Fourth Quarter Revenue of $56.4 Million and Annual Revenue of $212.3 Million in Line With Estimates; Fiscal 2006 Outlook Reaffirmed
NASHUA, N.H., March 30 /PRNewswire-FirstCall/ -- SkillSoft PLC (Nasdaq: SKIL), a leading provider of content resources and complementary technologies for integrated enterprise learning, today announced financial results for its fiscal fourth quarter and year ended January 31, 2005.
Fiscal 2005 Fourth Quarter Results
The Company reported total revenue of $56.4 million for the fourth quarter of the fiscal year ended January 31, 2005 (fiscal 2005), which represented a 3% increase over the $54.8 million reported in the fourth quarter of the fiscal year ended January 31, 2004 (fiscal 2004). Gross margin was 90% for its fiscal 2005 fourth quarter compared to 92% for its fourth quarter of fiscal 2004. The Company's net loss was $9.5 million, or $0.09 per share, for its fiscal 2005 fourth quarter. The fiscal 2005 fourth quarter net loss includes the following items: $0.3 million, or $0.00 per share, of restatement related charges; $12.2 million, or $0.12 per share, of restructuring charges related to the restructuring (as previously discussed in our fiscal 2005 third quarter earnings release) of our content development organization, including costs incurred for severance payments to terminated employees in Dublin and the U.S., facilities consolidation resulting from excess space following the workforce reductions and the completion of the merger-related work, and the repayment of employment and facilities-related grants previously awarded to the Company by agencies in Ireland; $0.8 million, or $0.01 per share, of restructuring charges related to the closing of our German office, which involved terminating all staff and vacating all leased facilities; $2.6 million, or $0.02 per share, for amortization of intangibles and deferred compensation; and, $0.1 million, or $0.00 per share, of non-cash income tax provision.
"We feel confident that we are currently looking at all options to improve shareholder value in this difficult market," commented Chuck Moran, President and Chief Executive Officer. "Our focus for fiscal 2006 will be executing on our new product and telesales distribution initiatives to provide new revenue streams while we work to increase our combined renewal rate on existing customers over our fiscal 2005 level."
The decrease in gross margin to 90% in the fiscal 2005 fourth quarter compared to 92% for the fiscal 2004 fourth quarter was due mainly to a higher mix of royalty bearing content. Research and development expenses remained flat at $13.0 million in the fiscal 2005 fourth quarter compared to the fiscal 2004 fourth quarter. Sales and marketing expenses increased to $24.0 million in the fiscal 2005 fourth quarter from $20.1 million in the fiscal 2004 fourth quarter. This increase was primarily due to higher commission expense resulting from higher bookings in the fiscal 2005 fourth quarter compared to the fiscal 2004 fourth quarter and additional expenses associated with building the direct sales channel for the Company's newly introduced virtual classroom offering, SkillSoft Dialogue. General and administrative expenses decreased to $6.5 million in the fiscal 2005 fourth quarter compared to $7.9 million for the fiscal 2004 fourth quarter. This decrease was primarily the result of lower legal and professional service fees. Restatement-related expenses decreased to $0.3 million in the fiscal 2005 fourth quarter as compared to $1.4 million in the fiscal 2004 fourth quarter. The decrease was mainly due to a decline in professional fees related to the restatement of the SmartForce historical financial statements and to a lesser extent to a decline in SEC investigation charges. Restructuring expenses increased to $13.0 million in the fiscal 2005 fourth quarter as compared to $27,000 in the fiscal 2004 fourth quarter. This expense increased mainly due to the reorganization of the content development organization.
SkillSoft had approximately $64.9 million in cash, cash equivalents, short-term investments, long-term investments and restricted cash as of January 31, 2005 compared to $86.7 million as of January 31, 2004. The decrease was primarily due to the payments of litigation settlements of approximately $6.0 million for the final installment of the 1998 class action lawsuit, approximately $22.0 million for the final installment of the NETg lawsuit, and approximately $15.25 million for the first installment of the 2002 class action lawsuit. These decreases in cash were partially offset by cash receipts from employee stock option and stock purchase plan activity of approximately $21.0 million.
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 2005 fourth quarter. On a net basis, which considers only receivable balances for which revenue has been recorded, DSOs were 18 days in the fiscal 2005 fourth quarter as compared to 13 days in the year ago period and 12 days in the third quarter of fiscal 2005. On a gross basis, which considers all items billed as receivables, DSOs were 142 days in the fiscal 2005 fourth quarter compared to 122 days in the year ago quarter and 81 days in the third quarter of fiscal 2005.
