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 FOURTH QUARTER AND FISCAL 2006 RESULTS;
FOURTH QUARTER REVENUE OF $54.7 MILLION AND
ANNUAL REVENUE OF $215.6 MILLION EXCEEDED TARGETS;
REPORTS FINANCIAL TARGETS FOR FISCAL 2007
NASHUA, NH, MARCH 10, 2006 - SkillSoft PLC (NASDAQ: SKIL), a leading provider of
content resources and complementary technologies for integrated enterprise
learning, today announced financial results for its fourth quarter of fiscal
2006 and its fiscal 2006 year ended January 31, 2006.
FISCAL 2006 FOURTH QUARTER RESULTS
The Company reported total revenue of $54.7 million for the fourth quarter of
the fiscal year ended January 31, 2006 (fiscal 2006), which represented a 3%
decrease from the $56.4 million reported in the fourth quarter of the fiscal
year ended January 31, 2005 (fiscal 2005) mainly due to a reduction of
approximately $3.3 million in revenue resulting from the sale of certain assets
of SmartCertify, the Company's retail IT certification business, in the first
quarter of fiscal 2006.
The Company's net income was $5.9 million, or $0.06 per share, for its fiscal
2006 fourth quarter as compared to a net loss of $28.8 million, or $0.27 per
share, for its fiscal 2005 fourth quarter. The fiscal 2006 fourth quarter net
income includes the following items: $0.4 million of restatement related charges
and, $2.5 million for amortization of intangibles and deferred compensation. The
fiscal 2005 fourth quarter net loss includes the following items: $0.3 million
of restatement related charges, $2.6 million for amortization of intangibles and
deferred compensation, a goodwill impairment charge of $19.3 million and, $13.0
million of restructuring related charges, primarily related to the Company's
reorganization of its content development team.
"While we are pleased that we exceeded our revenue and earnings targets for the
fourth quarter and the fiscal year, we believe there is still work to be done.
We continue to look at all options to improve shareholder value in this
challenging market," commented Chuck Moran, President and Chief Executive
Officer. "For fiscal 2007 we will focus on revenue and earnings growth primarily
through the following initiatives: first, new customer acquisition and
continuing to execute on our new product and telesales distribution initiatives
to provide new revenue streams; second, a higher priority approach to produce a
long-term contribution from possible M&A opportunities; and third, establishing
a new shareholder-authorized share repurchase program and continuing to be
opportunistic in repurchasing outstanding shares."
Gross margin was 88% for the Company's fiscal 2006 fourth quarter compared to
90% for its fourth quarter of fiscal 2005. The decrease in gross margin
percentage was due mainly to a higher mix of royalty-bearing content in the
fiscal 2006 fourth quarter due to growth of the Referenceware product line.
Research and development expenses decreased to $9.8 million in the fiscal 2006
fourth quarter compared to $13.0 million in the fiscal 2005 fourth quarter due
primarily to savings realized as the result of the reorganization of the content
development organization completed in the fiscal 2005 fourth quarter and $0.7
million of purchased technology expenses included in the fiscal 2005 fourth
quarter results.
Sales and marketing expenses decreased to $22.6 million in the fiscal 2006
fourth quarter from $24.0 million in the fiscal 2005 fourth quarter. This
decrease was primarily due to the expense reduction resulting from the sale of
certain assets of SmartCertify in the fiscal 2006 first quarter, which was
partially offset by additional investment in the Books 24x7 sales force, the
ongoing incremental expenses to support the new Dialogue product line and the
new telesales distribution operation.
General and administrative expenses increased to $7.2 million in the fiscal 2006
fourth quarter compared to $6.5 million the fiscal 2005 fourth quarter primarily
due to a $0.5 million payment to Howard Edelstein, a director of the Company, in
recognition of Mr. Edelstein's contributions in connection with the Company's
settlements of its litigation with NETg and its securities class action
litigation.
