Exhibit 99.1
[PLATO LEARNING LOGO]
- ----------------------------------------------------------FOR IMMEDIATE RELEASE
CONTACT: DAVID SMITH - INTERIM CEO
LARRY BETTERLEY - SR. VP AND CFO
STEVE SCHUSTER - VP AND TREASURER
952.832.1000
PLATO LEARNING, INC. REPORTS
FISCAL YEAR 2004 RESULTS
FOURTH QUARTER REVENUE INCREASES 12% FROM 2003 ON PRO-FORMA BASIS
MINNEAPOLIS, MN - DECEMBER 15, 2004 - PLATO Learning, Inc. (NASDAQ: TUTR), a
leading provider of K-adult computer-based and e-learning solutions, today
announced revenues for its fourth quarter ended October 31, 2004, totaling $42.4
million. This represents a $14.9 million or a 54% increase versus the $27.5
million reported for the comparable period of fiscal 2003. Revenues for the year
ended October 31, 2004, were $141.8 million, a $59.6 million or a 73% increase
versus the $82.2 million reported for the same period in 2003. The Company's
acquisition of Lightspan, Inc. in November 2003 significantly contributed to the
revenue growth for the quarter and year ended October 31, 2004. On a pro-forma
basis, including revenues from Lightspan before the acquisition date, revenues
grew 12% for the fourth quarter and 10% for the year in 2004 over the comparable
periods in 2003.
Reported Revenues Quarter Ended October 31, Year Ended October 31,
------------------------------ ------------------------------
(000's) 2004 2003 Growth 2004 2003 Growth
-------------- --------------- ------------- -------------- --------------- -------------
PLATO Learning $ 42,420 $ 27,475 54% $ 141,801 $ 82,192 73%
Lightspan (1) - 10,500 969 47,871
-------------- --------------- -------------- ---------------
$ 42,420 $ 37,975 12% $ 142,770 $ 130,063 10%
============== =============== ============== ===============
(1) Lightspan revenues prior to acquisition.
Net earnings for the fourth quarter of 2004 were $2.2 million, or $0.09 per
diluted share, as compared to $3.3 million, or $0.20 per diluted share, for the
same period of 2003. The net loss for the year ended October 31, 2004, was $1.8
million, or $0.08 per diluted share, as compared to a net loss of $1.7 million
or $0.10 per diluted share, for the same period in 2003.
The Company recorded consolidated income tax expense of $1.6 million for the
fourth quarter and $2.0 million for the year 2004, compared to an expense of
$1.7 million and an income tax benefit of $0.4 million in the same periods for
2003, respectively. The high consolidated tax rate for the 2004 periods is
caused by losses in the Company's U.K. subsidiary, which are not offset against
U.S. profits for tax expense purposes and for which no tax benefit is
recognized, due to the ongoing losses of the U.K. entity. Earnings before taxes
were $3.8 million for the fourth quarter 2004 and $0.2 million for the fiscal
year 2004, compared to earnings of $5.0 million for fourth quarter 2003 and a
loss of $2.1 million for fiscal year 2003.
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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 October 31, Year Ended October 31,
------------------------------ ------------------------------
(000's) 2004 2003 2004 2003
-------------- --------------- --------------- --------------
Operating expenses:
PLATO Learning (1) 22,975 14,599 91,336 55,474
Lightspan (2) - 11,199 1,941 54,368
-------------- --------------- --------------- --------------
Total 22,975 25,798 93,277 109,842
============== =============== =============== ==============
As a percentage of pro-forma revenues 54.2% 67.9% 65.3% 84.5%
============== =============== =============== ==============
(1) PLATO operating expenses for the year in 2003 exclude $802 of
restructuring charges.
(2) Lightspan operating expenses prior to acquisition.
