Press Releases & Coverage

SkillSoft Reports Third Quarter Fiscal 2007 Results Including Revenue of $57.1 Million; EPS of $0.07; SkillSoft Raises Full Year Fiscal 2007 Financial Targets

NASHUA, N.H., Nov. 28 /PRNewswire-FirstCall/ -- SkillSoft PLC (Nasdaq: SKIL), a leading provider of e-learning and performance support solutions, today announced financial results for its third fiscal quarter ended October 31, 2006.

Fiscal 2007 Third Quarter Results

The Company reported total revenues of $57.1 million for the third quarter ended October 31, 2006 of the fiscal year ending January 31, 2007 (fiscal 2007), which represented a 6% increase over the $53.9 million reported in the third quarter ended October 31, 2005 of the fiscal year ended January 31, 2006 (fiscal 2006). Substantially all of the Company's revenues in fiscal 2007 are from its Multi-Modal Learning segment, including $55.9 million for the third quarter of fiscal 2007, a 10% increase over the $51.0 million of Multi-Modal Learning segment revenue reported in the third quarter of fiscal 2006. Remaining revenues came from the Company's Retail Certification segment as a result of the amortization of the deferred revenue retained by the Company following the sale of certain assets related to SmartCertify in the fiscal 2006 first quarter. Gross margin was 88% for both the fiscal 2007 and fiscal 2006 third quarters.

The Company's net income was $7.1 million, or $0.07 per basic and diluted share, for the fiscal 2007 third quarter. Significant non-cash charges included in the fiscal 2007 third quarter results consisted of $1.2 million for amortization of intangible assets, stock-based compensation expense of $0.8 million and the non-cash provision for income tax of $3.8 million. SkillSoft reported net income of $5.7 million, or $0.06 per basic and diluted share, for the third quarter of fiscal 2006. Significant non-cash charges included in the fiscal 2006 third quarter results consisted of $2.3 million for amortization of intangible assets, $0.2 million for deferred compensation expense and the non-cash provision for income tax of $3.9 million. The Company's effective tax rate remained at 36.5% for the nine months ended October 31, 2006. The Company's effective cash tax rate included in the overall effective tax rate is approximately 3.7% for such period.

"We are encouraged by the customer activity level we are experiencing in the second half of fiscal 2007. Our Multi-Modal Learning segment revenue (which excludes our Retail Certification segment) for the first nine months of fiscal 2007 grew approximately 10% compared to the same period of fiscal 2006. The first nine months performance and the increased customer activity level gives us the confidence to set our revenue and earnings expectations higher for the full fiscal year," said Chuck Moran, President and Chief Executive Officer. "We are excited about the growth opportunity inherent in the recently announced NETg acquisition agreement and the value such acquisition will bring to our customers and shareholders, once consummated. We expect to continue to aggressively review opportunities to add new product lines or technologies that would also contribute to our revenue growth in the future," commented Moran.

Research and development expense, which included $0.2 million of stock- based compensation expense, increased to $10.0 million in the fiscal 2007 third quarter from $9.2 million in the fiscal 2006 third quarter. This increase was primarily due to an increase of $0.7 million of additional salary and benefits associated with increased headcount and $0.1 million of additional depreciation expense compared to last year's fiscal 2006 third quarter. Sales and marketing expenses increased to $22.0 million in the fiscal 2007 third quarter from $20.5 million in the fiscal 2006 third quarter. This increase was primarily due to an increase of $0.1 million of stock-based compensation expense, $0.9 million of additional investment in worldwide sales headcount, $0.3 million of additional investment in SkillSoft marketing programs, and $0.3 million of direct sales force headcount additions targeted at generating new customer opportunities. General and administrative expenses increased to $6.8 million in the fiscal 2007 third quarter compared to $5.5 million in the fiscal 2006 third quarter. This increase was primarily due to $0.4 million of stock-based compensation expense, an increase of $0.5 million in business systems software development expense and an increase of $0.3 million in property tax and payroll benefit expense. Restatement charges related to the ongoing SEC investigation were $0.1 million in the fiscal 2007 third quarter as compared to $0.5 million in the fiscal 2006 third quarter.