FISCAL 2006 FULL YEAR RESULTS
For the fiscal year ended January 31, 2006, SkillSoft reported revenue of $215.6
million, which represented a 2% increase over the $212.3 million reported in the
fiscal year ended January 31, 2005. Fiscal 2006 revenue includes approximately
$5.8 million less revenue from SmartCertify than was included in fiscal 2005
revenue due to the sale of certain assets of SmartCertify in the first quarter
of fiscal 2006. The net income for fiscal 2006 was $37.0 million, or $0.36 per
share, compared to the net loss of $20.1 million, or $0.19 per share, for fiscal
2005.
The fiscal 2006 net income includes the following items: $2.0 million of
restatement related charges; $0.6 million of restructuring related charges;
$19.5 million benefit in the second quarter of fiscal 2006 for the insurance
recovery related to the settlement of the 2002 securities class action lawsuit;
$10.0 million for amortization of intangibles and deferred compensation; and
$7.9 million of non-cash income tax provision. The fiscal 2005 net loss includes
the following items: $2.5 million of restatement related charges; $13.4 million
of restructuring related charges; a goodwill impairment charge of $19.3 million;
$10.8 million for amortization of intangibles and deferred compensation; and
$0.3 million of non-cash income tax provision.
Gross margin was 88% for fiscal 2006 compared to 90% for fiscal 2005. The
decrease in gross margin percentage was due mainly to a higher mix of royalty
bearing content in fiscal 2006 due to growth of the Referenceware product line.
Research and development expenses decreased to $39.0 million for fiscal 2006
from $45.6 million for fiscal 2005 due primarily to $3.8 million of purchased
technology included in fiscal 2005 and savings realized in fiscal 2006 as the
result of the reorganization of the content development organization completed
in the fiscal 2005 fourth quarter.
Sales and marketing expenses decreased to $87.8 million for fiscal 2006 from
$93.5 million for fiscal 2005. This decrease was primarily due to the expense
reduction resulting from the SmartCertify sale at the end of the fiscal 2006
first quarter, which was partially offset by additional investment in the Books
24x7 sales force, the ongoing incremental expenses to support the new Dialogue
product line and the new telesales distribution operation.
General and administrative expenses increased to $25.7 million for fiscal 2006
compared to $25.2 million for fiscal 2005. This increase was primarily due to a
$0.5 million payment to Howard Edelstein, a director of the Company, in
recognition of Mr. Edelstein's contributions in connection with the Company's
settlements of its litigation with NETg and its securities class action
litigation.
Restructuring expenses decreased to $0.6 million for fiscal 2006 as compared to
$13.4 million for fiscal 2005. This decrease was mainly due to fiscal 2005
charges related to the reorganization of the content development organization in
the fiscal 2005 fourth quarter. The expense in fiscal 2006 mainly relates to the
facility shutdown and severance costs associated with the restructuring of its
SmartCertify business unit in the United States and the closing of its Ireland
SmartCertify sales office in the fiscal 2006 first quarter.
Restatement-related expenses decreased to $2.0 million for fiscal 2006 as
compared to $2.5 million for fiscal 2005. The decrease was mainly due to a
decrease in legal expenses relating to the ongoing SEC investigation.
At January 31, 2006, the Company had deferred revenue of approximately $137
million and a 12-month non-cancelable revenue backlog of approximately $171
million (which includes deferred revenue and committed contracts), which
represents approximately 80% of the mid-point of the Company's revenue target
for fiscal 2007 of $212.0 to $218.0 million, which is discussed further below.
Deferred revenue of approximately $137 million at January 31, 2006 compares to
approximately $140 million at January 31, 2005 and reflects a reduction of
approximately $10.6 million of deferred revenue due to the SmartCertify sale at
the end of the fiscal 2006 first quarter, as well as an increase in quarterly
billing and extended payment contracts in the fiscal 2006 fourth quarter
compared to the fiscal 2005 fourth quarter. The 12-month non-cancelable revenue
backlog of approximately $171 million at January 31, 2006 compares to
approximately $168 million of non-cancelable revenue backlog at January 31,
2005.
The Company's average contract length as of January 31, 2006 was unchanged at 19
months as compared to January 31, 2005. The Company's 12-month average contract
value as of January 31, 2006 increased to $146,000 as compared to $135,000 as of
January 31, 2005. SkillSoft's average total contract value as of January 31,
2006 increased to $231,000 as compared to $214,000 as of January 31, 2005.
