Reports Fiscal Third Quarter Revenue Of $30.4 Million, EPS Loss of $(0.20)
Files Form 10-Q With the Securities and Exchange Commissiom
The Company reported total revenue of $30.4 million for the third quarter of the fiscal year ending January 31, 2003 (fiscal 2003), which represented a 172% year-over-year increase from $11.2 million in the fiscal 2002 third quarter. Gross margin was 83% for its fiscal 2003 third quarter compared to 94% for its fiscal 2003 second quarter.
The Company's net loss was $(15.4) million, or $(0.20) per basic and diluted share for its fiscal 2003 third quarter. For the year ago period, the Company had a net loss of $(3.8) million, or $(0.10) per basic and diluted share. Net loss excluding amortization of intangibles, restructuring charges and other non-recurring items was $(6.5) million, or $(0.09) per basic and diluted share for the period ended October 31, 2002.
Chuck Moran, President and CEO commented, "We are steadfast in our belief that as a result of SkillSoft's powerful offering, we are positioned to deliver one of the most comprehensive and highest quality content-focused e-learning solutions in the market. The breadth of our product offering and expanded sales force combined with our strong customer relationships provide for a greater opportunity to build upon our market position."
By way of background, SkillSoft Corporation merged into a subsidiary of SmartForce PLC on September 6, 2002, with SmartForce PLC as the acquiring entity for legal and tax purposes. Subsequent to the merger, SmartForce PLC changed its name to SkillSoft PLC. For accounting purposes, the merger was accounted for as a reverse acquisition, with SkillSoft Corporation as the accounting acquirer. Accordingly, the historical financial statements of SkillSoft Corporation have become the historical financial statements of the Company, and the operating results of SmartForce are included in the operating results of the Company only from September 6, 2002, the effective date of the merger.
Continued NASDAQ National Market Listing
On December 17, 2002, SkillSoft received a NASDAQ staff determination letter indicating that it did not comply with the requirements for continued listing set forth in Marketplace Rule 4310(c)(14) as a result of its failure to file with the Securities and Exchange Commission its quarterly report on Form 10-Q for the quarter ended October 31, 2002 within the stipulated time period. Accordingly, its American Depositary Shares were subject to delisting from the NASDAQ National Market. The Company is hopeful that since it has now filed its quarterly report on Form 10-Q for the period in question, its ADSs will continue to trade on the NASDAQ National Market
Restatement of Historical SmartForce Financial Statements
On November 19, 2002, the Company announced that, in preparing the closing balance sheet of SmartForce PLC as of September 6, 2002, the Company discovered certain accounting issues relating to the historical financial statements of SmartForce PLC. The Company announced its intent to restate the SmartForce PLC financial statements for 1999, 2000, 2001 and the first two quarters of 2002. The Company, with the assistance of its independent auditors and outside consultants, continues to devote significant resources to determining the process of restating these financial statements. However, the Company currently believes that significant additional time and effort will be required to complete this process. The filing of the amendment to the Company's Current Report on Form 8-K relating to the SkillSoft-SmartForce merger, which must include historical and pro forma financial statements of the merged companies, cannot be made until this process is completed. The historical financial statements of SmartForce that are being restated are required for the amendment to the Form 8-K filing relating to the merger. The restatement should not have any adverse effect on the Company's business outlook for future fiscal periods.
For the fourth quarter of fiscal year 2003 ending January 31, 2003, revenue is expected to be in the range of $39.5 million to $40.0 million, and EPS is expected to be a loss of approximately $(0.06) excluding amortization of intangibles, restructuring charges and other non-recurring items. The Company will update its fiscal 2004 (ending January 31, 2004) guidance when it reports results for the fourth quarter and fiscal year ending January 31, 2003.
SkillSoft's days sales outstanding (DSO) has increased above the Company's previously stated targeted range, both on a net and a gross basis due to the addition of SmartForce's accounts receivable. On a net basis, which considers only receivable balances for which revenue has been recorded, DSO was 71 days in the fiscal 2003 third quarter, as compared to 41 days in the year ago period, and 33 days in the fiscal 2003 second quarter. On a gross basis, which considers all items billed as receivables, DSO was 162 days in the fiscal third quarter of 2003, compared to 101 days in the year ago quarter, and 100 days in the second quarter of fiscal 2003. As expected, the gross DSO numbers, on a sequential quarter basis, increased due to the addition of a partial quarter of revenue and the accounts receivable balances from SmartForce. Deferred revenue, on a sequential quarter basis, increased by 250% while the accounts receivable balances increased 223%, indicating that much of the gross DSO increase is in deferred revenue. The net DSO increase is attributable to the longer aging of the SmartForce accounts receivable as of October 31, 2002 pushing the Company higher than its historical target range (45 to 60 days). The Company will work to bring the merged companies into our historical DSO target range over the next four quarters.