SkillSoft had approximately $111.6 million in cash, cash equivalents, short-term investments, restricted cash and long-term investments as of October 31, 2006 compared to $78.6 million as of January 31, 2006. This increase primarily reflects cash provided by operations of $32.0 million and cash provided by stock option exercises and employee stock purchase plan activity of $4.5 million in the nine months ended October 31, 2006. These increases were partially offset by purchases of property and equipment of $4.0 million. The cash balance as of October 31, 2006 includes funds reserved for the final payment of the 2002 securities class action settlement of $15.3 million, which is expected to be paid in the next twelve months.

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 DSOs were in the targeted range for the fiscal 2007 third quarter. On a net basis, which considers only receivable balances for which revenue has been recorded, DSOs were 7 days in the fiscal 2007 third quarter as compared to 10 days in the year ago period and 7 days in the second quarter of fiscal 2007. On a gross basis, which considers all items billed as receivables, DSOs were 77 days in the fiscal 2007 third quarter as compared to 76 days in the year ago quarter and 79 days in the second quarter of fiscal 2007.

FISCAL 2007 OUTLOOK

Based on the reported third quarter performance and the guidance for the fourth quarter provided below, the Company is raising its full year fiscal 2007 revenue and earnings targets. The Company is now targeting a revenue range of $223.5 million to $225.0 million and a net income range of $21.0 million to $22.0 million, or $0.20 to $0.21 per basic and diluted share, for fiscal 2007 as a whole, compared to the previously targeted revenue range of $218.0 million to $222.0 million and a targeted net income range of $17.0 million to $20.0 million, or $0.17 to $0.20 per basic and diluted share.

For the fourth quarter of fiscal 2007 ending January 31, 2006, the Company currently anticipates revenue to be in the range of $56.0 to $57.5 million. The Company currently anticipates net income for the fiscal 2007 fourth quarter to be between $5.0 and $6.0 million, or $0.05 to $0.06 per basic and diluted share. The fiscal 2007 fourth quarter projected net income includes an increase in tax and audit fees of approximately $.03 to $.04 million and approximately $0.6 million of additional non-cash 123R stock option compensation expense associated with the new executive option grants discussed below that were not previously included in the Company's forecasted results of operations.

The Company's Compensation Committee is reviewing and anticipates awarding new executive option grants in the fourth quarter of fiscal 2007 to five executives. All previous options grants for these five executives are fully vested, with the most recent grants, dated August 16, 2002, becoming fully vested in the third quarter of fiscal 2007 ending October 31, 2006 per their terms (standard four year vesting). The number of shares expected to be covered by such options is in the range of 4.5 to 5.0 million with a four year vesting schedule. The non-cash financial impact is expected to be approximately $1.0 million of 123R expense per quarter following the date of the award. The Company therefore anticipates that it will have 109 million to 110 million diluted shares outstanding for earnings per share (EPS) calculation purposes for the fourth quarter ending January 31,2007 (fiscal 2007).

The Company's projected net income in fiscal 2007 (including the fourth 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 fourth 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.

Conference Call

In conjunction with the release, management will conduct a conference call on Tuesday, November 28, 2006 at 8:30 a.m. EST to discuss the Company's fiscal 2007 third quarter operating results and fiscal 2007 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) 582-2852. 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. EST on November 28, 2006 until 11:59 p.m. EST on December 5, 2006. The replay number is (973) 341-3080, passcode: 8149443. A webcast replay will also be available on SkillSoft's Web site at www.skillsoft.com.

About SkillSoft

SkillSoft PLC (Nasdaq: SKIL) is a leading provider of e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. SkillSoft enables companies to maximize business performance through a combination of comprehensive e-learning content, online information resources, flexible learning technologies and support services.