The Company's combined dollar renewal rate increased to 100% for the fiscal year
ended January 31, 2006 compared to 91% for the fiscal year ended January 31,
2005. This increase was due mainly to a higher dollar renewal rate. The combined
dollar renewal rate metric combines the dollar renewal rate on expiring
customers and the dollar upgrade rate on all existing customers (committed and
expiring) to provide a single metric that compares existing customer contract
dollars spent with SkillSoft year over year.
SkillSoft had approximately $78.6 million in cash, cash equivalents, short-term
investments, restricted cash and long-term investments as of January 31, 2006
compared to $64.9 million as of January 31, 2005. This increase primarily
reflects cash provided by operations of $42.2 million in the twelve months ended
January 31, 2006, which includes the receipt of $19.5 million from the insurance
recovery related to the settlement of the 2002 securities class action lawsuit.
Operating cash flow was offset in part by purchases of equipment, primarily
investments in the Company's hosting infrastructure, and capitalized software
development costs of $8.1 million in the twelve months ended January 31, 2006.
During the twelve months ended January 31, 2006, the Company spent approximately
$22.0 million to repurchase approximately 6.1 million outstanding shares under
its current shareholder-authorized share repurchase program. To date, including
shares repurchased in fiscal 2005, the Company has spent approximately $24.5
million to repurchase approximately 6.5 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 of
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 fourth quarter.
On a net basis, which considers only receivable balances for which revenue has
been recorded, DSOs were 16 days in the fiscal 2006 fourth quarter as compared
to 18 days in the year ago period and 10 days in the third quarter of fiscal
2006. On a gross basis, which considers all items billed as receivables, DSOs
were 144 days in the fiscal 2006 fourth quarter compared to 142 days in the year
ago quarter and 76 days in the third quarter of fiscal 2006.
FISCAL 2007 OUTLOOK
For fiscal 2007, the Company is currently anticipating revenue to be in the
range of $212.0 to $218.0 million. This revenue range reflects approximately
$9.0 million less SmartCertify revenue in fiscal 2007 than in fiscal 2006 as a
result of the SmartCertify sale in the first quarter of fiscal 2006. In
addition, the SmartCertify sale resulted in a reduction of approximately $5.0
million of first quarter bookings. The Company expects to replace the
SmartCertify bookings with bookings from other sources; however, the replacement
will occur later than the first quarter and therefore due to the subscription
nature of our revenue recognition will not contribute the same revenue dollars
in fiscal 2007 as was recognized in fiscal 2006.
The Company's effective tax rate in fiscal 2007 is expected to increase to 31%
to 35% compared to the fiscal 2006 effective tax rate of approximately 20%. This
increase is primarily due to the fact that the $19.5 million insurance recovery
related to the settlement of the 2002 securities class action lawsuit recorded
in fiscal 2006 was not taxable resulting in the lower effective tax rate for
fiscal 2006. The effective cash tax rate range for fiscal 2007 included in the
above fiscal 2007 effective tax rate is expected to be approximately 3% to 4%.
The Company currently anticipates that it will achieve net income for fiscal
2007 of between $16.0 and $20.0 million, or $0.16 to $0.20 per basic and diluted
share.
The most significant non-cash items included in fiscal 2007 projected net income
are the following: (1) amortization of intangible assets and deferred
compensation of approximately $6.0 to $8.0 million; (2) a non-cash tax provision
of approximately $6.0 to $8.0 million; and (3) stock option expense of
approximately $3.0 to $4.0 million.
