PLATO Learning Reports First Quarter 2010 Results
First Quarter Year-Over-Year Highlights
- Net Income of $1.0 million, or $0.04 per Share vs. $259,000 or $0.01 per Share, in Q1'09
- Total Subscription Orders Grow 28% in the Quarter; PLE(TM) Orders Up 37%
- Subscription Revenues Increase 11% in the Quarter; Subscription Margins Improve to 63%
MINNEAPOLIS, Feb. 25 /PRNewswire-FirstCall/ -- PLATO Learning, Inc. (Nasdaq: TUTR), a leading provider of K-adult online learning solutions, today announced unaudited results for its fiscal 2010 first quarter ended January 31, 2010.
Vin Riera, PLATO Learning President and CEO said, "We are very pleased with our solid start to fiscal 2010 as we continued to deliver strong year-over-year improvements in subscription orders, total orders, subscription revenues, subscription margins and profitability. PLE™ orders in the quarter grew 37% on strong growth in orders from first-time PLE™ customers and expansions of existing PLE™ installations. During the quarter we acquired a total of 71 new school districts on PLE™."
Mr. Riera continued, "The first quarter of our fiscal year aligns with what historically is the off-peak buying season in the education market. Despite this seasonality, we delivered double-digit growth in subscription revenues and strong growth in profitability, both of which demonstrate advantages of the subscription-based business model. As we approach the buying season in our market, our solid start to the year reaffirms our expectation of profitability growth in fiscal 2010 compared to 2009, and 10% to 20% growth in full year subscription orders."
Total orders in the first quarter were $11.5 million, an increase of 6% over the first quarter of 2009. Subscription orders grew 28% in the quarter on strong demand for the company's instructional solutions delivered in PLE™, while orders for the company's non-strategic perpetual products and related software maintenance declined $1.3 million to $0.9 million.
Total revenue for the first quarter was $15.6 million, down slightly from $16.0 million for the same period last year as strong growth in subscription revenues was offset by expected declines in revenues from non-strategic perpetual products and related software maintenance. Subscription revenues for the quarter grew $1.1 million, or 11%, over the first quarter of 2009, while revenues from perpetual products and related software maintenance declined $1.5 million over the same period.
Subscription gross margin in the quarter improved to 63% compared to 61% in the first quarter of 2009. Services gross margin in the quarter was 46%, down from 53% in the first quarter of last year on a decline in higher-margin software maintenance revenues. As a result, the total gross margin in the quarter was consistent with 2009 margins at 58%. Operating expenses in the quarter declined $1.1 million to $8.0 million, a decline of 12% from the same period last year, on lower sales, general and administrative expenses.
The continued improvements in gross margins and operating efficiencies resulted in the Company reporting strong growth in first quarter profitability. Net income for the first quarter was $1.0 million, or $0.04 per share, compared to net income of $259,000, or $0.01 per share in the first quarter of 2009. Earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measure) grew 41% in the quarter to $4.2 million compared to $3.0 million in the same period last year.
The Company's cash balance at the end of the quarter was $27.7 million, down slightly from $28.2 million at the end of fiscal 2009, but up significantly from $12.3 million at the end of the first quarter of 2009. Revenue backlog (a non-GAAP measure) at the end of the quarter was $64.1 million, down seasonally from $68.3 million at the end of fiscal 2009, but up 32% compared to the same time last year.
Fiscal Year 2010 Outlook
The Company's outlook for fiscal year 2010 is unchanged from the outlook previously provided. We continue to expect strong growth in orders and revenues from subscription products in fiscal 2010, growing 10% to 20% over 2009 levels. Orders and revenues from non-strategic perpetual license products and related software maintenance are expected to continue to decline, and may offset much of the growth in orders and revenues from subscription products. As a result, total orders and revenues in fiscal year 2010 are expected to be flat with, or slightly above, fiscal 2009 total orders and revenues.
Subscription revenue growth will drive continued improvements in subscription gross profit margins and in total gross profit margins, while investments in sales, marketing and product development will result in a 5% to 7% increase in operating expenses over fiscal 2009 levels. Despite our strong performance in net income in the first quarter, we expect investments in sales and marketing and a typical increase in product maintenance and development expense associated with a new release of our PLE™ platform to put pressure on near-term earnings. As a result, we continue to expect full year net income and EBITDA to be only slightly improved over fiscal 2009 levels. We continue to expect fiscal 2010 free cash flow to grow 30% to 40% over 2009, and revenue backlog to end the year 25% to 30% higher than at October 2009. Cash balances and revenue backlog will continue to follow the seasonal patterns of the education market, which is expected to result in declining balances in the first half of fiscal 2010, and growth in the second half of the year to the levels indicated.
