Exhibit 99.1
[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
THIRD QUARTER FISCAL YEAR 2004 RESULTS
COMPANY RETURNS TO PROFITABILITY
SHOWS SOLID REVENUE GROWTH COMPARED TO MARKET
MINNEAPOLIS, MN - AUGUST 26, 2004 - PLATO Learning, Inc. (NASDAQ: TUTR), a
leading provider of K-Adult computer-based and e-learning solutions, today
announced revenues for its third quarter ended July 31, 2004, totaling $40.6
million. This represents a $16.8 million or a 71% increase versus the $23.8
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 July 31, 2004.
Reported Revenues Quarter Ended July 31, Nine Months Ended July 31,
------------------------------ ------------------------------
(000's) 2004 2003 Growth 2004 2003 Growth
-------------- --------------- ------------- -------------- --------------- -------------
PLATO Learning $ 40,613 $ 23,793 71% $ 99,381 $ 54,717 82%
Lightspan (1) - 14,479 969 37,371
-------------- --------------- -------------- ---------------
$ 40,613 $ 38,272 6% $ 100,350 $ 92,088 9%
============== =============== ============== ===============
(1) Lightspan revenues prior to acquisition.
Net earnings for the third quarter of 2004 were $6.7 million, or $0.29 per
diluted share, as compared to $0.3 million, or $0.02 per diluted share, for the
same period of 2003. The third quarter results for the period ended July 31,
2003, included tax expense of $1.6 million, or $0.10 per diluted share. Tax
expense for the quarter ended July 31, 2004 was related to non-deductible
goodwill and was $150,000, or $.01 per diluted share. The tax expense reduction
between periods resulted from the full valuation allowance the Company provided
against its deferred tax assets in connection with the acquisition of Lightspan
and from the losses incurred year-to-date in fiscal 2004.
1
Adjusted Net Earnings (Loss) Quarter Ended July 31, Nine Months Ended July 31,
------------------------------ ------------------------------
(000's, except per share amounts) 2004 2003 2004 2003
-------------- --------------- --------------- --------------
Net earnings (loss) (GAAP) $ 6,724 $ 285 $ (4,041) $ (4,943)
Exclude income tax expense (benefit) 150 1,600 450 (2,185)
-------------- --------------- --------------- --------------
Net earnings (loss) (Non-GAAP) $ 6,874 $ 1,885 $ (3,591) $ (7,128)
============== =============== =============== ==============
Weighted average common shares outstanding 23,012 16,363 22,497 16,558
============== =============== =============== ==============
Earnings (loss) per basic share (Non-GAAP) $ 0.30 $ 0.12 $ (0.16) $ (0.43)
============== =============== =============== ==============
Weighted average common shares outstanding 23,556 16,420 22,497 16,558
============== =============== =============== ==============
Earnings (loss) per diluted share (Non-GAAP) $ 0.29 $ 0.11 $ (0.16) $ (0.43)
============== =============== =============== ==============
The acquisition of Lightspan also added significant expenses to the Company's
operations, the impact of which has been partially offset by cost reductions
from operating synergies of the merged businesses.
Reported Operating Expenses Quarter Ended July 31, Nine Months Ended July 31,
------------------------------ ------------------------------
(000's) 2004 2003 2004 2003
-------------- --------------- --------------- --------------
Operating expenses:
PLATO Learning (1) 22,217 13,898 68,361 40,875
Lightspan (2) - 13,941 1,941 43,169
-------------- --------------- --------------- --------------
Total 22,217 27,839 70,302 84,044
============== =============== =============== ==============
As a percentage of revenues 54.7% 72.7% 70.1% 91.3%
============== =============== =============== ==============
(1) PLATO operating expenses for the quarter and nine months in 2003 exclude
$422 and $802 of restructuring charges, respectively.
(2) Lightspan operating expenses prior to acquisition.