The Company expects gross margin to be in the range of 87% to 89% of revenue for
fiscal 2007. Research and development expenses are expected to be in the range
of $40.0 to $41.5 million. Sales and marketing expenses are expected to be in
the range of $86.0 to $88.0 million. General and
administrative expenses are expected to be in the range of $26.0 to $27.0
million. Amortization of intangible assets and deferred compensation is expected
to be in the range of approximately $6.0 million to $8.0. Provision for income
taxes is expected to be in the range of $7.0 to $10.0 million, or approximately
31% to 35% of net income. Only $1.0 to $2.0 million of this amount is expected
to be represented by actual cash tax payments. The remainder of the provision
($6.0 to $8.0 million) is non-cash due to the utilization of net operating loss
carry forwards acquired in the merger. The non-cash portion of the provision for
income tax will reduce goodwill on the Company's balance sheet. Interest income
is expected to be in the range of $0.7 to $0.8 million. Additionally, capital
expenditures are expected to be in the range of $6.0 to $8.0 million, and
depreciation expense is expected to be in the range of $6.0 to $8.0 million.
For the first quarter of fiscal 2007 ending April 30, 2006, the Company
currently anticipates revenue to be in the range of $53.0 to $55.0. This revenue
range reflects approximately $3.7 million less SmartCertify revenue in the first
quarter of fiscal 2007 than in the first quarter of fiscal 2006 as a result of
the SmartCertify sale in the first quarter of fiscal 2006. In addition, the
SmartCertify sale resulted in a reduction of approximately $5.0 million of first
quarter bookings. The Company expects to replace the SmartCertify bookings with
bookings from other sources; however, the replacement will occur later than the
first quarter and therefore due to the subscription nature of our revenue
recognition will not contribute the same revenue dollars in fiscal 2007 as was
recognized in fiscal 2006.
The Company currently anticipates net income for the fiscal 2007 first quarter
to be between $2.0 and $3.0 million, or $0.02 to $0.03 per basic and diluted
share.
The most significant non-cash items included in first quarter fiscal 2007
projected net income are the following: (1) amortization of intangible assets
and deferred compensation of approximately $2.0 to $3.0 million; (2) a non-cash
tax provision of approximately $0.5 to $1.5 million; and (3) stock option
expense of approximately $1.0 to $2.0 million.
The Company's projected net income in fiscal 2007 (including the first quarter
of fiscal 2007) does not reflect any foreign exchange gains or losses. The
fiscal 2007 earnings outlook also does not take into account the potential
negative impact of the resolution of litigation matters, potential restructuring
charges, or the potential impact of any future 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 outlook also does not take into
account the effect of a public offering or other financing arrangements that
could impact outstanding shares and thereby the Company's EPS outlook.
SkillSoft is presenting projected net income (for both fiscal 2007 and the first
quarter of fiscal 2007) without the impact of those items because it is
currently unable to estimate the amount of those items and it believes that
presenting net income without taking them into account presents investors with
meaningful information about the Company's projected operating performance for
fiscal 2007.
The Company anticipates that it will have 102 million to 104 million diluted
shares outstanding for earnings per share (EPS) calculation purposes in fiscal
2007.
CONFERENCE CALL
In conjunction with this release, management will conduct a conference call
today, Friday, March 10, at 8: 30 a.m. ET to discuss the Company's operating
performance. 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
973-935-2981. 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 March 10, until 11:59 p.m. ET
on March 17, 2006. The replay number is 973-341-3080, passcode: 7126677. 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 October 31, 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 March 10, 2006. 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 FISCAL YEAR ENDED
JANUARY 31, JANUARY 31,
------------------------------ ------------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Revenues $ 54,734 $ 56,351 $ 215,567 $ 212,300
Cost of revenues 6,645 5,792 25,307 21,724
------------- ------------- ------------- -------------
Gross profit 48,089 50,559 190,260 190,576
Operating expenses:
Research and development 9,804 12,987 38,985 45,575