Content offerings include business, IT, desktop and compliance courseware collections, as well as complementary content assets such as SkillSim(TM) simulations, KnowledgeCenter(TM) portals and online mentoring services. The Books24x7(R) division offers online access to more than 10,000 unabridged IT and business books in its Referenceware(R) collections, as well as book summaries, executive reports and best practices. Technology offerings include the SkillPort(R) learning management system, Search-and-Learn(R), SkillSoft(R) Dialogue(TM) virtual classroom, SkillView(R) competency management software and the Enterprise Learning Connection Suite(TM), a set of platform-neutral modules that can be used to create learning programs tailored to business needs.

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.

SkillSoft, the SkillSoft logo, Ahead of the Learning Curve, SkillPort, Search-and-Learn, SkillChoice, Books24x7, Referenceware, ITPro, BusinessPro, OfficeEssentials, GovEssentials, EngineeringPro, FinancePro, AnalystPerspectives 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.

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 "Risk Factors" in SkillSoft's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2006 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 November 28, 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         Nine Months Ended
                                  October 31,                October 31,
                               2006         2005          2006         2005

    Revenues                  $57,135      $53,901      $167,521     $160,833
    Cost of revenues            6,846        6,509        19,962       18,662

      Gross profit             50,289       47,392       147,559      142,171

    Operating expenses:
      Research and development 10,047        9,169        29,913       29,321
      Selling and marketing    21,983       20,546        68,375       65,641
      General and
       administrative           6,844        5,504        20,948       18,531
      Legal settlements             -            -             -      (19,500)
      Amortization of
       intangible assets
       and FAS 86 assets        1,152        2,285         5,443        6,838
      Restructuring                25          226            47          813
      Restatement - SEC
       investigation              114          507           434        1,591

    Total operating expenses   40,165       38,237       125,160      103,235

    Other income /
     (expense), net               (35)         341           (67)         727
    Interest income             1,137          511         3,011        1,213
    Interest expense              (69)        (243)         (205)        (341)
    Loss on sale of component,
     net                            -           73             -         (608)

      Income before
       provision for
       income taxes            11,157        9,837        25,138       39,927

    Provision for income
     taxes - cash                 274          303           931          980
    Provision for income
     taxes - non-cash           3,799        3,851         8,245        7,853

    Net income                 $7,084       $5,683       $15,962      $31,094


    Net income, per share,
     basic                      $0.07        $0.06         $0.16        $0.30

    Basic weighted
     average common
     shares outstanding   101,763,654  100,663,757   101,446,427  103,055,159

    Net income, per share,
     diluted                    $0.07        $0.06         $0.15        $0.30

    Diluted weighted
     average common
     shares outstanding   104,724,685  101,540,690   103,887,852  103,726,562

    Pro Forma:

      Legal settlements -
       insurance proceeds           -            -             -      (19,500)

    Pro forma net income       $7,084       $5,683       $15,962      $11,594


    Pro forma net income,
     per share, basic           $0.07        $0.06         $0.16        $0.11

    Basic weighted
     average common
     shares outstanding   101,763,654  100,663,757   101,446,427  103,055,159

    Pro forma net income,
     per share, diluted         $0.07        $0.06         $0.15        $0.11

    Diluted weighted
     average common
     shares outstanding   104,724,685  101,540,690   103,887,852  103,726,562


   * 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.


