and stockholders' equity $ 208,898 $ 149,962
================ =================
5
PLATO LEARNING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30,
--------------------------------
2004 2003
-------------- --------------
OPERATING ACTIVITIES:
Net loss $ (10,765) $ (5,228)
-------------- --------------
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Deferred income taxes 300 (3,785)
Amortization of capitalized product development costs 3,478 2,624
Amortization of identified intangible assets 3,763 970
Depreciation and amortization of equipment and
leasehold improvements 1,837 1,106
Provision for doubtful accounts 827 1,052
Stock-based compensation 217 -
Loss on disposal of equipment 1 59
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 5,775 4,579
Prepaid expenses and other current and noncurrent assets (755) 280
Accounts payable (1,854) 1,003
Accrued liabilities, accrued employee salaries and
benefits and other liabilities (6,210) (2,403)
Deferred revenue (834) (195)
-------------- --------------
Total adjustments 6,545 5,290
-------------- --------------
Net cash provided by (used in) operating activities (4,220) 62
-------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired 2,460 -
Capitalization of product development costs (4,291) (3,168)
Capital expenditures (1,112) (828)
Purchases of marketable securities (287) -
Sales of marketable securities 370 -
-------------- --------------
Net cash used in investing activities (2,860) (3,996)
-------------- --------------
FINANCING ACTIVITIES:
Repurchase of common stock (205) (2,161)
Net proceeds from issuance of common stock 1,491 35
Repayments of capital lease obligations (70) (147)
-------------- --------------
Net cash provided by (used in) financing activities 1,216 (2,273)
-------------- --------------
Effect of foreign currency on cash (28) 19
-------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,892) (6,188)
Cash and cash equivalents at beginning of period 23,834 30,390
-------------- --------------
Cash and cash equivalents at end of period $ 17,942 $ 24,202
============== ==============
6
PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
REVENUES QUARTER ENDED APRIL 30,
------------------------------------------------------------------------
($000's) 2004 2003 % CHANGE
----------------------------------- ------------------------------------ ------------------
As Lightspan Pro As Lightspan Pro As Pro
Reported (1) Forma Reported (1) Forma Reported Forma
----------------------------------- ------------------------------------ ------------------
License fees $17,213 $ - $17,213 $9,752 $4,722 $14,474 77% 19%
Subscriptions 5,325 - 5,325 1,767 2,865 4,632 201% 15%
Services 7,197 - 7,197 4,296 2,189 6,485 68% 11%
Other 2,585 - 2,585 1,652 713 2,365 56% 9%
----------------------------------- ------------------------------------
$32,320 $ - $32,320 $17,467 $10,489 $27,956 85% 16%
=================================== ====================================
(1) Lightspan revenues prior to acquisition.
OPERATING EXPENSES QUARTER ENDED QUARTER ENDED JANUARY 31,
($000'S) APRIL 30, 2004 2004 % OF REVENUE
---------------------- ------------------------------------ ------------------
As % of As Lightspan Pro As Pro
Reported Revenue Reported (1) Forma Reported Forma
------------ --------- ------------------------------------ ------------------
Sales and marketing $15,793 49% $15,185 $1,282 $16,467 57% 60%
General and administrative 5,040 16% 4,492 310 4,802 17% 18%
Product development 1,346 4% 2,203 327 2,530 8% 9%
Amortization of intangibles 1,102 3% 983 22 1,005 4% 4%
------------ ------------------------------------
$23,281 72% $22,863 $1,941 $24,804 86% 90%
============ ====================================
(1) Lightspan operating expenses prior to acquisition.
OPERATING EXPENSES QUARTER ENDED APRIL 30,
($000's) 2003 % of Revenue
----------------------------------- -------------------
As Lightspan Pro As Pro
Reported (1) (2) Forma Reported Forma
----------------------------------- -------------------
Sales and marketing $9,946 $8,459 $18,405 57% 66%
General and administrative 3,035 2,138 5,173 17% 19%
Product development 627 2,382 3,009 4% 11%
Amortization of intangibles 147 2,001 2,148 1% 8%
-----------------------------------
$13,755 $14,980 $28,735 79% 103%
===================================
(1) Excludes $380 of restructuring charges
(2) Lightspan operating expenses prior to acquisition.