Conference Call
A conference call to discuss this announcement is scheduled for today, February 25, 2010, at 9:00 am CT (10:00 am ET). The dial-in number for this call is 877-941-2324 in the U.S. and Canada, and (480) 629-9716 internationally. Attendees should call 10 minutes prior to the start of the call and inform the operator they are participating in PLATO Learning's call. A recording of the call will be available from 11:00 am CT (12:00 pm ET) on February 25, 2010, until midnight March 4, 2010. To access the recording, call 800-406-7325 in the U.S. and Canada and (303) 590-3030 internationally. At the prompt, enter pass code number 4238079. Additionally, the webcast will be available for replay on the investor relations section of PLATO Learning's web site at www.plato.com/Investor-Relations/Conference-Calls.aspx.
About PLATO Learning
PLATO Learning is a leading provider of computer-based and e-learning instruction for kindergarten through adult learners, offering curricula in reading, writing, math, science, social studies, and life and job skills. Learn more about PLATO Learning by visiting www.plato.com.
The announcement includes the use of non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures have been used in this announcement because the Company believes they are useful to investors by providing greater transparency to supplemental information used in the Company's internal financial and operational analysis. Investors are encouraged to review the reconciliations attached to this announcement of the non-GAAP financial measures used in this announcement to their most directly comparable GAAP financial measures.
This announcement includes forward-looking statements. PLATO Learning has based these forward-looking statements on its current expectations and projections about future events. Although PLATO Learning believes that its assumptions made in connection with the forward-looking statements are reasonable, no assurances can be given that its assumptions and expectations will prove to have been correct. These forward-looking statements are subject to various risks, uncertainties and assumptions. PLATO Learning undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements made are subject to the risks and uncertainties as those described in the Company's most recent filings with the Securities and Exchange Commission on Forms 10-K and 10-Q. Actual results may differ materially from anticipated results.
PLATO®, Straight Curve® and Academic Systems® are registered trademarks of PLATO Learning, Inc. PLATO Learning, PLATO Learning Environment and PLE are trademarks of PLATO Learning, Inc.
Company Contacts: |
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Rob Rueckl |
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Chief Financial Officer |
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PLATO Learning, Inc. |
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952.832.1000 |
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Todd Kehrli or Charles Messman |
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MKR Group |
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323.468.2300 |
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PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
----------------------------------------
Three Months Ended
January 31,
--------------
2010 2009
---- ----
REVENUES
Subscriptions $10,968 $9,868
License fees 549 1,004
Services 4,070 5,165
----- -----
Total revenues 15,587 16,037
------ ------
COST OF REVENUES
Subscriptions 4,064 3,888
License fees 234 439
Services 2,186 2,428
----- -----
Total cost of revenues 6,484 6,755
----- -----
GROSS PROFIT 9,103 9,282
----- -----
OPERATING EXPENSES
Sales and marketing 5,382 5,887
General and administrative 1,948 2,424
Software maintenance and development 495 567
Amortization of intangibles 213 213
--- ---
Total operating expenses 8,038 9,091
----- -----
OPERATING INCOME 1,065 191
Other (expense) income, net (63) 68
--- ---
INCOME BEFORE INCOME TAXES 1,002 259
Income tax expense - -
--- ---
NET INCOME $1,002 $259
====== ====
INCOME PER SHARE
Basic $0.04 $0.01
===== =====
Diluted $0.04 $0.01
===== =====
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 24,298 23,983
====== ======
Diluted 25,247 24,260
====== ======
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
----------------
January 31, October 31,
2010 2009
---- ----
ASSETS
Current assets:
Cash and cash equivalents $27,653 $28,164
Accounts receivable, net 7,995 10,710
Other current assets 5,828 6,539
----- -----
Total current assets 41,476 45,413
Equipment and leasehold
