[PLATO LEARNING LOGO]
__________________________________________________________FOR IMMEDIATE RELEASE
CONTACT: MIKE MORACHE -- PRESIDENT AND CEO
LARRY BETTERLEY -- SR. VP AND CFO
STEVE SCHUSTER -- VP AND TREASURER
952.832.1000
PLATO LEARNING, INC. REPORTS
SECOND QUARTER FISCAL YEAR 2005 RESULTS
MINNEAPOLIS, MN -- JUNE 2, 2005 -- 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, 2005, totaling $31.4
million. This represents a $0.9 million or a 3% decrease versus the $32.3
million reported for the comparable period of fiscal 2004.
Net loss for the second quarter of 2005 was $3.0 million, or $0.13 per diluted
share, as compared to a net loss of $3.2 million, or $0.14 per share, for the
same period of 2004. The net loss, excluding the impact of restructuring and
other charges, was $2.3 million, or $0.10 per share, for the second quarter of
2005.
Gross margin was 58.3% for the quarter versus 62.2% in the second quarter of
2004. The lower gross margin was primarily driven by a shift in revenue mix from
high gross margin license fee revenue to lower gross margin service revenues.
Operating expenses, excluding the impact of restructuring and other charges,
declined 12% for the quarter from 2004. The decrease resulted from cost
reduction actions initiated throughout 2004 and 2005 and from realignment of
service resources from sales support to billable activities. Restructuring and
other charges primarily include severance payments, facility closing costs, and
amounts paid to terminated executives under employment agreements.
Revenues for the six months ended April 30, 2005, were $56.9 million, also a 3%
decrease from 2004. Net loss, excluding restructuring and other charges of $2.9
million, was $10.6 million, compared to $10.8 million in 2004. Loss per share,
excluding the impact of restructuring and other charges of $0.13, was $0.45,
compared to $0.48 in 2004.
Mike Morache, PLATO Learning President and CEO, said, "Our performance in the
second quarter was somewhat better than anticipated and got us back on plan for
the first six months of the year. Particularly noteworthy was the 12% reduction
in operating expenses from 2004 for both the quarter and year-to-date periods,
excluding restructuring and other charges. These declines reflect our continuing
focus on reducing the company's cost structure and improving efficiency."
1
"Since joining the company much of my time has been spent on assessing the
business. PLATO Learning has tremendous assets in its intellectual property,
customer relationships, and the talent of its employees who have a sincere
passion for improving education. The company, however, also needs to make
changes in its business structure, systems, and processes to sustain a growing
and profitable business in the future. All of us at PLATO Learning are working
diligently to implement the changes necessary to transform the Company during
2005, with the goal of having them in place as we enter into fiscal year 2006,"
said Morache.
"Our financial goals for the year remain unchanged, as we see sufficient
opportunity to achieve our objectives. The type and magnitude of the changes we
are implementing, however, can have an impact on our near-term financial
performance. We intend to manage change to minimize disruption; however, the
changes are needed to achieve our expected financial performance over the long
term and are among the Company's top priorities," added Morache.
The Company highlighted additional key financial information for the second
quarter of 2005:
o Earnings Before Interest Taxes Depreciation and Amortization (EBITDA),
and restructuring and other charges, was $2.4 million for the quarter,
compared to $1.6 million for the same period in 2004.
o Cash and marketable securities were $31.5 million at April 30, 2005,
compared to $21.7 million at April 30, 2004, and $45.5 million at
October 31, 2004.
o Deferred revenue was $39.3 million at April 30, 2005, versus $38.3
million at April 30, 2004, and $51.6 million at October 31, 2004.
o Both cash and marketable securities and deferred revenue were impacted
by low order volume in the first half of the year, due in part to
changes in the sales organization and procedures and in part to the
seasonality of the business.
USE OF NON-GAAP FINANCIAL MEASURES
The non-GAAP financial measures used in this press release exclude the impact of
2005 restructuring and other charges on PLATO Learning's operating results, as
well as present EBITDA. 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 ongoing operating results. 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 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.
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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 1.877.209.0397 in the U.S. and
Canada and 1.612.332.0923 for international calls. Please call 10 minutes prior
to the start of the call and inform the operator you are participating in PLATO
Learning's quarterly earnings call. Should you be unable to attend the live
conference call, a recording will be available to you from 7:15 p.m. (CT) on
June 2, 2005, through midnight on June 9, 2005. 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 765768.
Additionally, investors have the opportunity to listen to the conference call
over the Internet through PLATO Learning's web site at
http://www.plato.com/aboutus/investor_calls.asp.
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.
