First Quarter Revenue of $52.8 Million; EPS of $0.03
Cash Balance at $106.5 Million
Maintains Full Year Fiscal 2005 Financial Targets While Revising Quarterly Targets
NASHUA, N.H., June 3 /PRNewswire-FirstCall/ -- SkillSoft PLC (Nasdaq: SKIL), a leading provider of enterprise e-learning courseware and Referenceware(R) for business and IT professionals, today announced financial results for its fiscal first quarter ended April 30, 2004.
First Quarter Results
The Company reported total revenue of $52.8 million for the first quarter ended April 30, 2004 of the fiscal year ending January 31, 2005 (fiscal 2005), which represented a 21% increase over the $43.6 million reported in the fiscal 2004 first quarter. Gross margin was 90% for its fiscal 2005 first quarter compared to 87% for its first quarter of fiscal 2004.
The Company's net income was $3.2 million, or $0.03 per basic and diluted share, for its fiscal 2005 first quarter. First quarter net income includes restructuring and other non-recurring expenses of $0.6 million, or $0.01 per basic and diluted share, for costs incurred in connection with the re-filing of statutory tax returns as a result of the restatement of the historical SmartForce PLC financial statements, charges for the ongoing SEC investigation and costs associated with international restructuring activities. Non-cash charges included in the fiscal 2005 first quarter were $2.8 million, or $0.03 per diluted share, for amortization expense and the non-cash provision for income tax of $1.1 million, or $0.01 per diluted share. SkillSoft reported a net loss of $12.6 million, or $0.13 per basic and diluted share, for the fiscal 2004 first quarter which included restructuring and other non-recurring expenses of $6.6 million, or $0.07 per basic and diluted share, primarily for costs incurred due to the restatement of the historical SmartForce PLC financial statements.
"Our review of the sales forecasts for the remainder of the fiscal year indicates we will achieve our planned total annual booking number, although it will be more weighted to the second half of the year. In light of this shift in bookings we felt it prudent to factor that into our quarterly estimates going forward. With the benefit of having many of the operational distractions put behind us in fiscal 2004, we have and will continue to fully focus on sales growth opportunities and continue to explore ways to leverage our cost structure in the most efficient manner practicable," commented Chuck Moran, President and Chief Executive Officer.
Gross margins were 90% for the fiscal 2005 first quarter compared to 87% in the fiscal 2004 first quarter mainly due to efficiencies achieved as part of the Merger. Research and development expenses decreased to $9.4 million in the fiscal 2005 first quarter compared to $12.8 million in the fiscal 2004 first quarter due to the completion of merger-related research and development and incremental research and development regarding the Company's initiative for content and platform improvements. Sales and marketing expenses increased to $24.4 million in the fiscal 2005 first quarter from $23.3 million in the fiscal 2004 first quarter. This increase was primarily due to increased commission expense associated with higher revenues in the fiscal 2005 first quarter. General and administrative expenses decreased to $6.1 million in the fiscal 2005 first quarter compared to $8.9 million in the fiscal 2004 first quarter mainly due to lower litigation costs. Restructuring and other non-recurring charges decreased to $0.6 million in the fiscal 2005 first quarter as compared to $6.6 million in the fiscal 2004 first quarter. This expense decreased primarily due to the completion of the restatement of the SmartForce PLC historical financial statements in the fiscal year ended January 31, 2004. The expense reflected in the fiscal 2005 first quarter relates primarily to the re-filing of statutory tax returns as a result of the restatement of the SmartForce PLC historical financial statements, charges for the ongoing SEC investigation and costs associated with international restructuring activities.
SkillSoft had approximately $106.5 million in cash, cash equivalents and short-term investments as of April 30, 2004 compared to $86.4 million as of January 31, 2004 which reflects a strong cash collection first quarter and delay in paying the initial 2002 securities class action settlement payment of $16.0 million to the second quarter ending July 31, 2004.
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 2005 first quarter. On a net basis, which considers only receivable balances for which revenue has been recorded, DSOs were 12 days in the fiscal 2005 first quarter as compared to 14 days in the year ago period and 13 days in the fourth quarter of fiscal 2004. On a gross basis, which considers all items billed as receivables, DSOs were 76 days in the fiscal 2005 first quarter compared to 99 days in the year ago quarter and 122 days in the fourth quarter of fiscal 2004.
FISCAL 2005 OUTLOOK
For the fiscal year ending January 31, 2005 (fiscal 2005), the Company's annual outlook, as set forth in its press release issued on March 12, 2004, remains unchanged. The Company anticipates revenue to be in the range of $221 to $225 million. The Company continues to anticipate its Generally Accepted Accounting Principles (GAAP) net income for fiscal 2005 to be between $21.0 million and $24.0 million or $0.20 to $0.22 per basic and diluted share.