John Murray, Chairman, President and CEO, said, "Our financial performance for
the third quarter clearly demonstrates the significant financial leverage of our
business model. We returned to profitability this quarter with $6.9 million of
operating income, representing 17% of revenue. Operating income also improved
from second quarter 2004 by over $10 million, further demonstrating both our
financial leverage and the additional cost synergies achieved since the
Lightspan acquisition. Our cash and investments grew over $9 million during the
quarter, including over $12 million provided by operating activities. Given the
relatively fixed nature of most of our cost structure, our financial performance
is expected to continue to improve as revenues grow."
Mr. Murray continued, "While the market has been softer than expected, we have
successfully grown revenues and deferred revenues at rates greater than the
market growth rate by capturing market share. This growth reflects the superior
quality and strength of our product offering. With a broad market leading
portfolio of accountability, assessment and curriculum products and services, we
are uniquely positioned to take full advantage of this growth. As our business
model has demonstrated, this growth is expected to continue to generate improved
financial performance and, accordingly, increased value for our shareholders."
The Company highlighted additional key financial information:
o Earnings Before Interest Taxes Depreciation and Amortization (EBITDA),
calculated as operating income before depreciation, amortization and
restructuring charges, were $17.9 million for the twelve month period ended
July 31, 2004 as compared to $4.9 million for the twelve month period ended
July 31, 2003.
o Cash and marketable securities were $31.0 million at July 31, 2004,
compared to $21.7 million at April 30, 2004. No bank borrowings were
outstanding at July 31, 2004.
o Deferred revenue was $42.9 million at July 31, 2004, versus $39.7 million
at July 31, 2003, which includes Lightspan deferred revenue on a pro-forma
basis.
o Stockholders' equity was $157.2 million at July 31, 2004, compared to
$109.9 million at October 31, 2003 and $106.6 million at July 31, 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
(CDT). 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 5:45 p.m. on August
26, 2004, through midnight September 4, 2004. To access the recording call:
1-800-642-1687. At the prompt, enter pass code number 8356830.
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 $127 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. The
Company also sells to job training programs, correctional institutions, military
education programs, corporations and individuals. Products are 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.
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PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
------------------------------- -------------------------------
2004 2003 2004 2003
-------------- -------------- --------------- --------------
Revenues:
License fees $ 25,421 $ 16,300 $ 55,693 $ 33,497
Subscriptions 5,812 1,806 15,645 5,197
Services 7,403 3,918 20,937 11,597
Other 1,977 1,769 7,106 4,426
-------------- -------------- --------------- --------------
Total revenues 40,613 23,793 99,381 54,717
-------------- -------------- --------------- --------------
Cost of revenues:
License fees 3,378 2,124 9,953 5,798
Subscriptions 1,782 1,204 5,522 2,559
Services 4,193 2,646 12,527 8,024
Other 2,157 1,649 6,698 3,951
-------------- -------------- --------------- --------------
Total cost of revenues 11,510 7,623 34,700 20,332
-------------- -------------- --------------- --------------
Gross profit 29,103 16,170 64,681 34,385
-------------- -------------- --------------- --------------
Operating expenses:
Sales and marketing 14,897 10,079 45,875 29,263
General and administrative 4,915 3,200 14,447 9,511
Product development 1,293 472 4,842 1,660
Amortization of intangibles 1,112 147 3,197 441
Restructuring charges - 422 - 802
-------------- -------------- --------------- --------------
Total operating expenses 22,217 14,320 68,361 41,677
-------------- -------------- --------------- --------------
Operating income (loss) 6,886 1,850 (3,680) (7,292)
Interest income 41 83 298 295
Interest expense (28) (34) (100) (88)
Other expense, net (25) (14) (109) (43)
-------------- -------------- --------------- --------------
Earnings (loss) before income taxes 6,874 1,885 (3,591) (7,128)
Income tax expense (benefit) 150 1,600 450 (2,185)
-------------- -------------- --------------- --------------
Net earnings (loss) $ 6,724 $ 285 $ (4,041) $ (4,943)
============== ============== =============== ==============
Earnings (loss) per share:
Basic and diluted $ 0.29 $ 0.02 $ (0.18) $ (0.30)
============== ============== =============== ==============
Weighted average common shares outstanding:
Basic 23,012 16,363 22,497 16,558
