PLATO Learning, Inc. (NASDAQ:TUTR), a leading provider of K�adult
computer-based and e-learning solutions, today announced orders for
its fourth quarter ended October 31, 2006, totaling $25.7 million,
compared to $33.1 million for the same period in 2005, a decline of
22%. Orders for subscription courseware products, which are the
foundation of the Company�s new product strategy, grew by over 160%
for the quarter and nearly 200% for the year from comparable
periods in 2005. The decline in total orders and continued shift in
order mix from perpetual to subscription license products resulted
in a 29% decrease in revenues for fourth quarter 2006 to $23.8
million, from the $33.7 million reported for fourth quarter 2005.
Mike Morache, PLATO Learning President and CEO, said, �Further
review confirmed our previously disclosed conclusions about the
factors that contributed to a decline in fourth quarter orders.
These factors included a higher rate of decline of perpetual
license orders than expected; the timing of some new products and
features; a relatively new sales organization that did not have the
experience working with customers to close year-end opportunities;
and a longer ramp-up required for sales of our new classroom
supplemental solution, Straight CurveTM Mathematics. These planning
and execution gaps have been corrected.� �We did continue to make
significant progress selling subscription courseware solutions as
evidenced by the growth of over 160% for the quarter and nearly
200% for the year over 2005 for these products. There is no
significant market resistance to subscription delivery of web-based
instructional solutions. Our new infrastructure for delivering
web-based instruction over the Internet, the PLATO Learning
Environment�, is fully operational and has achieved 100% up-time
since it was released at the end of July. Another favorable
achievement was in post-secondary orders, which were up 11% for the
year over 2005. Significant new products for this market will be
released in 2007, which is expected to drive more growth from
post-secondary institutions.� Cash and marketable securities
remained strong at $33.1 million, compared to $31.7 million at the
end of third quarter 2006 and $47.1 million at October 31, 2005.
The decline from year-end 2005 was affected by an $8.9 million
increase in purchased and capitalized product development in 2006
over 2005, driven by the Company�s aggressive product development
strategy. Deferred revenue at October 31, 2006, of $41.8 million
grew 7.0% from July 31, 2006 and 3.5% from October 31, 2005, as the
order mix continued to shift toward subscription products. Reported
net loss for the fourth quarter 2006, including charges of $9.8
million, was $(11.6) million, or $(0.49) per share, compared to a
net loss of $(13.9) million, or $(0.59) per share, for the same
period of 2005, including charges of $16.1 million. Net loss for
fourth quarter 2006 was $(1.8) million, or $(0.07) per share, as
compared to net earnings of $2.2 million, or $0.09 per share, for
the same period of 2005, excluding restructuring, impairment, and
other charges in both periods (a non-GAAP measure). Cost reductions
partially offset the effect of lower revenues in the quarter.
Adjusted EBITDA (Earnings before interest, taxes, depreciation and
amortization, excluding restructuring, impairment, and other
charges, a non-GAAP measure) were $2.7 million for the quarter,
compared to $6.6 million for the same period in 2005. Reported
gross margin was 52.9% for the fourth quarter 2006 versus 23.1% in
the fourth quarter of 2005. The gross margins include $1.1 million
and $13.2 million, respectively, of asset impairment charges of
certain capitalized product development and purchased technology
assets, due to changes in the Company�s product strategy resulting
in lower expected future revenues. Gross margin was 57.5% for the
fourth quarter versus 62.3% in the fourth quarter of 2005,
excluding impairment charges in both periods (a non-GAAP measure).
The decline was primarily driven by lower license fee and service
revenues, which was partially offset by lower service costs and
higher subscription gross profit, as a result of lower royalty
costs. Operating expenses declined 16% for the quarter from 2005,
excluding restructuring, impairment and other charges in both
periods. The decrease primarily resulted from reduced variable
costs associated with reduced revenue, cost reduction actions
initiated throughout 2006, and lower bad debt expense.