Fiscal 2005 Full Year Results
For the fiscal year ended January 31, 2005, SkillSoft reported revenue of $212.3 million as compared to $193.5 million in the fiscal year ended January 31, 2004. The net loss for fiscal 2005 was $0.8 million, or $0.01 per share, compared to the net loss of $113.3 million, or $1.13 per share, for fiscal 2004.
The fiscal 2005 net loss includes the following items: $2.5 million, or $0.02 per share, of restatement-related charges; $13.4 million, or $0.13 per share, of restructuring related charges; $10.8 million, or $0.10 per share, for amortization of intangibles and deferred compensation; and $0.3 million, or $0.00 per share, of non-cash income tax provision.
Gross margin remained flat at 90% for fiscal 2005 compared to fiscal 2004. Research and development expenses decreased to $45.6 million for fiscal 2005 from $53.6 million for fiscal 2004. This decrease was due primarily to our completion of the initiative for the acceleration of content and platform improvements undertaken in fiscal 2004. Sales and marketing expenses increased to $93.5 million for fiscal 2005 from $87.5 million for fiscal 2004. This increase was primarily due to higher commission expense resulting from higher bookings in fiscal 2005 compared to fiscal 2004 and additional expenses associated with building the direct sales channel for the Company's newly introduced virtual classroom offering, SkillSoft Dialogue. General and administrative expenses decreased to $25.2 million for fiscal 2005 compared to $27.9 million for fiscal 2004. This decrease was primarily the result of lower legal and professional service fees. Restatement-related expenses decreased to $2.5 million for fiscal 2005 as compared to $16.4 million for fiscal 2004. The decrease was mainly due to the completion of the restatement of the SmartForce historical financial statements in the third quarter of fiscal 2004. Restructuring expenses increased to $13.4 million for fiscal 2005 as compared to $1.9 million for fiscal 2004. This increase was mainly due to the reorganization of the content development organization.
At January 31, 2005, the Company had deferred revenue of $140 million and a 12-month non-cancelable revenue backlog of approximately $168 million (which includes deferred revenue and committed contracts), which represents approximately 83% of the mid-point of the Company's revenue target for fiscal 2006 of $200 to $206 million. Deferred revenue met the Company's expectations due to strong billings in the fiscal 2005 fourth quarter. The revenue associated with these billings, relating primarily to acquired and expanded product offerings for multi-modal learning (MML) customers, resellers and product/service bundle customers, conform to the SkillSoft subscription-based revenue recognition model, which increases future revenue.
For each of the previous four quarters in fiscal 2005, the Company's average annual contract length ranged from 18 to 24 months with an average of 19 months in the fourth quarter of fiscal 2005. For each of these four quarters, the average annual contract value ranged from $69,000 to $237,000 with an average of $135,000 in the fourth quarter of fiscal 2005. SkillSoft's average total contract value for the fiscal 2005 fourth quarter was $214,000. The Company's dollar weighted renewal rate declined to 48% for the fiscal year ended January 31, 2005 compared to 65% for the fiscal year ended January 31, 2004. This decrease was due mainly to competitive pricing pressures. Customers upgraded their annual dollar commitments to the Company by an average of 120% for the fiscal year ended January 31, 2005 compared to 121% for the fiscal year ended January 31, 2004. The combined dollar renewal rate for the fiscal year ended January 31, 2005 was 91%. This new 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. This new combined dollar renewal rate metric is what SkillSoft will report going forward on an annual basis in place of the customer upgrade rate and expiring customer renewal rate metrics previously reported.
SmartCertify Subsidiary Pending Sale Transaction
The Company, as previously stated in its March 14, 2005 press release, has entered into a non-binding letter of intent with respect to the sale of its retail IT certification business, SmartCertify. In the event the transaction is not consummated as anticipated, the Company will shut down its SmartCertify operations. The Company continues to work on finalizing sale terms with the potential purchaser. The Company is currently evaluating whether an impairment exists at January 31, 2005 relating to the SmartCertify business. If the Company concludes an impairment exists at that date, the related charge will be reflected in the Company's fiscal 2005 results when reported in form 10-K. The impact on the 2006 earnings of the sale or shutdown of the operations will be announced when the transaction is finalized or the alternative course of action is determined.
