EXHIBIT 99.1
FOR: SKILLSOFT PLC
COMPANY CONTACT:
Tom McDonald
Chief Financial Officer
(603) 324-3000, x4232
INVESTOR CONTACTS:
Michael Polyviou/Peter Schmidt
Financial Dynamics
(212) 850-5748
SKILLSOFT REPORTS SECOND QUARTER FISCAL 2006 RESULTS
SKILLSOFT RAISES FULL YEAR FISCAL 2006 FINANCIAL TARGETS
NASHUA, NH, SEPTEMBER 1, 2005 - SkillSoft PLC (NASDAQ: SKIL), a leading provider
of content resources and complementary technologies for integrated enterprise
learning, today announced financial results for its second fiscal quarter ended
July 31, 2005.
SECOND QUARTER RESULTS
The Company reported total revenue of $53.6 million for the second quarter ended
July 31, 2005 of the fiscal year ending January 31, 2006 (fiscal 2006), which
represented a 6% increase over the $50.6 million reported in the second quarter
ended July 31, 2004 of the fiscal year ended January 31, 2005 (fiscal 2005).
Gross margin was 88% for the second quarter of fiscal 2006 compared to 90% for
the second quarter of fiscal 2005.
The Company's net income was $22.9 million, or $0.22 per basic and diluted
share, for the second quarter of fiscal 2006. Second quarter net income includes
a gain of $19.5 million, or $0.19 per basic and diluted share, which resulted
from the final settlement with the Company's insurance carriers regarding the
2002 securities class action lawsuit and related legal fees. Also included in
the fiscal 2006 second quarter results are restatement expenses for the ongoing
SEC investigation related to the restatement of the historical SmartForce
financial statements of approximately $0.8 million, or $0.01 per basic and
diluted share. Fiscal 2006 second quarter results included the following
non-cash charges totaling $5.7 million, or $0.06 per basic and diluted share:
$2.5 million for amortization of intangible assets and deferred compensation
expense and the non-cash portion of the provision for income tax of $3.2
million. SkillSoft reported net income of $1.4 million, or $0.01 per basic and
diluted share, for the second quarter of fiscal 2005. The fiscal 2005 second
quarter results included restatement expenses of $0.9 million, or $0.01 per
basic and diluted share, primarily related to costs incurred in connection with
the re-filing of statutory tax returns as a result of the restatement of the
historical SmartForce financial statements and charges for the ongoing SEC
investigation. Fiscal 2005 second quarter results included the following
non-cash charges totaling $1.7 million, or $0.02 per basic and diluted share:
$2.7 million for amortization of intangible assets and deferred compensation
expense and a credit for the non-cash portion of the provision for income tax of
$1.0 million.
The Company's effective tax rate decreased from 27.1% in the fiscal 2006 first
quarter to 15.5% in the fiscal 2006 second quarter. This decrease is primarily
due to the fact that the $19.5 million insurance settlement is not taxable,
offset in part by the increase in the fiscal 2006 financial targets discussed
below.
"We are encouraged by our performance in the first half of fiscal 2006. Our
results for the first half of fiscal 2006, even excluding the $19.5 million
insurance settlement gain, came in ahead of the revenue and EPS ranges we
forecasted. Our better than forecasted performance was attributable to our core
business, without a substantial contribution from our recently released new
products and our emerging telesales distribution strategy. The performance in
our business gives us the confidence to set our financial expectations higher
for our 2006 fiscal year," said Chuck Moran, President and Chief Executive
Officer. "We look forward to a continued stable market environment in the second
half of this fiscal year which will allow our new products and distribution
strategies the time needed to gain market acceptance and contribute to our
growth in the future," commented Moran.
The decrease in gross margin to 88% in the fiscal 2006 second quarter compared
to 90% in the fiscal 2005 second quarter was due mainly to a higher mix of
royalty-bearing content in the fiscal 2006 second quarter due to growth of the
Referenceware product line. Research and development expenses decreased to $10.2
million in the fiscal 2006 second quarter compared to $12.6 million in the
fiscal 2005 second quarter due primarily to $2.3 million of purchased technology
included in the fiscal 2005 second quarter results and savings realized as the
result of the reorganization of the content development organization completed
in the fiscal 2005 fourth quarter. These decreases were partially offset by $0.4
million for ongoing software development support of the Dialogue product line
and $0.5 million for severance costs associated with a realignment of the
Company's software development operation in the United States, Canada, and
Ireland. Sales and marketing expenses decreased to $20.7 million in the fiscal
2006 second quarter from $22.7 million in the fiscal 2005 second quarter. This
decrease was primarily due to the expense reduction resulting from the asset
sale of SmartCertify, the Company's retail IT certification business, at the end
of the fiscal 2006 first quarter, which was partially offset by the costs of the
Perspectives customer marketing event shifting from the first quarter in the
prior year to the second quarter this year along with the ongoing incremental
expenses to support the new Dialogue product line, new telesales distribution
operation and additional investment in the Books 24x7 sales force. General and
administrative expenses increased to $6.7 million in the fiscal 2006 second
quarter compared to $6.2 million the fiscal 2005 second quarter primarily due to
an increase in expenses related to legal, tax, and other service fees, which
were partially offset by the expense reduction resulting from the asset sale of
SmartCertify at the end of the fiscal 2006 first quarter.