Restructuring, impairment and other charges of $8.7 million were
incurred in the quarter, including $5.9 million of impairment costs
related to acquired intangible non-technology assets, as a result
of a reduction in anticipated future revenues from those assets;
$1.6 million for vacated facilities in the U.K., and $1.2 million
for severance related costs from anticipated workforce reductions.
Revenues for the year ended October 31, 2006, were $90.7 million, a
26% decrease from 2005. Net loss for the year was $(22.5) million,
or $(0.95) per share, compared to a net loss of $(27.7) million, or
$(1.18) per share in 2005. Net loss, excluding restructuring,
impairment and other charges (a non-GAAP measure), was $(12.3)
million, or $(0.52) per share for fiscal year 2006, compared to a
net loss of $(8.5) million, or $(0.36) per share in 2005. �2006 was
a transition year for the Company, and the effects of the
transitions were greater than we had anticipated. We are making
progress on many fronts, including introduction of innovative new
products from a development team that is second to none in the
industry, improvement in the quality and maturity of the sales
organization, greatly improved business processes that will
facilitate growth in the future, and accelerated migration toward a
subscription-based business that will lower our business costs and
provide market-leading product quality at affordable prices to our
customers. We have also dramatically reduced our costs and lowered
our net earnings break-even point to less than $100 million of
revenue,� said Morache. �These changes set the stage for strong
order growth in 2007 and attractive financial returns in the long
term. The order growth will generate deferred revenue increases,
our key indicator of future financial performance. Revenue and net
earnings will continue to lag in performance until the transition
from perpetual license to subscription products is completed, which
is expected to occur during fiscal year 2008,� said Morache. Fiscal
year 2007 financial guidance: The Company expects total order
growth in 2007 of 10% to 15% over 2006, as a result of increased
sales productivity and availability of new products. This growth
will occur in the last three quarters of the year. Revenue is
expected to decline by 6% to 11% due to the continued transition
from perpetual to subscription license orders, which results in
revenue being deferred and recognized over the subscription period
rather than up-front upon shipment. As a result of the order growth
and transition to subscription products, deferred revenue is
expected to increase up to 50% by the end of 2007 over the end of
2006. The total gross profit percentage should be similar to that
achieved in 2006, excluding impairment charges. The Company has
taken further actions to reduce its operating costs to partially
offset the effect of lower revenues, and amortization expense will
be lower, due to 2006 impairment charges; therefore, operating
expenses are expected to decline by 10% to 12% from 2006, excluding
restructuring, impairment and other charges. As a result, the net
loss for 2007 is expected to improve by 15% to 30% from the net
loss in 2006, excluding restructuring, impairment and other
charges, even though revenue will decline. The Company expects to
achieve profitability in 2008, when the transition from perpetual
to subscription license products is largely completed. Cash and
marketable securities at October 31, 2007, are expected to be
similar to the balance at the end of 2006, as the Company expects
to continue to heavily invest in new product development,
increasing its spending on capitalized product development projects
in 2007 from 2006. These expected financial results are highly
dependent on the actual amount of orders received, as well as the
mix and timing of those orders. Use of Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release exclude
the impact of restructuring, impairment and other charges from our
operating results, as well as present Adjusted EBITDA. These
