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(TM) orders in the
quarter grew 37% on strong growth in orders from first-time PLE(TM)
customers and expansions of existing PLE(TM) installations. During
the quarter we acquired a total of 71 new school districts on
PLE(TM)." 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(TM), 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(TM) 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
http://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 http://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: Rob Rueckl Chief
Financial Officer PLATO Learning, Inc. 952.832.1000 Todd Kehrli or
Charles Messman MKR Group 323.468.2300 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% ======= ======= DATASOURCE: PLATO
Learning, Inc. CONTACT: Rob Rueckl, Chief Financial Officer of
PLATO Learning, Inc., +1-952-832-1000; or Todd Kehrli or Charles
Messman, both of MKR Group, +1-323-468-2300, for PLATO Learning,
Inc. Web Site: http://www.plato.com/
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