SkillSoft had approximately $71.2 million in cash, cash equivalents, short-term
investments, restricted cash and long-term investments as of July 31, 2005
compared to $64.9 million as of January 31, 2005. The $71.2 million does not
reflect the final payment of $15.25 million for the 2002 securities class action
settlement, which is now expected to be paid in the second half of fiscal 2006.
SkillSoft's increase in cash, cash equivalents, restricted cash and investments
of $6.3 million as of July 31, 2005 reflects cash provided by operations of
$30.8 million in the six months ended July 31, 2005, which includes the receipt
of $19.5 million from the insurance settlement of the 2002 securities class
action lawsuit. Operating cash flow was offset in part by purchases of equipment
and capitalized software development costs of $4.9 million in the six months
ended July 31, 2005. During the six months ended July 31, 2005, the Company
spent approximately $20.2 million to repurchase approximately 5.7 million
outstanding shares under its current shareholder-authorized share repurchase
program. Through July 31, 2005, including shares repurchased in fiscal 2005, the
Company has spent approximately $22.8 million to repurchase approximately 6.1
million outstanding shares under this program.
In order to adequately assess the Company's collection efforts, taking into
account the seasonality of the Company's business, the Company believes that it
is most useful to compare current period days sales outstanding (DSOs) to the
prior year period. Given the quarterly seasonality of bookings, the deferral
from revenue of subscription billings may increase or decrease the DSOs on
sequential quarterly comparisons.
SkillSoft's DSOs were in the targeted range for the fiscal 2006 second quarter.
On a net basis, which considers only receivable balances for which revenue has
been recorded, DSOs were 10 days in the
fiscal 2006 second quarter as compared to 9 days in the year ago period and 14
days in the first quarter of fiscal 2006. On a gross basis, which considers all
items billed as receivables, DSOs were 84 days in the fiscal 2006 second quarter
compared to 77 days in the year ago quarter and 81 days in the first quarter of
fiscal 2006.
FISCAL 2006 OUTLOOK
As a result of the Company's financial performance and insurance settlement in
the first half of fiscal 2006 ended July 31, 2005, the Company is raising its
full year fiscal 2006 revenue and earnings targets. The Company is now targeting
a revenue range of $208 million to $212 million and a net income range of $30.0
million to $34.0 million, or $0.29 to $0.33 per basic and diluted share, for
fiscal 2006 as a whole, compared to the previously targeted revenue range of
$200 million to $206 million and a targeted net income range of $8.0 million to
$13.0 million, or $0.08 to $0.12 per basic and diluted share. Of the increase of
$21 million to $22 million in the Company's net income forecast for fiscal 2006,
$19.5 million is accounted for by the final settlement with the Company's
insurance carriers regarding the 2002 securities class action lawsuit and
related legal fees.
For the third quarter of fiscal 2006 ending October 31, 2005, the Company
currently anticipates revenue to be in the range of $51.0 to $53.0 million. This
revenue range reflects the impact of the declining quarterly deferred revenue
recognition associated with the SmartCertify asset sale completed at the end of
the fiscal 2006 first quarter. The Company currently anticipates net income for
the fiscal 2006 third quarter to be between $2.0 and $4.0 million, or $0.02 to
$0.04 per basic and diluted share.
The Company's forecasted net income excludes foreign exchange gains or losses
and potential restructuring charges, as well as the potential impact of any
future legal settlements, acquisitions or divestitures, including potential
non-recurring acquisition related expenses and the amortization of any purchased
intangibles and deferred compensation charges resulting from an acquisition
transaction. The net income outlook also excludes the effect of a public
offering or other financing arrangements that could impact outstanding shares
and thereby the Company's EPS calculation.
SkillSoft is presenting its net income outlook without these items (for both
fiscal 2006 and the third quarter of fiscal 2006) because it is currently unable
to estimate the amount of the excluded items and it believes that this presents
investors with meaningful information about the Company's projected operating
performance for fiscal 2006.