============== ============== =============== ==============
Diluted 23,556 16,420 22,497 16,558
============== ============== =============== ==============
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PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
JULY 31, OCTOBER 31,
2004 2003
---------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 27,011 $ 23,834
Accounts receivable, net 46,831 39,176
Prepaid expenses and other current assets 9,389 4,819
Deferred income taxes - 2,218
---------------- -----------------
Total current assets 83,231 70,047
Long-term marketable securities 3,993 3,862
Equipment and leasehold improvements, net 6,899 5,024
Product development costs, net 16,481 14,738
Goodwill 67,743 39,609
Identified intangible assets, net 41,369 14,707
Other assets 1,617 1,975
---------------- -----------------
Total assets $ 221,333 $ 149,962
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,794 $ 2,876
Accrued employee salaries and benefits 9,934 6,678
Accrued liabilities 6,173 3,600
Deferred revenue 35,607 22,192
---------------- -----------------
Total current liabilities 55,508 35,346
Deferred revenue 7,337 4,372
Deferred income taxes 1,163 -
Other liabilities 141 312
---------------- -----------------
Total liabilities 64,149 40,030
---------------- -----------------
Stockholders' equity:
Common stock, $.01 par value, 50,000 shares authorized; 23,065 shares
issued and 23,045 outstanding at July 31, 2004; 17,671 shares issued
and 16,370 shares outstanding
at October 31, 2003 230 164
Additional paid in capital 162,828 123,135
Treasury stock at cost, 20 and 1,301 shares, respectively (205) (11,652)
Accumulated deficit (5,063) (1,022)
Accumulated other comprehensive loss (606) (693)
---------------- -----------------
Total stockholders' equity 157,184 109,932
---------------- -----------------
Total liabilities and stockholders' equity $ 221,333 $ 149,962
================ =================
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PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED
JULY 31,
--------------------------------
2004 2003
-------------- --------------
Operating activities:
Net loss $ (4,041) $ (4,943)
-------------- --------------
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes 450 (2,185)
Amortization of capitalized product development costs 5,160 4,202
Amortization of identified intangible assets 5,706 1,495
Depreciation and amortization of equipment and
leasehold improvements 2,600 1,635
Provision for doubtful accounts 1,522 1,607
Stock-based compensation 217 -
Loss on disposal of equipment 79 59
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (357) (2,220)
Prepaid expenses and other current and noncurrent assets (2,184) 395
Accounts payable (1,566) 1,339
Accrued liabilities, accrued employee salaries and
benefits and other liabilities (3,210) (1,484)
Deferred revenue 3,789 5,350
-------------- --------------
Total adjustments 12,206 10,193
-------------- --------------
Net cash provided by operating activities 8,165 5,250
-------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired 2,460 -
Capitalization of product development costs (6,830) (4,893)
Capital expenditures (1,880) (1,542)
Purchases of marketable securities (387) -
Sales of marketable securities 256 -
-------------- --------------
Net cash used in investing activities (6,381) (6,435)
-------------- --------------
FINANCING ACTIVITIES:
Repurchase of common stock (205) (2,161)
Net proceeds from issuance of common stock 1,812 51
Repayments of capital lease obligations (54) (196)
-------------- --------------
Net cash provided by (used in) financing activities 1,553 (2,306)
-------------- --------------
Effect of foreign currency on cash (160) 17
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,177 (3,474)
Cash and cash equivalents at beginning of period 23,834 30,390
-------------- --------------
Cash and cash equivalents at end of period $ 27,011 $ 26,916
============== ==============
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PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
REVENUES QUARTER ENDED JULY 31,
------------------------------------------------------------------------
($000's) 2004 2003 % CHANGE
----------------------------------- ------------------------------------ ------------------
As Lightspan Pro As Lightspan Pro As Pro
Reported (1) Forma Reported (1) Forma Reported Forma
----------------------------------- ------------------------------------ ------------------
License fees $25,421 $ - $25,421 $16,300 $ 7,976 $24,276 56% 5%
Subscriptions 5,812 - 5,812 1,806 2,957 4,763 222% 22%
Services 7,403 - 7,403 3,918 2,411 6,329 89% 17%
Other 1,977 - 1,977 1,769 1,135 2,904 12% -32%
----------------------------------- ------------------------------------
$40,613 $ - $40,613 $23,793 $14,479 $38,272 71% 6%
=================================== ====================================
(1) Lightspan revenues prior to acquisition.