non-GAAP financial measures 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 as a substitute for, or
superior to, measures of financial performance prepared in
accordance with GAAP. We view these non-GAAP financial measures to
be helpful in assessing the Company�s ongoing operating results. In
addition, these non-GAAP financial measures facilitate our internal
comparisons to historical operating results and comparisons to
competitors' operating results. We include these non-GAAP financial
measures in our earnings announcement because we believe they are
useful to investors in allowing for greater transparency related to
supplemental information we use in our financial and operational
analysis. Investors are encouraged to review the reconciliations of
the non-GAAP financial measures used in this press release to their
most directly comparable GAAP financial measures as provided with
the financial statements attached to this press release. Conference
Call A conference call to discuss this announcement is scheduled
for today, December 12, 2006, at 3:45 p.m. CST (Central Standard
Time). The dial-in number for this call is 1-888-428-4480 in the
U.S. and Canada, and 1-612-332-0226 internationally. Please call 10
minutes prior to the start of the call and inform the operator you
are participating in PLATO Learning�s call. Should you be unable to
attend the live conference call, a recording will be available to
you from 8:15 p.m. CST on December 12, 2006, until midnight on
December 19, 2006. To access the recording, call 1-800-475-6701 in
the U.S. and Canada and 1-320-365-3844 internationally. At the
prompt, enter pass code number 824940. Additionally, investors have
the opportunity to listen to the conference call over the Internet
through PLATO Learning�s web site at
http://www.plato.com/aboutus/investor_calls.asp. 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. The Company also offers
innovative online assessment and accountability solutions and
standards-based professional development services. With over 6,000
hours of objective-based, problem-solving courseware, plus
assessment, alignment and curriculum management tools, we create
standards-based curricula that facilitate learning and school
improvement. PLATO Learning is a publicly held company traded as
TUTR on the NASDAQ. PLATO Learning educational software delivered
via networks, CD-ROM, the Internet, and private intranets, is
primarily marketed to K�12 schools and colleges. The Company also
sells to job training programs, correctional institutions, military
education programs, corporations, and individuals. PLATO Learning
is headquartered at 10801 Nesbitt Avenue South, Bloomington,
Minnesota 55437, 952. 832.1000 or 800.869.2000. The Company has
offices throughout North America and Puerto Rico, as well as
international distributors in the United Kingdom and South Africa.
For more information, please visit http://www.plato.com. 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
Annual Report on Form 10-K for the year ended October 31, 2005.
Actual results may differ materially from anticipated results.
PLATO� is a registered trademark of PLATO Learning, Inc. PLATO
Learning and Straight Curve are trademarks of PLATO Learning, Inc.
PLATO Inc. is a PLATO Learning, Inc., company. PLATO Learning, Inc.
and Subsidiaries Condensed Consolidated Statements of Operations
(Unaudited) (In thousands, except per share amounts) � Three Months
Ended Year Ended October 31, October 31, 2006� 2005� 2006� 2005� �
REVENUES: License fees $ 9,664� $ 16,622� $ 37,322� $ 62,527�
Subscriptions 5,393� 4,547� 18,176� 17,997� Services 8,745� 12,512�
35,221� 41,280� Total revenues 23,802� 33,681� 90,719� 121,804�
COST OF REVENUES: License fees 3,499� 4,175� 13,204� 17,680�
Subscriptions 2,564� 3,341� 9,000� 9,576� Services 4,054� 5,190�
17,490� 24,358� Impairment charges 1,089� 13,194� 1,089� 13,194�
Total cost of revenues 11,206� 25,900� 40,783� 64,808� Gross profit
12,596� 7,781� 49,936� 56,996� OPERATING EXPENSES: Sales and