CONFERENCE CALL
In conjunction with the release, management will conduct a conference call on
Thursday, September 1, 2005 at 8:30 a.m. ET to discuss the Company's fiscal 2006
second quarter and fiscal 2006 outlook. Chuck Moran, President and Chief
Executive Officer, and Tom McDonald, Chief Financial Officer, will host the
call.
To participate in the conference call, local and international callers can dial
(973) 935-2408. The live conference call will be available via the Internet by
accessing the SkillSoft Web site at www.skillsoft.com. Please go to the Web site
at least fifteen minutes prior to the call to register, download and install any
necessary audio software.
A replay will be available from 12:01 p.m. ET on September 1, 2005 until 11:59
p.m. ET on September 7, 2005. The replay number is (973) 341-3080, passcode:
6430144. A webcast replay will also be available on SkillSoft's Web site at
www.skillsoft.com.
ABOUT SKILLSOFT
SkillSoft is a leading provider of comprehensive e-learning content and
technology products for business and IT professionals within global enterprises.
SkillSoft's multi-modal learning solutions
support and enhance the speed and effectiveness of both formal and informal
learning processes and integrate SkillSoft's in-depth content resources,
learning management system, virtual classroom technology and support services.
Content offerings include SkillSoft's business, IT, desktop and compliance
courseware collections and BusinessPro(TM), ITPro(TM), OfficeEssentials(TM),
FinancePro(TM), EngineeringPro(TM), GovEssentials(TM), ExecSummaries(TM) and
ExecBlueprints(TM) collections from Books24x7(R). SkillSoft's complementary
technologies include SkillPort(R), the company's learning management system with
its powerful Search-and-Learn(TM) technology and premium add-on modules, and
SkillSoft(R) Dialogue(TM) virtual classroom, a tool that allows customers to
create and deliver effective blended learning programs using custom content and
off-the-shelf learning resources. For more information, visit
http://www.skillsoft.com.
SkillSoft, the SkillSoft logo, Ahead of the Learning Curve, SkillPort,
Search-and-Learn, SkillChoice, Books24x7, Referenceware, ITPro, BusinessPro,
OfficeEssentials, GovEssentials, EngineeringPro, FinancePro, ExecSummaries,
ExecBlueprints, Express Guide and Dialogue are trademarks or registered
trademarks of SkillSoft PLC in the United States and certain other countries.
All other trademarks are the property of their respective owners.
SkillSoft courseware content described herein is for information purposes only
and is subject to change without notice. SkillSoft has no obligation or
commitment to develop or deliver any future release, upgrade, feature,
enhancement or function described in this press release except as specifically
set forth in a written agreement.
This release includes information that constitutes forward-looking statements
made pursuant to the safe harbor provision of the Private Securities Litigation
Reform Act of 1995. Any such forward-looking statements involve risk and
uncertainties that could cause actual results to differ materially from those
indicated by such forward-looking statements. Factors that could cause or
contribute to such differences include competitive pressures, changes in
customer demands or industry standards, adverse economic conditions, loss of key
personnel, litigation and other risk factors disclosed under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Future Operating Results" in SkillSoft's Annual Report on Form 10-K
for the fiscal year ended January 31, 2005 and its Form 10-Q for the quarterly
period ended April 30, 2005, as filed with the Securities and Exchange
Commission. The forward-looking statements provided by the Company in this press
release represent the Company's views as of September 1, 2005. The Company
anticipates that subsequent events and developments may cause the Company's
views to change. However, while the Company may elect to update these
forward-looking statements at some point in the future, the Company specifically
disclaims any obligation to do so. These forward-looking statements should not
be relied upon as representing the Company's views as of any date subsequent to
the date of this release.