    (1) The following summarizes the departmental allocation of the
        stock-based compensation

      Cost of revenues
       (includes $14, $0,
       $31 and $0 of
       FAS123R
       compensation
       expense,
       respectively)              $14           $-           $31           $-
      Research and
       development
       (includes $150,
       $0, $725 and $0 of
       FAS123R
       compensation
       expense,
       respectively)              151           47           818          140
      Selling and
       marketing
       (includes $269,
       $0, $1,379 and $0
       of FAS123R
       compensation
       expense,
       respectively)              269          164         1,646          511
      General and
       administrative
       (includes $403,
       $0, $1,640 and $0
       of FAS123R
       compensation
       expense,
       respectively)              404            8         1,657           24
                                 $838         $219        $4,152         $675



                                SkillSoft PLC
                    Condensed Consolidated Balance Sheets
                                 (Unaudited)

                                                  October 31,      January 31,
                                                    2006              2006
    ASSETS

    CURRENT ASSETS:
        Cash, cash equivalents and short-term
         investments                              $102,846           $73,339
        Restricted cash                              4,704             5,039
        Accounts receivable, net                    47,641            85,681
        Prepaid expenses and other current assets   13,705            22,006

    Total current assets                           168,896           186,065

        Property and equipment, net                  9,742            10,231
        Goodwill                                    85,092            93,929
        Acquired intangible assets, net              3,268             8,711
        Long-term investments                        4,017               230
        Deferred tax assets                            694               694
        Other assets                                   375                42

    Total assets                                  $272,084          $299,902


    LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES:

        Accounts payable                            $3,453            $3,819
        Accrued expenses                            41,449            53,795
        Deferred revenue                            98,077           136,699

    Total current liabilities                      142,979           194,313

    Total long-term liabilities                      2,694             3,317

    Total stockholders' equity                     126,411           102,272

    Total liabilities and stockholders' equity    $272,084          $299,902



                                SkillSoft PLC
               Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)

                                                        Nine Months Ended
                                                          October 31,
                                                    2006              2005
    Cash flows from operating activities:

        Net income
        Adjustments to reconcile net income
         to net cash provided by operating
           activities ---                          $15,962           $31,094
        Stock-based compensation                     4,152               676
        Depreciation and amortization                4,502             3,790
        Amortization of acquired intangibles
         and FAS 86 assets                           5,443             6,838
        Provision for bad debts                       (477)             (772)
        Loss on disposition                              -               683
        Provision for income taxes - non-cash        8,245             7,853
        Changes in current assets and liabilities,
         net of acquisitions
             Accounts receivable                    39,354            41,381
             Prepaid expenses and other current
              assets                                 8,498             6,815
             Accounts payable                         (403)           (2,644)
             Accrued expenses (including long-term):
                  Accrued merger                      (451)           (3,705)
                  Accrued restructuring               (364)           (6,918)
                  Accrued other                    (12,375)          (12,023)
             Deferred revenue                      (40,043)          (36,547)

        Net cash provided by operating activities   32,043            36,521

    Cash flows from investing activities:

        Purchases of property and equipment         (3,989)           (4,157)
        Purchases of FAS 86 assets                       -            (1,247)
        Purchases of investments                   (74,843)          (14,848)
        Maturity of investments                     39,810            21,596
        Sale of investments                              -               248
        Release/(designation) of restricted cash       335            (4,415)

        Net cash used in investing activities      (38,687)           (2,823)

    Cash flows from financing activities:

        Exercise of stock options                    1,977               550
        Proceeds from employee stock purchase plan   2,561             2,210
        Payments to acquire treasury stock               -           (22,000)

        Net cash provided by / (used in)
         financing activities                        4,538           (19,240)

        Effect of exchange rate changes on cash
         and cash equivalents                          562            (1,305)

        Net (decrease) / increase in cash
         and cash equivalents                       (1,544)           13,153
        Cash and cash equivalents, beginning
         of period                                  51,937            34,906

        Cash and cash equivalents, end of period   $50,393           $48,059
                                          
SOURCE  SkillSoft PLC
    -0-                             11/28/2006
    /CONTACT:  Tom McDonald, Chief Financial Officer of SkillSoft,
+1-603-324-3000, x4232, or Investors: Michael Polyviou or Peter Schmidt, both
of Financial Dynamics for SkillSoft PLC, +1-212-850-5748/
    /Web site:  http://www.skillsoft.com/
                                          
 
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding SkillSoft Corporation's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.