marketing 9,749� 11,740� 38,598� 49,996� General and administrative
3,593� 4,227� 16,619� 18,420� Product maintenance and development
1,522� 1,726� 5,496� 5,646� Amortization of intangibles 905� 1,075�
3,711� 4,322� Restructuring, impairment and other charges 8,733�
2,904� 9,093� 6,025� Total operating expenses 24,502� 21,672�
73,517� 84,409� Operating loss (11,906) (13,891) (23,581) (27,413)
OTHER INCOME (EXPENSE): Interest income 435� 395� 1,684� 1,026�
Interest expense (2) (1) (34) (90) Other, net 30� 12� 51� (350)
LOSS BEFORE INCOME TAXES (11,443) (13,485) (21,880) (26,827) Income
tax expense 150� 410� 600� 860� NET LOSS $ (11,593) $ (13,895) $
(22,480) $ (27,687) � LOSS PER SHARE: Basic and diluted $ (0.49) $
(0.59) $ (0.95) $ (1.18) � WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: Basic and diluted 23,714� 23,550� 23,679� 23,381� �
Note: Amounts previously reported in 2005 as other revenues and
other cost of revenues were reclassified to license fees and
services to conform to the 2006 classification. The
reclassifications had no effect on previously reported 2005 total
revenues, total cost of revenues, or gross profit. PLATO Learning,
Inc. and Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited) (In thousands, except per share amounts) � October 31,
October 31, 2006� 2005� � ASSETS � Current assets: Cash and cash
equivalents $ 33,094� $ 46,901� Marketable securities -� 213�
Accounts receivable, net 18,529� 22,768� Inventories 1,832� 4,026�
Other current assets 6,346� 6,351� Total current assets 59,801�
80,259� � Equipment and leasehold improvements, net 6,308� 5,711�
Product development costs, net 25,363� 14,753� Goodwill 71,865�
71,865� Identified intangible assets, net 10,545� 22,505� Other
long-term assets 2,348� 2,235� Total assets $ 176,230� $ 197,328� �
LIABILITIES AND STOCKHOLDERS' EQUITY � Current liabilities:
Accounts payable $ 4,685� $ 2,938� Accrued compensation 5,990�
7,772� Accrued liabilities 6,622� 8,933� Deferred revenue 33,736�
35,218� Total current liabilities 51,033� 54,861� � Long-term
deferred revenue 8,110� 5,213� Deferred income taxes 2,531� 1,931�
Other long-term liabilities 106� 496� Total liabilities 61,780�
62,501� Stockholders' equity: Common stock 237� 236� Additional
paid-in capital 168,597� 166,295� Treasury stock at cost (205)
(205) Accumulated deficit (53,017) (30,537) Accumulated other
comprehensive loss (1,162) (962) Total stockholders' equity
114,450� 134,827� Total liabilities and stockholders' equity $
176,230� $ 197,328� PLATO Learning, Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (Unaudited) (In thousands) �
� Year Ended October 31, 2006� 2005� � OPERATING ACTIVITIES: Net
loss $ (22,480) $ (27,687) Adjustments to reconcile net loss to net
cash provided by operating activities: Deferred income taxes 600�
628� Impairment charges 7,044� 13,194� Amortization of capitalized
product development costs 7,706� 7,272� Amortization of identified
intangible and other long-term assets 5,249� 8,352� Depreciation
and amortization of equipment and leasehold improvements 2,408�
3,393� Provision for doubtful accounts (380) 1,245� Stock-based
compensation 1,650� 39� Gain on sale of marketable securities (37)
-� Loss on disposal of equipment 166� 289� Changes in assets and
liabilities, net of effects of acquisitions: Accounts receivable
4,619� 17,839� Inventories 2,194� (1,343) Other current and
long-term assets (441) (1,846) Accounts payable 1,748� (2,258)
Other current and long-term liabilities (4,480) 1,863� Deferred
revenue 1,415� (11,144) Total adjustments 29,461� 37,523� Net cash
provided by operating activities 6,981� 9,836� � INVESTING
ACTIVITIES: Capitalized internal product development costs (15,316)
(9,440) Purchased product development (3,000) -� Purchases of
equipment and leasehold improvements (3,172) (1,400) Purchases of
marketable securities (11,750) (9,474) Sales of marketable
securities 229� 4,559� Maturities of marketable securities 11,750�
21,000� Net cash (used in) provided by investing activities