###
SKILLSOFT PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
-------- --------
2005 2004 2005 2004
---- ---- ---- ----
Revenues $ 53,604 $ 50,625 $ 106,931 $ 103,442
Cost of revenues 6,318 5,257 12,152 10,335
------------- ------------- ------------- -------------
Gross profit 47,286 45,368 94,779 93,107
Operating expenses:
Research and development 10,190 12,639 20,059 22,083
Selling and marketing 20,718 22,664 44,748 47,026
General and administrative 6,735 6,182 13,011 12,236
Legal settlements (19,500) -- (19,500) --
Amortization of stock-based compensation 220 300 457 648
Amortization of intangible assets and FAS 86 assets 2,307 2,390 4,553 4,812
Restructuring (116) 175 587 322
Restatement:
SEC investigation 834 779 1,084 1,103
Professional fees - restatement of SmartForce
historical financial statements -- 136 -- 250
------------- ------------- ------------- -------------
Total operating expenses 21,388 45,265 64,999 88,480
Other income / (expense), net 495 (32) 385 (211)
Interest income / (expense), net 310 241 605 364
Loss on sale of component, net -- -- (681) --
------------- ------------- ------------- -------------
Income before provision for income taxes 26,703 312 30,089 4,780
Provision for / (benefit from) income taxes - cash 542 (79) 676 62
Provision for / (benefit from) income taxes - non-cash 3,217 (966) 4,002 158
------------- ------------- ------------- -------------
Net income $ 22,944 $ 1,357 $ 25,411 $ 4,560
============= ============= ============= =============
Net income, per share, basic $ 0.22 $ 0.01 $ 0.24 $ 0.04
============= ============= ============= =============
Basic weighted average common shares outstanding 103,796,060 105,421,510 104,362,838 104,304,852
============= ============= ============= =============
Net income, per share, diluted $ 0.22 $ 0.01 $ 0.24 $ 0.04
============= ============= ============= =============
Diluted weighted average common shares outstanding 104,222,841 110,555,106 104,895,595 110,647,070
============= ============= ============= =============
PRO FORMA:
Legal settlements - insurance proceeds (19,500) -- (19,500) --
------------- ------------- ------------- -------------
Pro forma net income $ 3,444 $ 1,357 $ 5,911 $ 4,560
============= ============= ============= =============
Pro forma net income, per share, basic $ 0.03 $ 0.01 $ 0.06 $ 0.04
============= ============= ============= =============
Basic weighted average common shares outstanding 103,796,060 105,421,510 104,362,838 104,304,852
============= ============= ============= =============
Pro forma net income, per share, diluted $ 0.03 $ 0.01 $ 0.06 $ 0.04
============= ============= ============= =============
Diluted weighted average common shares outstanding 104,222,841 110,555,106 104,895,595 110,647,070
============= ============= ============= =============
* The Company is providing pro forma financial measures as the Company
believes that these figures are helpful in allowing individuals to more
accurately assess the Company's operations and provide individuals with
additional information to more readily compare the Company's results over
multiple periods.
SKILLSOFT PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JULY 31, 2005 JANUARY 31, 2005
------------- ----------------
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and short-term investments $ 65,188 $ 54,927
Restricted cash 5,823 994
Accounts receivable, net 48,893 87,030
Prepaid expenses and other current assets 18,474 22,659
-------- --------
Total current assets 138,378 165,610
Property and equipment, net 10,033 9,137
Goodwill 98,962 103,576
Acquired intangible assets, net 12,866 16,171
Long-term investments 209 8,943
Other assets 56 60
-------- --------
Total assets $260,504 $303,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,317 $ 5,361
Accrued expenses 48,942 66,995
Deferred revenue 110,962 140,008
-------- --------
Total current liabilities 163,221 212,364
Total long-term liabilities 4,440 6,214
Total stockholders' equity 92,843 84,919
-------- --------
Total liabilities and stockholders' equity $260,504 $303,497
======== ========
SKILLSOFT PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JULY 31,
--------
2005 2004
---- ----
Cash flows from operating activities:
Net income $ 25,411 $ 4,560
Adjustments to reconcile net income to net
cash used in operating activities---
Stock-based compensation 457 648
Depreciation and amortization 2,596 2,385
Amortization of acquired intangibles and FAS 86 assets 4,553 4,812
Provision for bad debts (623) 34
Loss on disposition 681 --
Provision for income taxes - non-cash 4,002 158
Changes in current assets and liabilities, net of acquisitions
Accounts receivable 38,117 30,421
Prepaid expenses and other current assets 3,755 7,762
Accounts payable (2,685) (1,663)
Accrued expenses (including long-term):
Accrued merger (2,997) (2,282)
Accrued restructuring (6,353) (84)
Accrued other (8,097) (38,749)
Deferred revenue (27,990) (20,884)
-------- --------
Net cash provided by / (used in) operating activities 30,827 (12,882)
Cash flows from investing activities:
Purchases of property and equipment (3,628) (4,682)
Purchases of FAS 86 assets (1,247) --
Purchases of investments (11,948) (21,768)
Maturity of investments 14,425 26,208
Sale of investments 248 --
Release/(designation) of restricted cash (4,840) 24,600
-------- --------
Net cash (used in) / provided by investing activities (6,990) 24,358
Cash flows from financing activities:
Exercise of stock options 457 17,112
Proceeds from employee stock purchase plan 1,336 1,675
Payments to acquire treasury stock (20,244) --
-------- --------
Net cash (used in) / provided by financing activities (18,451) 18,787
Effect of exchange rate changes on cash and cash equivalents (1,015) (313)
-------- --------
Net increase in cash and cash equivalents 4,371 29,950
Cash and cash equivalents, beginning of period 34,906 42,866
-------- --------
Cash and cash equivalents, end of period $ 39,277 $ 72,816
======== ========