In order to adequately assess the Company's collection efforts, due to the seasonality of the Company's business, DSO analysis must compare current period results to the results of the prior year period. Given the quarterly seasonality of bookings, the deferral from revenue of subscription billings may increase or decrease the DSO on subsequent quarterly comparisons.
Strong Balance Sheet
The Company's cash and cash equivalents at October 31, 2002 totaled $141.5 million. Together with long-term investments maturing over one year of $1.6 million, this brings the Company's cash and investment balance to $143.1 million. The Company notes that, independent of the results from operations, significant merger-related accrued expenses to be paid for over the coming months will cause cash to go down. The Company has no long-term debt.
SkillSoft will be hosting a conference call to discuss earnings on Tuesday, January 21, 2003, at 10:00AM EST. To participate in the conference call, local and international callers can dial 952-556-2804. 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 approximately one hour after the call, until 11:59 p.m. EDT on [TBD]. The replay number is 703-326-3020, passcode: 6390718. A webcast replay will also be available on the Company's web site at http://www.skillsoft.com.
SkillSoft is a leading provider of e-learning courseware and referenceware for business and IT professionals. SkillSoft products and services are designed to accelerate the ability of today’s workforce to master the business and technology skills required for competitive success. The company currently has more than 2,800 corporate customers worldwide and more than 4.5 million licensed users.
SkillSoft focuses on meeting the comprehensive business skills and information technology learning needs of professionals in Global 5000 organizations through a comprehensive range of content-focused, e-learning solutions, including:
Business Skills Library: More than 1,600 courseware and simulation titles encompassing professional effectiveness, management/leadership, project management, sales & customer-facing skills, business strategy/operations, finance, human resources, safety/health and financial services industry. Courses feature strong visual design; a focus on instructional objectives at the application and analysis levels; learner interactivity and reinforcement through RolePlays, SkillSimulations, and case studies; and pre- and post-course assessments with prescriptive learning capabilities.
IT Skills and Certification Library: More than 2,800 course titles encompassing software development, operating systems and server technologies, Internet and network technologies, enterprise database systems, web design, and desktop computer skills. The IT library also supports more than 40 certification programs.
ITPro and Business Pro Referenceware: More than 2,500 unabridged IT and business books and reports are available to online subscribers through SkillSoft’s subsidiary, Books24x7. A unique, patent-pending search engine gives subscribers the ability to perform multi-level searches.
SkillSoft customers include organizations such as: First Union, Clarica (Canada), Fluor Corporation, Verizon, U.S. Army, Deloitte Consulting, Raytheon, IBM, Internal Revenue Service, Lockheed Martin, Microsoft, Army National Guard, Dell Computers, Qwest, Department of Transportation, NEC America, British Telecom and Wells Fargo.
SkillSoft, SkillPort, RolePlay, Search-and-Learn, e-Learning for the Knowledge Economy, NetUniversity, and Accelerated Path are trademarks and/or servicemarks of SkillSoft Corporation. Books24x7.com and Referenceware are servicemarks of Books24x7, Inc. All brand names, trademarks, or registered trademarks are the property of their respective holders.
Safe Harbor: 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 any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include difficulties in integrating the organizations of SmartForce and SkillSoft, competitive pressures, changes in customer demands or industry standards, adverse economic conditions, loss of key personnel, litigation and other matters disclosed under the heading "Risk Factors" in the SkillSoft’s most recent Quarterly Report on Form 10-Q and its proxy statement/prospectus dated August 5, 2002, each as filed with the Securities and Exchange Commission. The forward-looking information provided in this press release represents the company's estimates as of December 2002. We anticipate that subsequent events and developments will cause the company's estimates to change. However, while the company may elect to update this forward-looking financial information at some point in the future, the company specifically disclaims any obligation to do so. This forward-looking information should not be relied upon as representing the company's estimates of its future financial performance as of any date subsequent to the date of this release.