OPERATING EXPENSES QUARTER ENDED QUARTER ENDED QUARTER ENDED
($000'S) JULY 31, 2004 APRIL 30, 2004 JANUARY 31, 2004
---------------------- ---------------------- --------------------------------------------
As % of As % of As Pro % of Revenue
-------------------
Reported Revenue Reported Revenue Reported Forma (3) Reported Pro Forma
------------ --------- ------------ --------- ----------------------- -------------------
Sales and marketing $14,897 37% $15,793 49% $15,185 $16,467 57% 60%
General and administrative 4,915 12% 5,040 16% 4,492 4,802 17% 18%
Product development 1,293 3% 1,346 4% 2,203 2,530 8% 9%
Amortization of intangibles 1,112 3% 1,102 3% 983 1,005 4% 4%
------------ ------------ -----------------------
$22,217 55% $23,281 72% $22,863 $24,804 86% 90%
============ ============ =======================
OPERATING EXPENSES QUARTER ENDED JULY 31,
($000'S) 2003 % OF REVENUE
----------------------------------- -------------------
As Lightspan Pro As Pro
Reported (1) (2) Forma Reported Forma
----------------------------------- -------------------
Sales and marketing $10,079 $ 8,614 $18,693 42% 49%
General and administrative 3,200 1,343 4,543 13% 12%
Product development 472 2,153 2,625 2% 7%
Amortization of intangibles 147 1,831 1,978 1% 5%
-----------------------------------
$13,898 $13,941 $27,839 58% 73%
===================================
(1) Excludes $422 of restructuring charges.
(2) Lightspan operating expenses prior to acquisition.
(3) Difference between As Reported and Pro Forma represents $1.9 million of
Lightspan operating expenses prior to acquisition.
ORDER SIZE QUARTER ENDED JULY 31,
------------------------------------------------------------
($000'S) 2004 2003 (1) % CHANGE
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 52 $ 7,699 56 $ 8,772 -7% -12%
$250 or greater 18 13,506 25 12,689 -28% 6%
----------------------------- -----------------------------
70 $ 21,205 81 $ 21,461 -14% -1%
============================= =============================
(1) 2003 includes both PLATO Learning and Lightspan.
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PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
REVENUES NINE MONTHS ENDED JULY 31,
------------------------------------------------------------------------
($000's) 2004 2003 % CHANGE
----------------------------------- ------------------------------------ ------------------
As Lightspan Pro As Lightspan Pro As Pro
Reported (1) Forma Reported (1) Forma Reported Forma
----------------------------------- ------------------------------------ ------------------
License fees $55,693 $ - $ 55,693 $33,497 $18,880 $52,377 66% 6%
Subscriptions 15,645 531 16,176 5,197 8,799 13,996 201% 16%
Services 20,937 438 21,375 11,597 7,025 18,622 81% 15%
Other 7,106 - 7,106 4,426 2,667 7,093 61% 0%
----------------------------------- ------------------------------------
$99,381 $ 969 $100,350 $54,717 $37,371 $92,088 82% 9%
=================================== ====================================
(1) Lightspan revenues prior to acquisition.