In connection with the Company's fiscal 2005 year-end financial statements audit, the Company is testing its internal controls over financial reporting, as required by the Sarbanes-Oxley (SOX) rules that went into effect in November 2004. Such testing and related evaluation is continuing, therefore the audit cannot be considered complete until the filing of the Company's annual report on form 10-K, currently expected to be filed no later than April 18, 2005
Fiscal 2006 Outlook
Based on the above fiscal 2005 results, the Company's fiscal 2006 outlook, as set forth in its press release issued on March 14, 2005, remains unchanged. A copy of this release may be viewed in the Investor Relations section of the Company's Web site at http://www.skillsoft.com.
In conjunction with this release, management will conduct a conference call today, Wednesday, March 30, at 9:00 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 973-935-2408. The live conference call will be available via the Internet by accessing the SkillSoft Web site at http://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 30, until 11:59 p.m. ET on April 7, 2005. The replay number is 973-341-3080, passcode: 5889997. A webcast replay will also be available on SkillSoft's Web site at http://www.skillsoft.com.
SkillSoft is a leading provider of comprehensive e-learning content and technology products for business and IT professionals within the Global 2000. 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 platform, virtual classroom technology and support services.
Content offerings include SkillSoft's business and IT skills courseware collections; ITPro(TM), BusinessPro(TM), FinancePro(TM), EngineeringPro(TM), OfficeEssentials(TM) and ExecSummaries(TM) Referenceware(R) collections by Books24x7(R); and health and safety compliance courseware by GoTrain. SkillSoft's complementary technologies include SkillPort(R), the Company's learning management platform with its powerful Search-and-Learn capabilities, and SkillSoft(R) Dialogue(TM), the Company's newly introduced virtual classroom offering with associated tools for blended learning solutions. 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, EngineeringPro, ExecSummaries, Express Guide and SkillSoft Dialogue are trademarks or registered trademarks of SkillSoft PLC in the United States and certain other countries.
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 Quarterly Report on Form 10-Q for the quarter ended October 31, 2004, 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 30, 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
Three Months Ended Years Ended
January 31, January 31,
2005 2004 2005 2004
Revenues $56,351 $54,761 $212,300 $193,475
Cost of revenues 5,792 4,163 21,724 18,397
Gross profit 50,559 50,598 190,576 175,078
development 12,989 13,024 45,575 53,627
marketing 24,019 20,128 93,486 87,532
administrative 6,538 7,852 25,162 27,883
Legal settlements - 31,500 - 93,750
compensation 245 349 1,191 1,986
intangible assets 2,373 2,574 9,575 10,072
Restructuring 13,046 27 13,361 1,862
SEC investigation 363 706 2,182 1,898
Professional fees -
financial statements (16) 670 320 14,468
expenses 59,557 76,830 190,852 293,078
Other income /
(expense), net (528) 514 (692) 786
Interest income /
(expense), net 273 106 754 787
Gain on sale of
investments, net - - - 3,682
income taxes (9,253) (25,612) (214) (112,745)
Provision for income
taxes - cash 168 - 305 529
Provision for income
taxes - non-cash 100 - 326 -
Net loss $(9,521) $(25,612) $(845) $(113,274)
Net loss, per share,
basic $(0.09) $(0.25) $(0.01) $(1.13)
Basic weighted average
outstanding 105,972,880 101,230,885 105,133,730 100,115,159
Net loss, per share,
diluted $(0.09) $(0.25) $(0.01) $(1.13)
average common shares
outstanding 105,972,880 101,230,885 105,133,730 100,115,159
January 31, January 31,
Cash, cash equivalents
investments $54,927 $61,340
Restricted cash 994 25,044
Accounts receivable, net 87,030 72,775
and other current assets 22,659 24,759
Total current assets 165,610 183,918
Property and equipment, net 9,137 6,447
Goodwill 122,844 125,878
assets, net 16,171 25,745
Long term investments 8,943 266
Other assets 60 124
Total assets $322,765 $342,378
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $5,361 $6,588
Accrued expenses 66,995 92,117
Deferred revenue 140,008 134,328
Total current liabilities 212,364 233,033
Total long term liabilities 6,214 23,587
Total stockholders' equity 104,187 85,758
Total liabilities and
stockholders' equity $322,765 $342,378
SOURCE SkillSoft PLC
/CONTACT: Tom McDonald, Chief Financial Officer of SkillSoft, +1-603-324-
3000 ext. 4232; or Investors: Michael Polyviou, or Peter Schmidt, both of
Financial Dynamics, +1-212-850-5748, for SkillSoft/
/Web site: http://www.skillsoft.com /