PLATO Learning, Inc. is a publicly held company traded as TUTR on the NASDAQ,
with trailing 12-month revenues of approximately $140 million. PLATO 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, 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, 2004. 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,
------------------------------- -------------------------------
2005 2004 2005 2004
-------------- -------------- --------------- --------------
Revenues:
License fees $ 14,233 $ 17,213 $ 25,328 $ 30,272
Subscriptions 4,517 5,325 9,050 9,833
Services 10,908 7,197 19,104 13,534
Other 1,771 2,585 3,402 5,129
-------------- -------------- --------------- --------------
Total revenues 31,429 32,320 56,884 58,768
-------------- -------------- --------------- --------------
Cost of revenues:
License fees 2,869 3,234 6,301 6,575
Subscriptions 2,142 2,061 4,455 3,740
Services 6,108 4,570 12,234 8,334
Other 1,985 2,342 3,685 4,541
-------------- -------------- --------------- --------------
Total cost of revenues 13,104 12,207 26,675 23,190
-------------- -------------- --------------- --------------
Gross profit 18,325 20,113 30,209 35,578
-------------- -------------- --------------- --------------
Operating expenses:
Sales and marketing 13,410 15,793 26,736 30,978
General and administrative 4,842 5,040 9,052 9,532
Product development 1,222 1,346 2,693 3,549
Amortization of intangibles 1,080 1,102 2,172 2,085
Restructuring and other charges 632 - 2,921 -
-------------- -------------- --------------- --------------
Total operating expenses 21,186 23,281 43,574 46,144
-------------- -------------- --------------- --------------
Operating loss (2,861) (3,168) (13,365) (10,566)
Interest income 168 138 380 257
Interest expense (28) (37) (43) (72)
Other expense, net (83) (13) (153) (84)
-------------- -------------- --------------- --------------
Loss before income taxes (2,804) (3,080) (13,181) (10,465)
Income tax expense 150 150 300 300
-------------- -------------- --------------- --------------
Net loss $ (2,954) $ (3,230) $ (13,481) $ (10,765)
============== ============== =============== ==============
Loss per share:
Basic and diluted $ (0.13) $ (0.14) $ (0.58) $ (0.48)
============== ============== =============== ==============
Weighted average common shares outstanding:
Basic and diluted 23,378 22,989 23,240 22,236
============== ============== =============== ==============
PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
APRIL 30, OCTOBER 31,
2005 2004
----------------- -----------------
(UNAUDITED) (SEE NOTE)
ASSETS
Current assets:
Cash and cash equivalents $ 25,534 $ 29,235
Marketable securities 5,982 12,615
Accounts receivable, net 28,589 41,852
Prepaid expenses and other current assets 9,672 9,460
----------------- -----------------
Total current assets 69,777 93,162
Long-term marketable securities - 3,608
Equipment and leasehold improvements, net of accumulated
depreciation and amortization of $11,955 and $10,361, respectively 7,499 7,946
Product development costs, net of accumulated amortization of
$22,294 and $18,835, respectively 18,628 17,116
Goodwill 71,997 71,267
Identified intangible assets, net 35,291 39,432
Other assets 1,088 213
----------------- -----------------
Total assets $ 204,280 $ 232,744
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,104 $ 5,196
Accrued employee salaries and benefits 6,798 8,772
Accrued liabilities 5,624 6,383
Deferred revenue 33,434 43,042
----------------- -----------------
Total current liabilities 47,960 63,393
Long-term deferred revenue 5,835 8,533
Deferred income taxes 1,622 1,322
Other liabilities 39 46
----------------- -----------------
Total liabilities 55,456 73,294
----------------- -----------------
Stockholders' equity:
Common stock, $.01 par value, 50,000 shares authorized; 23,495 shares
issued and 23,475 outstanding at April 30, 2005; 23,095 shares issued
and 23,075 shares outstanding at October 31, 2004 235 231
Additional paid in capital 165,457 162,956
Treasury stock at cost, 20 shares (205) (205)
Accumulated deficit (16,331) (2,850)
Accumulated other comprehensive loss (332) (682)
----------------- -----------------
Total stockholders' equity 148,824 159,450
----------------- -----------------
Total liabilities and stockholders' equity $ 204,280 $ 232,744
================= =================
Note: The balance sheet at October 31, 2004 has been derived from our audited
financial statements at that date.
PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30,
--------------------------------
2005 2004
--------------- ---------------
OPERATING ACTIVITIES:
Net loss $ (13,481) $ (10,765)
--------------- ---------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Deferred income taxes 300 300
Amortization of capitalized product development costs 3,463 3,478
Amortization of identified intangible and other noncurrent assets 4,280 3,763
Depreciation and amortization of equipment and
leasehold improvements 1,743 1,837
Restructuring and other charges 2,921 -
Provision for doubtful accounts 674 827
Stock-based compensation 39 217
Loss on disposal of equipment 32 1
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 12,589 5,775
Prepaid expenses and other current and noncurrent assets (1,170) (755)
Accounts payable (3,092) (1,854)
Accrued liabilities, accrued employee salaries and
benefits and other liabilities (5,588) (6,210)
Deferred revenue (12,306) (834)
--------------- ---------------
Total adjustments 3,885 6,545
--------------- ---------------
Net cash used in operating activities (9,596) (4,220)
--------------- ---------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired - 2,460
Capitalization of product development costs (5,211) (4,291)
Capital expenditures (1,375) (1,112)
Purchases of marketable securities (9,266) (287)
Sales and maturities of marketable securities 19,559 370
--------------- ---------------
Net cash provided by (used in) investing activities 3,707 (2,860)
--------------- ---------------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 1,925 1,491
Repurchase of common stock - (205)
Repayments of capital lease obligations (127) (70)
--------------- ---------------
Net cash provided by financing activities 1,798 1,216
--------------- ---------------
Effect of foreign currency on cash 390 (28)
--------------- ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,701) (5,892)
Cash and cash equivalents at beginning of period 29,235 23,834
--------------- ---------------
Cash and cash equivalents at end of period $ 25,534 $ 17,942
=============== ===============
PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
REVENUES QUARTER ENDED SIX MONTHS ENDED
($000's) APRIL 30, APRIL 30,
---------------------------- ---------------------------
2005 2004 % CHANGE 2005 2004 % CHANGE
------------- ------------- ------------- ------------- ------------- --------------
License fees $ 14,233 $ 17,213 -17% $ 25,328 $ 30,272 -16%
Subscriptions 4,517 5,325 -15% 9,050 9,833 -8%
Services 10,908 7,197 52% 19,104 13,534 41%
Other 1,771 2,585 -31% 3,402 5,129 -34%
------------- ------------- ------------- -------------
$ 31,429 $ 32,320 -3% $ 56,884 $ 58,768 -3%
============= ============= ============= =============
- ----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES QUARTER ENDED APRIL 30,
---------------------------------------------------
($000's) 2005 2004
------------------------- -------------------------
% of % of
----------
Revenue Revenue % Change
------------ ---------- -----------
Total operating expenses $ 21,186 67% $ 23,281 72% -9%
Restructuring and other charges (632) -
------------- -------------
Operating expenses before
restructuring and other charges $ 20,554 65% $ 23,281 72% -12%
============= =============
SIX MONTHS ENDED APRIL 30,
---------------------------------------------------
2005 2004
------------------------- -------------------------
% of % of
----------
Revenue Revenue % Change
------------ ---------- -----------
Total operating expenses $ 43,574 77% $ 46,144 79% -6%
Restructuring and other charges (2,921) -
------------- -------------
Operating expenses before
restructuring and other charges $ 40,653 71% $ 46,144 79% -12%
============= =============
- --------------------------------------------------------------------------------------------------------------------
NET LOSS QUARTER ENDED SIX MONTHS ENDED
($000's) APRIL 30, APRIL 30,
-------------------------- ----------------------------
2005 2004 2005 2004
----------- ------------- ------------ --------------
Net loss $ (2,954) $ (3,230) $ (13,481) $ (10,765)
Add back restructuring and other charges 632 - 2,921 -
----------- ------------- ------------ --------------
Net loss before restructuring and other charges $ (2,322) $ (3,230) $ (10,560) $ (10,765)
=========== ============= ============ ==============
Weighted average common shares outstanding -
basic and diluted 23,378 22,989 23,240 22,236
=========== ============= ============ ==============
Loss per share before restructuring and other
charges - basic and diluted (0.10) (0.14) (0.45) (0.48)
=========== ============= ============ ==============
PLATO LEARNING, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------
ORDER SIZE QUARTER ENDED APRIL 30,
------------------------------------------------------------
($000's) 2005 2004 % CHANGE
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 19 $ 3,021 40 $ 5,961 -53% -49%
$250 or greater 10 5,060 11 6,919 -9% -27%
----------------------------- -----------------------------
29 $ 8,081 51 $ 12,880 -43% -37%
============================= =============================
SIX MONTHS ENDED APRIL 30,
------------------------------------------------------------
2005 2004 % CHANGE
----------------------------- ----------------------------- -----------------------------
Number Value Number Value Number Value
----------------------------- ----------------------------- -----------------------------
$100 to $249 37 $ 5,550 70 $ 10,270 -47% -46%
$250 or greater 21 9,984 25 16,037 -16% -38%
----------------------------- -----------------------------
58 $ 15,534 95 $ 26,307 -39% -41%
============================= =============================
- ------------------------------------------------------------------------------------------------------------------------
EBITDA (EXCLUDING RESTRUCTURING AND OTHER CHARGES)
($000'S)
TWELVE MONTHS ENDED
APRIL 30, 2005
------------------------------------------------------------------------
Q3-2004 Q4-2004 Q1-2005 Q2-2005 TOTAL
------------------------------------------------------------------------
Net earnings (loss) $ 6,724 $ 2,213 $ (10,527) $ (2,954) $ (4,544)
Income taxes 150 1,580 150 150 2,030
Interest expense 28 22 15 28 93
Depreciation and amortization 4,388 4,481 4,984 4,502 18,355
Restructuring and other charges - - 2,289 632 2,921
------------------------------------------------------------------------
$ 11,290 $ 8,296 $ (3,089) $ 2,358 $ 18,855
========================================================================
TWELVE MONTHS ENDED
APRIL 30, 2004
------------------------------------------------------------------------
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 and other charges 422 - - - 422
------------------------------------------------------------------------
$ 5,123 $ 7,890 $ (2,895) $ 1,580 $ 11,698
========================================================================
- -----------------------------------------------------------------------------------------------------------------------
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