David Smith, Interim CEO, said, "Revenues and earnings for the quarter and year
were in line with our revised expectations and showed solid growth over 2003 on
a pro-forma basis. This growth was achieved while expending substantial effort
to integrate Lightspan operations. Even more notable was the increase in cash
and investments of $14.5 million during the quarter to $45.5 million at
year-end, driven by strong earnings before the impact of non-cash expenses,
improvements in accounts receivable metrics, and growth in deferred revenues."
Mr. Smith continued, "Since assuming the CEO role, much of my time has been
spent assessing the business. I've been impressed by the Company's products and
depth of intellectual assets, as well as the quality and enthusiasm of its
employees. Much has been accomplished, but much more needs to be done to fully
realize our growth and earnings potential. The foundation has been set. Now we
need to clearly define the Company's focus, refine its processes, and align its
resources to enhance profitability and accelerate growth. I firmly believe this
can be done, and it will be our priority over the coming year."
The Company highlighted additional key financial information:
- Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)
and restructuring charges were $18.3 million for the year ended
October 31, 2004, compared to $9.0 million in 2003.
- Cash and marketable securities were $45.5 million at October 31, 2004,
compared to $31.0 million at July 31, 2004, and $27.7 million at
October 31, 2003.
- Deferred revenue was $51.6 million at October 31, 2004, versus $45.4
million at October 31, 2003, including Lightspan deferred revenue on a
pro-forma basis. Both balances reflect a fourth quarter 2004 purchase
accounting adjustment of $4.6 million to the Lightspan deferred
revenue to align it with the fair value of undelivered educational
consulting days at the acquisition date.
- Stockholders' equity was $159.5 million at October 31, 2004, compared
to $109.9 million at October 31, 2003.
USE OF NON-GAAP FINANCIAL MEASURES
The non-GAAP financial measures used in this press release exclude the impact 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
2
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
p.m. (CT). The dial-in number for this call is 1-877-775-1746. Please call 10
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 5:00 p.m. (CT) on
December 15, 2004, through midnight on December 20, 2004. To access the
recording call 1-800-642-1687. At the prompt, enter pass code number 1632269.
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 $142 million, PLATO Learning,
Inc. is a publicly held company traded as TUTR on the NASDAQ. PLATO(R) Learning
educational software delivered via networks, CD-ROM, the internet, and private
intranets, 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 offices
throughout the United States, Canada, and the United Kingdom, as well as
international distributors in Puerto Rico, Singapore, South Africa, and the
United Arab Emirates. For more information, please visit 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 YEAR ENDED
OCTOBER 31, OCTOBER 31,
------------------------------- -------------------------------
2004 2003 2004 2003
-------------- -------------- --------------- --------------
Revenues:
License fees $ 24,385 $ 18,942 $ 80,078 $ 52,439
Subscriptions 5,073 1,954 20,718 7,151
Services 9,093 5,141 30,030 16,738
Other 3,869 1,438 10,975 5,864
-------------- -------------- --------------- --------------
Total revenues 42,420 27,475 141,801 82,192
-------------- -------------- --------------- --------------
Cost of revenues:
License fees 5,107 2,419 15,060 8,217
Subscriptions 1,984 1,008 7,506 3,567
Services 4,846 2,905 17,373 10,929
Other 3,916 1,517 10,614 5,468
-------------- -------------- --------------- --------------
Total cost of revenues 15,853 7,849 50,553 28,181
-------------- -------------- --------------- --------------
Gross profit 26,567 19,626 91,248 54,011
-------------- -------------- --------------- --------------
Operating expenses:
Sales and marketing 15,711 10,175 61,586 39,438
General and administrative 5,022 3,671 19,469 13,182
Product development 1,131 607 5,973 2,267
Amortization of intangibles 1,111 146 4,308 587
Restructuring charges - - - 802
-------------- -------------- --------------- --------------
Total operating expenses 22,975 14,599 91,336 56,276
-------------- -------------- --------------- --------------