The Company experienced a shortfall in bookings in the first quarter and upon review of its sales pipeline for the remainder of fiscal 2005 the timing of bookings for the year now appears to be more weighted to the second half of the year. The first quarter booking shortfall did not materially affect first quarter revenue but will impact future quarterly revenue because of the Company's subscription revenue recognition model. The Company anticipates that the stronger bookings outlook for the second half of the fiscal year will offset weakness in the first half. As a result of these factors, the Company is adjusting its quarterly revenue and earnings targets for fiscal 2005 while maintaining the annual revenue and earnings targets. The Company's updated quarterly revenue targets for the second, third and fourth quarters of fiscal 2005 are $49.0 to $52.0 million, $52.0 to $56.0 million, and $64.0 to $67.0 million, respectively. This compares to the previous targets of $52.5 to $53.5 million, $55.0 to $56.0 million, and $62.0 to $63.0 million, respectively. The Company now anticipates its quarterly earnings per basic and diluted share for the second, third and fourth quarters of fiscal 2005 will be $0.01 to $0.025, $0.04 to $0.055, and $0.105 to $0.125, respectively. This compares to the previous targets of $0.04 to $0.044, $0.05 to $0.06, $0.08 to $0.09, respectively.
Separately, the Company now anticipates that annual capital expenditures are expected to be in the range of $7.5 to $8.5 million as compared to the previous range of $5.0 to $6.0 million due to additional hardware server requirements needed to support increased Skillport platform usage.
The Company is currently consolidating space in Ireland to fit the current needs of the business. When completed, this will result in a one-time charge to earnings and is expected to reduce the Company's operating expenses on a going-forward basis. In addition, the Company continues to work on resolving the insurance recovery matter pertaining to the 2002 securities class action lawsuit settled in the fourth quarter of fiscal 2004. Any insurance recovery less prior litigation resolution related costs would result in a one-time gain to earnings. Neither the facility consolidation nor the insurance recovery is reflected in the revised 2005 outlook.
The Company's outlook excludes the impact of potential restructuring charges, as well as 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 excludes the effect of financing arrangements that could impact outstanding shares and thereby the Company's EPS outlook.
In conjunction with the release, management will conduct a conference call on Thursday, June 3, 2004 at 5:00 p.m. ET to discuss the Company's fiscal 2005 first quarter and fiscal 2005 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 (703) 639-1212. 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 8:00 p.m. ET on June 3, 2004 until 11:59 p.m. ET on June 10, 2004. The replay number is (703) 925-2533, passcode: 480571. A webcast replay will also be available on SkillSoft's Web site at http://www.skillsoft.com.
SkillSoft is a leading global provider of e-learning content and technology products for business and information technology (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 courseware, learning management platform technology and support services.
Content offerings include SkillSoft's Business Skills Library and IT Skills and Certification Library; ITPro, BusinessPro, FinancePro, and OfficeEssentials Referenceware(R) collections by Books24x7; and health and safety compliance courseware by GoTrain.
For more information, visit http://www.skillsoft.com
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 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 risk factors disclosed under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in SkillSoft's Annual Report on Form 10-K for the year ended January 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 June 3, 2004. 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 Statement of Operations (Unaudited) Three Months Ended April, 30 2004 2003 Revenues $52,817 $43,613 Cost of revenues 5,078 5,497 Gross profit 47,739 38,116 Operating expenses: Research and development 9,444 12,782 Selling and marketing 24,362 23,347 General and administrative 6,054 8,934 Amortization of stock-based compensation 348 490 Amortization of intangible assets 2,422 2,406 Restructuring and other non-recurring items 585 6,552 Total operating expenses 43,215 54,511 Other income / (expense), net (179) 4 Interest income, net 123 363 Gain on sale of investments, net - 3,682 Income / (loss) before provision for income taxes 4,468 (12,346) Provision for income taxes - cash 141 229 Provision for income taxes - non-cash 1,124 - Net income / (loss) $3,203 $(12,575) Net income / (loss), per share, basic $0.03 $(0.13) Basic weighted average common shares outstanding 103,163,380 99,599,477 Net income / (loss), per share, diluted $0.03 $(0.13) Diluted weighted average common shares outstanding 110,392,610 99,599,477 SkillSoft PLC Condensed Consolidated Balance Sheet (Unaudited) April 30, 2004 January 31, 2004 ASSETS CURRENT ASSETS: Cash, cash equivalents and short term investments $81,480 $61,340 Restricted cash 25,000 25,044 Accounts receivable, net 44,577 72,775 Prepaid expenses and other current assets 21,215 24,759 Total current assets 172,272 183,918 Property and equipment, net 7,163 6,447 Goodwill 124,675 125,878 Acquired intangible assets, net 23,323 25,745 Long term investments 261 266 Other assets 73 124 Total assets $327,767 $342,378 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $5,061 $6,588 Accrued expenses 78,094 92,117 Deferred revenue 118,349 134,328 Total current liabilities 201,504 233,033 Total long term liabilities 22,510 23,587 Total stockholders' equity 103,753 85,758 Total liabilities and shareholders' equity $327,767 $342,378
Company - Tom McDonald
Chief Financial Officer of SkillSoft PLC
603-324-3000, ext. 4232
Investors - Michael Polyviou, or Kirin Smith
Both of Financial Dynamics for SkillSoft PLC
"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.