NASHUA, N.H., March 22 /PRNewswire-FirstCall/ -- SkillSoft PLC (Nasdaq: SKIL), a leading provider of e-learning courseware and Referenceware(R) for business and IT professionals, today announced financial results for its fiscal fourth quarter and year ended January 31, 2004.
Fourth Quarter Results
The Company reported total revenue of $54.8 million for the fourth quarter of the fiscal year ended January 31, 2004 (fiscal 2004), which represented a 28% increase over the $42.9 million reported in the fiscal 2003 fourth quarter. Gross margin was 92% for its fiscal 2004 fourth quarter compared to 91% for its fiscal 2004 third quarter and 88% for its fourth quarter of fiscal 2003.
The Company's net income was $6.1 million, or $0.06 per basic and diluted share, for its fiscal 2004 fourth quarter. Fourth quarter net income includes restatement expenses of $1.4 million, or $0.01 per basic and diluted share, for costs incurred in connection with restructuring activities and the restatement of the historical SmartForce PLC financial statements. Expenses that reduced net income also included incremental research and development costs of $2.3 million, or $0.02 per diluted share, related to a Company initiative for content offerings and improvements and platform improvements, and non-cash charges of $4.8 million, or $0.04 per diluted share, for depreciation and amortization expense. SkillSoft reported a net loss of $21.9 million, or $0.22 per diluted share, for its fiscal 2004 third quarter and a net loss of $269.9 million, or $2.71 per basic and diluted share, for the fiscal 2003 fourth quarter.
"Our achievements in 2004 have established the foundation for future profitability and cash flow generation," commented Chuck Moran, President and Chief Executive Officer. "We have entered fiscal 2005 with a lot of positive momentum and we are currently focused on executing our operational plan for fiscal 2005 -- with the benefit of having many of the prior operational distractions put behind us in fiscal 2004."
The improvement in gross margins sequentially from 91% in the quarter ended October 31, 2003 to 92% for the quarter ended January 31, 2004 was due mainly to the mix of royalty and non-royalty bearing products. Research and development expenses decreased to $13.0 million in the fiscal 2004 fourth quarter from $15.2 million in the previous quarter due to the completion of merger-related research and development activities, specifically, the repurposing of SmartForce content, platform and other technologies in order make them compliant with SkillSoft's standards and policies in the quarter ended October 31, 2003. Sales and marketing expenses decreased slightly to $20.1 million in the fiscal 2004 fourth quarter from $20.8 million in the previous quarter. This decrease was primarily due to the lower commission expense resulting from the reconciliation in the fourth quarter of accrued expenses to actual commissions earned. This exercise was performed upon completion of our fourth quarter, which is SkillSoft's largest seasonal booking quarter, when worldwide sales quota attainment can more readily be measured for every salesperson on an annual basis. General and administrative expenses increased to $7.6 million in the fiscal 2004 fourth quarter compared to $6.9 million the previous quarter mainly due to public company costs including legal, audit and Sarbanes-Oxley compliance. Restatement and restructuring related expenses decreased to $1.4 million in the fiscal 2004 fourth quarter as compared to $5.3 million in the previous quarter. This expense decreased primarily because the restatement of the historical SmartForce financial statements was substantially completed in the fiscal 2004 third quarter. The expense reflected in the fourth quarter relates to the 2002 securities class action lawsuits, the SEC investigation related to the restatement and costs related to the restatement of the SmartForce PLC historical financial statements.
SkillSoft had approximately $86 million in cash and investments as of January 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 2004 fourth quarter. On a net basis, which considers only receivable balances for which revenue has been recorded, DSOs were 13 days in the fiscal 2004 fourth quarter as compared to 33 days in the year ago period and 11 days in the third quarter of fiscal 2004. On a gross basis, which considers all items billed as receivables, DSOs were 122 days in the fiscal 2004 fourth quarter compared to 141 days in the year ago quarter and 85 days in the third quarter of fiscal 2004.
Fiscal Year Results
For the fiscal year ended January 31, 2004, SkillSoft reported revenue of $193.5 million as compared to $101.5 million in the fiscal year ended January 31, 2003. The net loss for fiscal 2004 was $81.5 million, or $0.81 per basic and diluted share, compared to the net loss of $284.0 million, or $4.40 per basic and diluted share, for fiscal 2003.