Selling and marketing 22,635 24,019 87,764 93,486
General and administrative 7,238 6,538 25,745 25,162
Legal settlements/(recoveries) -- -- (19,500) --
Amortization of stock-based compensation 217 247 892 1,191
Amortization of intangible assets and FAS 86 assets 2,275 2,373 9,113 9,575
Impairment charge -- 19,268 -- 19,268
Restructuring (171) 13,046 641 13,361
Restatement:
SEC investigation 397 363 1,988 2,182
Professional fees - restatement of SmartForce
historical financial statements -- (17) -- 320
------------- ------------- ------------- -------------
Total operating expenses 42,395 78,824 145,628 210,120
Other income/(expense), net 37 (556) 155 (692)
Interest income, net 476 302 1,348 754
------------- ------------- ------------- -------------
Income/(loss) before provision for income taxes 6,207 (28,519) 46,135 (19,482)
Provision for income taxes - cash 228 169 1,208 305
Provision for income taxes - non-cash 69 100 7,922 326
------------- ------------- ------------- -------------
Net income/(loss) $ 5,910 $ (28,788) $ 37,005 $ (20,113)
============= ============= ============= =============
Net income/(loss), per share, basic $ 0.06 $ (0.27) $ 0.36 $ (0.19)
============= ============= ============= =============
Basic weighted average common shares outstanding 100,706,520 105,972,880 102,473,128 105,133,730
============= ============= ============= =============
Net income/(loss), per share, diluted $ 0.06 $ (0.27) $ 0.36 $ (0.19)
============= ============= ============= =============
Diluted weighted average common shares outstanding 102,438,849 105,972,880 103,352,001 105,133,730
============= ============= ============= =============
SKILLSOFT PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JANUARY 31, 2006 JANUARY 31, 2005
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and short-term investments $ 73,339 $ 54,927
Restricted cash 5,039 994
Accounts receivable, net 85,681 87,030
Prepaid expenses and other current assets 22,006 22,659
-------- --------
Total current assets 186,065 165,610
Property and equipment, net 10,231 9,137
Goodwill 93,929 103,576
Intangible assets, net 8,711 16,171
Long-term investments 230 8,943
Deferred tax assets 694 --
Other assets 42 60
-------- --------
Total assets $299,902 $303,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,819 $ 5,361
Accrued expenses 52,005 66,995
Deferred revenue 136,699 140,008
-------- --------
Total current liabilities 192,523 212,364
Total long-term liabilities 3,317 6,214
Total stockholders' equity 104,062 84,919
-------- --------
Total liabilities and stockholders' equity $299,902 $303,497
======== ========
SKILLSOFT PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FISCAL YEAR ENDED
JANUARY 31,
-----------------------
2006 2005
-------- --------
Cash flows from operating activities:
Net income/(loss) $ 37,005 $(20,113)
Adjustments to reconcile net income to net
cash provided by / (used in) operating activities---
Stock-based compensation 893 1,191
Depreciation and amortization 5,224 4,779
Impairment charge -- 19,268
Amortization of acquired intangibles and FAS 86 assets 9,113 9,575
Provision for bad debts (593) 335
Loss on disposition 585 --
Provision for income taxes - non-cash 7,922 326
Accelerated vesting of unvested stock options 89 --
Changes in current assets and liabilities, net of acquisitions
Accounts receivable 784 (14,062)
Prepaid expenses and other current assets 407 2,406
Accounts payable (1,935) (1,220)
Accrued expenses (including long-term):
Accrued merger (4,124) (3,547)
Accrued restructuring (7,381) 9,284
Accrued other (3,144) (46,595)
Deferred revenue (2,693) 4,743
-------- --------
Net cash provided by/(used in) operating activities 42,152 (33,630)
Cash flows from investing activities:
Purchases of property and equipment (6,423) (7,594)
Purchases of FAS 86 assets (1,652)
Purchases of investments (20,048) (52,456)
Maturity of investments 27,219 42,063
Sale of investments -- --
(Designation)/release of restricted cash (4,045) 24,943
-------- --------
Net cash (used in)/provided by investing activities (4,949) 6,956
Cash flows from financing activities:
Exercise of stock options 848 17,950
Proceeds from employee stock purchase plan 2,210 3,050
Payments to acquire treasury stock (22,000) (2,523)
-------- --------
Net cash (used in)/provided by financing activities (18,942) 18,477
Effect of exchange rate changes on cash and cash equivalents (1,230) 1,174
-------- --------
Net increase in cash and cash equivalents 17,031 (7,023)
Cash and cash equivalents, beginning of year 34,906 41,929
-------- --------
Cash and cash equivalents, end of year $ 51,937 $ 34,906
======== ========