Operating income (loss) 3,592 5,027 (88) (2,265)
Interest income 134 22 432 317
Interest expense (22) (16) (122) (104)
Other income (expense), net 89 (13) (20) (56)
-------------- -------------- --------------- --------------
Earnings (loss) before income taxes 3,793 5,020 202 (2,108)
Income tax expense (benefit) 1,580 1,744 2,030 (441)
-------------- -------------- --------------- --------------
Net earnings (loss) $ 2,213 $ 3,276 $ (1,828) $ (1,667)
============== ============== =============== ==============
Earnings (loss) per share:
Basic $ 0.10 $ 0.20 $ (0.08) $ (0.10)
============== ============== =============== ==============
Diluted $ 0.09 $ 0.20 $ (0.08) $ (0.10)
============== ============== =============== ==============
Weighted average common shares outstanding:
Basic 23,050 16,366 22,637 16,510
============== ============== =============== ==============
Diluted 23,468 16,618 22,637 16,510
============== ============== =============== ==============
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PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
OCTOBER 31, OCTOBER 31,
2004 2003
---------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 29,235 $ 23,834
Marketable securities 12,615 -
Accounts receivable, net 41,852 39,176
Prepaid expenses and other current assets 9,460 4,819
Deferred income taxes - 2,218
---------------- -----------------
Total current assets 93,162 70,047
Long-term marketable securities 3,608 3,862
Equipment and leasehold improvements, net 7,946 5,024
Product development costs, net 17,116 14,738
Goodwill 71,267 39,609
Identified intangible assets, net 39,432 14,707
Other assets 174 1,975
---------------- -----------------
Total assets $ 232,705 $ 149,962
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,196 $ 2,876
Accrued employee salaries and benefits 8,772 6,678
Accrued liabilities 6,383 3,600
Deferred revenue 43,042 22,192
---------------- -----------------
Total current liabilities 63,393 35,346
Deferred revenue 8,533 4,372
Deferred income taxes 1,322 -
Other liabilities 7 312
---------------- -----------------
Total liabilities 73,255 40,030
---------------- -----------------
Stockholders' equity:
Common stock, $.01 par value, 50,000 shares authorized;
23,095 shares issued and 23,075 outstanding at October 31,
2004; 17,671 shares issued and 16,370 shares outstanding
at October 31, 2003 231 164
Additional paid in capital 162,956 123,135
Treasury stock at cost, 20 and 1,301 shares, respectively (205) (11,652)
Accumulated deficit (2,850) (1,022)
Accumulated other comprehensive loss (682) (693)
---------------- -----------------
Total stockholders' equity 159,450 109,932
---------------- -----------------
Total liabilities and stockholders' equity $ 232,705 $ 149,962
================ =================
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PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED
OCTOBER 31,
--------------------------------
2004 2003
-------------- --------------
OPERATING ACTIVITIES:
Net loss $ (1,828) $ (1,667)
-------------- --------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deferred income taxes 2,030 (441)
Amortization of capitalized product development costs 6,941 5,720
Amortization of identified intangible assets 7,648 2,239
Depreciation and amortization of equipment and
leasehold improvements 3,358 2,227
Provision for doubtful accounts 2,305 2,476
Stock-based compensation 217 -
Loss on disposal of equipment 53 61
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 4,786 (8,442)
Prepaid expenses and other current and noncurrent assets (2,008) (956)
Accounts payable (164) 1,988
Accrued liabilities, accrued employee salaries and
benefits and other liabilities (4,183) (1,492)
Deferred revenue 7,838 6,850
-------------- --------------
Total adjustments 28,821 10,230
-------------- --------------
Net cash provided by operating activities 26,993 8,563
-------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired 2,460 -
Capitalization of product development costs (9,238) (6,863)
Capital expenditures (3,615) (2,088)
Purchases of marketable securities (13,176) (5,061)
Sales and maturities of marketable securities 741 1,219
-------------- --------------
Net cash used in investing activities (22,828) (12,793)
-------------- --------------
FINANCING ACTIVITIES:
Repurchase of common stock (205) (2,161)
Net proceeds from issuance of common stock 1,941 82
Repayments of capital lease obligations (239) (258)
-------------- --------------