At January 31, 2004, the Company had deferred revenue of $134 million and a 12-month non-cancelable revenue backlog of approximately $170 million (which includes deferred revenue and committed contracts), which represents approximately 76% of the Company's revenue expectation for fiscal 2005. Deferred revenue exceeded the Company's expectations due to improved renewal rates in the fourth quarter as compared to the third quarter, and strong new billing in the fourth quarter. The revenue related to these new billings, relating 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 visibility.
The Company's dollar weighted renewal rate was 65% for the year ended January 31, 2004, compared to 55% for the prior year. The improvement in renewal rates reflects increased customer satisfaction, but still indicates a cautious corporate spending environment and tough competition. Customers upgraded their annual dollar commitment to the Company by an average of 121% for the year ended January 31, 2004, compared to 128% for the prior year.
Fiscal 2005 Outlook
Based on the above fiscal 2004 fourth quarter results, the Company's fiscal 2005 outlook, as set forth in its press release issued on March 12, 2004, remains unchanged.
In conjunction with the release, management will conduct a conference call on Tuesday, March 23, 2004 at 10:00 a.m. ET to discuss the Company's fiscal 2004 fourth quarter and fiscal 2004 results. 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 (706) 634-7038. 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 1:00 p.m. ET on March 23, 2004 until 11:59 p.m. ET on March 30, 2004. The replay number is (706) 645-9291, passcode: 6155782. A webcast replay will also be available on SkillSoft's Web site at 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.
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 matters disclosed under the heading "Future Operating Results" in SkillSoft's Quarterly Report on Form 10-Q for the quarter ended October 31, 2003, 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 22, 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 Twelve Months Ended January 31, January, 31 2004 2003 2004 2003 Revenues $54,761 $42,914 $193,475 $101,470 Cost of revenues 4,163 4,988 18,397 11,548 Gross profit 50,598 37,926 175,078 89,922 Operating expenses: Research and development 13,024 14,218 53,627 29,104 Selling and marketing 20,128 21,107 87,532 52,691 General and administrative 7,602 6,735 27,633 17,914 Litigation settlement -- -- 62,250 -- Amortization of stock- based compensation 349 496 1,986 1,634 Amortization of intangible assets 2,574 2,696 10,072 4,683 Impairment charge -- 250,107 -- 250,107 Restructuring and other non-recurring items 1,403 12,679 18,228 19,286 Total operating expenses 45,080 308,038 261,328 375,419 Other income (expense), net 514 (154) 786 (282) Interest income, net 106 703 786 2,165 Gain on sale of investments, net -- 3,682 Income/(loss) before provision for income taxes 6,138 (269,563) (80,996) (283,614) Provision for income taxes -- 383 528 383 Net income/(loss) $6,138 $(269,946) $(81,524) $(283,997) Net income/(loss), per share, basic $0.06 $(2.71) $(0.81) $(4.40) Basic weighted average common shares outstanding 101,230,885 99,590,000 100,119,931 64,472,000 Net income/(loss), per share, diluted $0.06 $(2.71) $(0.81) $(4.40) Diluted weighted average common shares outstanding 108,146,890 99,590,000 100,119,931 64,472,000 Pro forma net income per share reconciliation Net income / (loss) $6,138 $(81,524) Less: certain cash charges R&D expenses - incremental assumed in merger (1) -- 10,373 R&D expenses - incremental strategic spend (2) 2,323 5,280 G&A litigation settlement (3) -- 62,250 Litigation expenses - other (4) 129 2,742 Restructuring expenses (5) 27 1,858 Restatement expenses (6) 1,376 16,371 Less: amortization expense 2,923 12,058 Less: depreciation expense 1,895 9,208 Add: gain on sale of investments -- (3,682) Pro forma net income $14,811 $34,934 Diluted weighted average common shares outstanding 108,146,890 104,376,888 Pro forma net income per share, diluted $0.14 $0.33 Pro forma net income per share, basic $0.15 $0.35
Chief Financial Officer of SkillSoft PLC
603-324-3000, ext. 4232
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.