improvements, net 2,352 2,472
Software development costs, net 19,051 19,904
Identified intangible
assets, net 2,050 2,384
Other long-term assets 3,231 3,279
----- -----
Total assets $68,160 $73,452
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,918 $1,070
Accrued compensation 2,102 3,805
Other accrued liabilities 1,405 2,457
Deferred revenue 33,700 38,020
------ ------
Total current liabilities 39,125 45,352
Long-term deferred revenue 15,783 15,678
------ ------
Total liabilities 54,908 61,030
------ ------
Stockholders' equity:
Common stock 244 243
Additional paid-in capital 172,381 172,560
Treasury stock at cost (319) (319)
Accumulated deficit (157,831) (158,833)
Accumulated other
comprehensive loss (1,223) (1,229)
------ ------
Total stockholders' equity 13,252 12,422
------ ------
Total liabilities and
stockholders' equity $68,160 $73,452
======= =======
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
----------------
Three Months Ended
January 31,
-------------
2010 2009
---- ----
OPERATING ACTIVITIES:
Net income $1,002 $259
------ ----
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,170 2,840
Stock-based compensation (71) 264
Other adjustments - 14
Changes in operating assets and
liabilities:
Accounts receivable 2,715 2,132
Other current and long-term assets 715 994
Accounts payable 848 (1,506)
Other current and long-term liabilities (2,752) (5,366)
Deferred revenue (4,215) (5,706)
------ ------
Total adjustments 410 (6,334)
--- ------
Net cash provided by (used in)
operating activities 1,412 (6,075)
----- ------
INVESTING ACTIVITIES:
Capitalized software development costs (1,564) (1,648)
Purchases of capital equipment (255) (98)
---- ---
Net cash used in investing activities (1,819) (1,746)
------ ------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock,
net of repurchases (107) 37
Repayments of capital lease obligations (3) (3)
--- ---
Net cash (used in) provided by
financing activities (110) 34
---- ---
EFFECT OF CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 6 43
--- ---
Net decrease in cash and cash equivalents (511) (7,744)
Cash and cash equivalents at beginning of
period 28,164 20,018
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,653 $12,274
======= =======
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
-------------
Order Information ($000s)
Three Months Ended
January 31,
-------------
2010 2009 % Change
---- ---- --------
Subscriptions & related services:
---------------------------------
Subscriptions $8,545 $6,674 28%
Professional services 1,389 1,195 16%
Other 652 759 (14%)
--- ---
Subtotal 10,586 8,628 23%
------ -----
Legacy products and services:
-----------------------------
License fees 239 1,031 (77%)
Software maintenance 673 1,180 (43%)
--- -----
Subtotal 912 2,211 (59%)
--- -----
Total Orders $11,498 $10,839 6%
======= =======
Revenue Information ($000s)
Three Months Ended
January 31,
-------------
2010 2009 % Change
---- ---- --------
Subscriptions & related services:
---------------------------------
Subscriptions $10,968 $9,868 11%
Professional services 1,972 1,951 1%
Other 652 747 (13%)
--- ---
Subtotal 13,592 12,566 8%
------ ------
Legacy products and services:
-----------------------------
License fees 549 1,004 (45%)
Software maintenance 1,446 2,467 (41%)
----- -----
Subtotal 1,995 3,471 (43%)
----- -----
$15,587 $16,037 (3%)
======= =======
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
-------------
Reconciliation of GAAP Net Income To Non-GAAP Earnings before
Interest, Taxes, Depreciation and Amortization ("EBITDA") ($000s)
Three Months Ended
January 31,
-------------
2010 2009
---- ----
Net income $1,002 $259
Income taxes - -
Interest, net 62 (82)
Depreciation and amortization 3,126 2,797
----- -----
EBITDA $4,190 $2,974
====== ======
Reconciliation of Deferred Revenue to Non-GAAP
Revenue Backlog ($000s):
As of January 31,
-------------------
2010 2009 % Change
---- ---- --------
Reconciliation:
Total Deferred Revenue $49,483 $39,215 26%
Add: Unbilled amounts due
under non-cancelable subscription
agreements 14,592 9,329 56%
------ -----
Revenue Backlog $64,075 $48,544 32%
======= =======
Components of Revenue Backlog:
Subscriptions and related services:
Subscriptions $53,688 $38,360 40%
Professional services 6,830 4,366 56%
----- -----
Subtotal 60,518 42,726 42%
------ ------
Legacy products and services:
License fees 85 488 (83%)
Software Maintenance 3,472 5,330 (35%)
----- -----
Subtotal 3,557 5,818 (39%)
----- -----
Total Revenue Backlog $64,075 $48,544 32%
======= =======
SOURCE PLATO Learning, Inc.
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