Net cash provided by (used in) financing activities 1,497 (2,337)
-------------- --------------
Effect of foreign currency on cash (261) 11
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,401 (6,556)
Cash and cash equivalents at beginning of period 23,834 30,390
-------------- --------------
Cash and cash equivalents at end of period $ 29,235 $ 23,834
============== ==============
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PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
REVENUES QUARTER ENDED OCTOBER 31,
($000'S) ------------------------------------------------------------------------------
2004 2003 % CHANGE
-------------------------------------- --------------------------------------- ------------------
As Lightspan Pro As Lightspan Pro As Pro
Reported (1) Forma Reported (1) Forma Reported Forma
-------------------------------------- --------------------------------------- ------------------
License fees $24,385 $ - $24,385 $18,942 $ 4,475 $23,417 29% 4%
Subscriptions 5,073 - 5,073 1,954 2,812 4,766 160% 6%
Services 9,093 - 9,093 5,141 2,499 7,640 77% 19%
Other 3,869 - 3,869 1,438 714 2,152 169% 80%
-------------------------------------- ---------------------------------------
$42,420 $ - $42,420 $27,475 $10,500 $37,975 54% 12%
====================================== =======================================
(1) Lightspan revenues prior to acquisition.
- --------------------------------------------------------------------------------
OPERATING EXPENSES QUARTER ENDED QUARTER ENDED
($000'S) OCTOBER 31, 2004 OCTOBER 31, 2003
---------------------- -------------------------------------------------------
As % of As Lightspan Pro % of Revenue
------------------
Reported Revenue Reported (1) Forma Reported Pro Forma
------------ --------- ------------------------------------ -------------------
Sales and marketing $15,711 37% $10,175 $ 7,714 $17,889 37% 47%
General and administrative 5,022 12% 3,671 586 4,257 13% 11%
Product development 1,131 3% 607 2,088 2,695 2% 7%
Amortization of intangibles 1,111 3% 146 811 957 1% 3%
------------ ------------------------------------
$22,975 54% $14,599 $11,199 $25,798 53% 68%
============ ====================================
QUARTER ENDED QUARTER ENDED QUARTER ENDED
JULY 31, 2004 APRIL 30, 2004 JANUARY 31, 2004
------------------------ ----------------------- ---------------------------------------------
As % of As % of As Pro % of Revenue
------------------
Reported Revenue Reported Revenue Reported Forma (2) 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%
============== ============= ==========================
(1) Lightspan operating expenses prior to acquisition.
(2) Difference between As Reported and Pro Forma represents $1.9 million of
Lightspan operating expenses prior to acquisition.
- --------------------------------------------------------------------------------
ORDER SIZE QUARTER ENDED OCTOBER 31,
($000'S) ------------------------------------------------------------
2004 2003 (1) % CHANGE
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 28 $ 4,335 39 $ 5,681 -28% -24%
$250 or greater 20 15,470 16 9,770 25% 58%
----------------------------- -----------------------------
48 $ 19,805 55 $ 15,451 -13% 28%
============================= =============================
(1) 2003 includes both PLATO Learning and Lightspan.
- --------------------------------------------------------------------------------
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PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
REVENUES YEAR ENDED OCTOBER 31,
($000'S) ------------------------------------------------------------------------------------
2004 2003 % CHANGE
---------------------------------------- ------------------------------------------- ------------------
As Lightspan Pro As Lightspan Pro As Pro
Reported (1) Forma Reported (1) Forma Reported Forma
---------------------------------------- ------------------------------------------- ------------------
License fees $ 80,078 $ - $ 80,078 $ 52,439 $23,355 $ 75,794 53% 6%
Subscriptions 20,718 531 21,249 7,151 11,611 18,762 190% 13%
Services 30,030 438 30,468 16,738 9,524 26,262 79% 16%
Other 10,975 - 10,975 5,864 3,381 9,245 87% 19%
---------------------------------------- -------------------------------------------
$141,801 $ 969 $142,770 $ 82,192 $47,871 $ 130,063 73% 10%
======================================== ===========================================
(1) Lightspan revenues prior to acquisition.