ORDER SIZE QUARTER ENDED APRIL 30,
------------------------------------------------------------
($000's) 2004 (1) 2003 (2) % Change
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 40 $ 5,961 25 $ 3,756 60% 59%
$250 or greater 11 6,919 14 6,145 -21% 13%
----------------------------- -----------------------------
51 $ 12,880 39 $ 9,901 31% 30%
============================= =============================
(1) 2004 excludes amounts related to the Idaho Department of Education contract
(2) 2003 includes both PLATO Learning and Lightspan
7
PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
REVENUES SIX MONTHS ENDED APRIL 30,
------------------------------------------------------------------------
($000's) 2004 2003 % CHANGE
----------------------------------- ------------------------------------ ------------------
As Lightspan Pro As Lightspan Pro As Pro
Reported (1) Forma Reported (1) Forma Reported Forma
----------------------------------- ------------------------------------ ------------------
License fees $30,272 $ - $30,272 $17,197 $10,904 $28,101 76% 8%
Subscriptions 9,833 531 10,364 3,391 5,842 9,233 190% 12%
Services 13,534 438 13,972 7,679 4,614 12,293 76% 14%
Other 5,129 - 5,129 2,657 1,532 4,189 93% 22%
----------------------------------- ------------------------------------
$58,768 $ 969 $59,737 $30,924 $22,892 $53,816 90% 11%
=================================== ====================================
(1) Lightspan revenues prior to acquisition.
OPERATING EXPENSES SIX MONTHS ENDED APRIL 30,
($000's) 2004 % of Revenue
----------------------------------- -------------------
As Lightspan Pro As Pro
Reported (1) Forma Reported Forma
----------------------------------- -------------------
Sales and marketing $30,978 $1,282 $32,260 53% 54%
General and administrative 9,532 310 9,842 16% 16%
Product development 3,549 327 3,876 6% 6%
Amortization of intangibles 2,085 22 2,107 4% 4%
-----------------------------------
$46,144 $1,941 $48,085 79% 80%
===================================
SIX MONTHS ENDED APRIL 30,
2003 % OF REVENUE
----------------------------------- -------------------
As Lightspan Pro As Pro
Reported (1) (2) Forma Reported Forma
----------------------------------- -------------------
Sales and marketing $19,184 $15,321 $34,505 62% 64%
General and administrative 6,311 4,505 10,816 20% 20%
Product development 1,188 5,400 6,588 4% 12%
Amortization of intangibles 294 4,002 4,296 1% 8%
-----------------------------------
$26,977 $29,228 $56,205 87% 104%
===================================
(1) Excludes $380 of restructuring charges
(2) Lightspan operating expenses prior to acquisition.
ORDER SIZE SIX MONTHS ENDED APRIL 30,
------------------------------------------------------------
($000's) 2004 (1) 2003 (2) % Change
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 70 $ 10,270 45 $ 6,906 56% 49%
$250 or greater 25 16,037 23 10,820 9% 48%
----------------------------- -----------------------------
95 $ 26,307 68 $ 17,726 40% 48%
============================= =============================
(1) 2004 excludes amounts related to the Idaho Department of Education contract
(2) 2003 includes both PLATO Learning and Lightspan
8
PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
DEFERRED REVENUE APRIL 30,
----------------------------- OCTOBER 31,
($000's) 2004 2003 2003
----------------------------- ------------
License fees $ 7,192 $ 4,811 $ 4,762
Subscriptions 8,774 1,630 4,134
Services 22,160 12,875 17,360
Other 195 203 308
----------------------------- --------------
38,321 19,519 26,564
Lightspan - 11,207 14,262
----------------------------- --------------
Total $ 38,321 $ 30,726 $ 40,826
============================= ==============
EBITDA TWELVE MONTHS ENDED
($000'S) APRIL 30, 2004
------------------------------------------------------------------------
As Reported Q3-2003 Q4-2003 Q1-2004 Q2-2004 TOTAL
------------------------------------------------------------------------
Net earnings (loss) $ 285 $ 3,276 $ (7,535) $ (3,230) $ (7,204)
Income taxes 1,600 1,744 150 150 3,644
Interest expense 34 16 35 37 122
Depreciation and amortization 2,782 2,854 4,455 4,623 14,714
Restructuring charge 422 - - - 422
------------------------------------------------------------------------
$ 5,123 $ 7,890 $ (2,895) $ 1,580 $ 11,698
========================================================================
TWELVE MONTHS ENDED
APRIL 30, 2003
------------------------------------------------------------------------
As Reported Q3-2002 Q4-2002 Q1-2003 Q2-2003 TOTAL
------------------------------------------------------------------------
Net earnings (loss) $ (200) $ 119 $ (3,407) $ (1,821) $ (5,309)
Income taxes (350) 1,575 (2,350) (1,435) (2,560)
Interest expense 34 24 24 30 112
Depreciation and amortization 2,017 2,076 2,319 2,231 8,643
Restructuring charge - - 380 - 380
------------------------------------------------------------------------
$ 1,501 $ 3,794 $ (3,034) $ (995) $ 1,266
========================================================================
9