OPERATING EXPENSES NINE MONTHS ENDED JULY 31,
($000'S) 2004 % OF REVENUE
----------------------------------- -------------------
As Lightspan Pro As Pro
Reported (2) Forma Reported Forma
----------------------------------- -------------------
Sales and marketing $45,875 $1,282 $47,157 46% 47%
General and administrative 14,447 310 14,757 15% 15%
Product development 4,842 327 5,169 5% 5%
Amortization of intangibles 3,197 22 3,219 3% 3%
-----------------------------------
$68,361 $1,941 $70,302 69% 70%
===================================
NINE MONTHS ENDED JULY 31,
2003 % OF REVENUE
----------------------------------- -------------------
As Lightspan Pro As Pro
Reported (1) (2) Forma Reported Forma
----------------------------------- -------------------
Sales and marketing $29,263 $23,935 $53,198 53% 58%
General and administrative 9,511 5,848 15,359 17% 17%
Product development 1,660 7,553 9,213 3% 10%
Amortization of intangibles 441 5,833 6,274 1% 7%
-----------------------------------
$40,875 $43,169 $84,044 75% 91%
===================================
(1) Excludes $802 of restructuring charges.
(2) Lightspan operating expenses prior to acquisition.
ORDER SIZE NINE MONTHS ENDED JULY 31,
------------------------------------------------------------
($000'S) 2004 (1) 2003 (2) % CHANGE
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 122 $ 17,969 101 $ 15,678 21% 15%
$250 or greater 43 29,543 48 23,509 -10% 26%
----------------------------- -----------------------------
165 $ 47,512 149 $ 39,187 11% 21%
============================= =============================
(1) 2004 excludes amounts related to the second quarter Idaho Department of
Education contract.
(2) 2003 includes both PLATO Learning and Lightspan.
8
PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
DEFERRED REVENUE JULY 31,
----------------------------- OCTOBER 31,
($000's) 2004 2003 2003
----------------------------- --------------
License fees $ 8,583 $ 5,446 $ 4,762
Subscriptions 9,141 3,365 4,134
Services 24,668 15,979 17,360
Other 552 274 308
----------------------------- --------------
42,944 25,064 26,564
Lightspan - 14,645 14,262
----------------------------- --------------
Total $ 42,944 $ 39,709 $ 40,826
============================= ==============
EBITDA TWELVE MONTHS ENDED
($000'S) JULY 31, 2004
------------------------------------------------------------------------
As Reported Q4-2003 Q1-2004 Q2-2004 Q3-2004 TOTAL
------------------------------------------------------------------------
Net earnings (loss) $ 3,276 $ (7,535) $ (3,230) $ 6,724 $ (765)
Income taxes 1,744 150 150 150 2,194
Interest expense 16 35 37 28 116
Depreciation and amortization 2,854 4,455 4,623 4,388 16,320
Restructuring charge - - - - -
------------------------------------------------------------------------
$ 7,890 $ (2,895) $ 1,580 $ 11,290 $ 17,865
========================================================================
TWELVE MONTHS ENDED
JULY 31, 2003
------------------------------------------------------------------------
As Reported Q4-2002 Q1-2003 Q2-2003 Q3-2003 TOTAL
------------------------------------------------------------------------
Net earnings (loss) $ 119 $ (3,407) $(1,821) $ 285 $ (4,824)
Income taxes 1,575 (2,350) (1,435) 1,600 (610)
Interest expense 24 24 30 34 112
Depreciation and amortization 2,076 2,319 2,231 2,782 9,408
Restructuring charge - 380 - 422 802
------------------------------------------------------------------------
$ 3,794 $ (3,034) $ (995) $ 5,123 $ 4,888
========================================================================
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