- --------------------------------------------------------------------------------
OPERATING EXPENSES YEAR ENDED
($000'S) OCTOBER 31, 2004 % OF REVENUE
---------------------------------------- ------------------
As Lightspan Pro As Pro
Reported (2) Forma Reported Forma
---------------------------------------- ------------------
Sales and marketing $ 61,586 $1,282 $ 62,868 43% 44%
General and administrative 19,469 310 19,779 14% 14%
Product development 5,973 327 6,300 4% 4%
Amortization of intangibles 4,308 22 4,330 3% 3%
----------------------------------------
$ 91,336 $1,941 $ 93,277 64% 65%
========================================
YEAR ENDED
OCTOBER 31, 2003 % OF REVENUE
---------------------------------------- ------------------
As Lightspan Pro As Pro
Reported (1) (2) Forma Reported Forma
---------------------------------------- ------------------
Sales and marketing $ 39,438 $31,649 $ 71,087 48% 55%
General and administrative 13,182 6,434 19,616 16% 15%
Product development 2,267 9,641 11,908 3% 9%
Amortization of intangibles 587 6,644 7,231 1% 6%
----------------------------------------
$ 55,474 $54,368 $109,842 67% 84%
========================================
(1) Excludes $802 of restructuring charges.
(2) Lightspan operating expenses prior to acquisition.
- --------------------------------------------------------------------------------
ORDER SIZE YEAR ENDED OCTOBER 31,
($000'S) ------------------------------------------------------------
2004 (1) 2003 (2) % CHANGE
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 150 $ 22,304 140 $ 21,359 7% 4%
$250 or greater 63 45,013 64 33,279 -2% 35%
----------------------------- -----------------------------
213 $ 67,317 204 $ 54,638 4% 23%
============================= =============================
(1) 2004 includes $4,275 related to the second quarter Idaho Department of
Education contract.
(2) 2003 includes both PLATO Learning and Lightspan.
- --------------------------------------------------------------------------------
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PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
EBITDA (EXCLUDING RESTRUCTURING CHARGES)
TWELVE MONTHS ENDED
($000'S) OCTOBER 31, 2004
------------------------------------------------------------------------
As Reported Q1-2004 Q2-2004 Q3-2004 Q4-2004 Total
------------------------------------------------------------------------
Net earnings (loss) $ (7,535) $(3,230) $ 6,724 $ 2,213 $ (1,828)
Income taxes 150 150 150 1,580 2,030
Interest expense 35 37 28 22 122
Depreciation and amortization 4,455 4,623 4,388 4,481 17,947
Restructuring charge - - - - -
------------------------------------------------------------------------
$ (2,895) $ 1,580 $ 11,290 $ 8,296 $ 18,271
========================================================================
TWELVE MONTHS ENDED
OCTOBER 31, 2003
------------------------------------------------------------------------
As Reported Q1-2003 Q2-2003 Q3-2003 Q4-2003 Total
------------------------------------------------------------------------
Net earnings (loss) $ (3,407) $ (1,821) $ 285 $ 3,276 $(1,667)
Income taxes (2,350) (1,435) 1,600 1,744 (441)
Interest expense 24 30 34 16 104
Depreciation and amortization 2,319 2,231 2,782 2,854 10,186
Restructuring charge 380 - 422 - 802
------------------------------------------------------------------------
$ (3,034) $ (995) $ 5,123 $ 7,890 $ 8,984
========================================================================
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