(21,259) 5,245� � FINANCING ACTIVITIES: Net proceeds from issuance
of common stock 741� 2,764� Repayments of capital lease obligations
(90) (225) Net cash provided by financing activities 651� 2,539� �
EFFECT OF CURRENCY EXCHANGE RATE CHANGES � � ON CASH AND CASH
EQUIVALENTS (180) 46� Net (decrease) increase in cash and cash
equivalents (13,807) 17,666� � Cash and cash equivalents at
beginning of period 46,901� 29,235� CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 33,094� $ 46,901� PLATO Learning, Inc. Supplemental
Financial Information (Unaudited) � Order Information ($000s) �
Three Months Ended October 31, Year Ended October 31, 2006� 2005� %
Change� 2006� 2005� % Change� Order Value: ��License fees $ 8,557�
$ 14,972� (43%) $ 36,974� $ 57,201� (35%) � ��Subscriptions (a)
����Courseware 6,980� 2,613� 167% 18,651� 6,339� 194%
����Assessment and other 1,885� 3,637� (48%) 7,608� 11,192� (32%)
������Total subscriptions 8,865� 6,250� 42% 26,259� 17,531� 50% �
��Services (a) 8,280� 11,882� (30%) 29,177� 33,425� (13%) $ 25,702�
$ 33,104� (22%) $ 92,410� $ 108,157� (15%) � Percent of Total Order
Value: ��License fees 33% 45% 40% 53% � ��Subscriptions (a)
����Courseware 27% 8% 20% 6% ����Assessment and other 8% 11% 8% 10%
������Total subscriptions 35% 19% 28% 16% � ��Services (a) 32% 36%
32% 31% 100% 100% 100% 100% � (a) Certain amounts previously
reported as services orders have been reclassified to subscriptions
orders to conform to the current period presentation. � Deferred
Revenue Balances ($000s) � As of October 31, 2006� 2005� % Change�
� License fees $ 2,282� $ 5,736� (60%) Subscriptions 20,192�
12,546� 61% Services 19,372� 22,149� (13%) $ 41,846� $ 40,431� 3% �
Reconciliation of GAAP Loss Per Share to Non-GAAP Income (Loss) Per
Share Before Restructuring, Impairment and Other Charges ($000s,
except per share amounts) � Three Months Ended Year Ended October
31, October 31, 2006� 2005� 2006� 2005� Net loss, as reported $
(11,593) $ (13,895) $ (22,480) $ (27,687) Restructuring, impairment
and other charges 9,822� 16,098� 10,182� 19,219� Net income (loss)
before restructuring, impairment and other charges $ (1,771) $
2,203� $ (12,298) $ (8,468) � Income (loss) per share (basic and
diluted): Loss per share, as reported $ (0.49) $ (0.59) $ (0.95) $
(1.18) Restructuring, impairment and other charges 0.41� 0.68� $
0.43� 0.82� Income (loss) per share before restructuring,
impairment and other charges $ (0.07) $ 0.09� $ (0.52) $ (0.36) �
Weighted average common shares outstanding: Basic and diluted
(GAAP) 23,714� 23,550� 23,679� 23,381� Diluted (Non-GAAP) 23,714�
23,687� 23,679� 23,381� � � � � � � � � � � Reconciliation of GAAP
Operating Expenses to Non-GAAP Operating Expenses Before
Restructuring, Impairment and Other Charges ($000s) � Three Months
Ended Three Months Ended October 31, October 31, 2006� 2005� %
Change� � 2006� 2005� % Change� Total operating expenses $ 24,502�
$ 21,672� 13% $ 73,517� $ 84,409� (13%) Restructuring, impairment
and other charges (8,733) (2,904) 201% (9,093) (6,025) 51%
Operating expenses before restructuring, impairment and other
charges $ 15,769� $ 18,768� (16%) $ 64,424� $ 78,384� (18%) � � � �
� � � � � Reconciliation of GAAP Gross Profit to Non-GAAP Gross
Profit Before Impairment Charges ($000s) � Three Months Ended Year
Ended October 31, October 31, 2006� 2005� % Change� � 2006� 2005� %
Change� Gross profit, as reported $ 12,596� $ 7,781� 62% $ 49,936�
$ 56,996� (12%) Impairment charges (1,089) (13,194) (92%) (1,089)
(13,194) (92%) Gross profit before impairment charges $ 13,685� $
20,975� (35%) $ 51,025� $ 70,190� (27%) � Gross margin, as reported
53% 23% 55% 47% Gross margin effect of impairment charges 5% 39% 1%
11% Gross margin, excluding impairment charges 58% 62% 56% 58% � �
� � � � � � � � � � � Reconciliation of GAAP Net Loss to Non-GAAP
Adjusted EBITDA (EBITDA excluding restructuring, impairment and
other charges, and stock-based compensation) ($000s) � Year Ended
Q4-2006 Q3-2006 Q2-2006 Q1-2006 October 31,2006 Net Loss: $
(11,593) $ (1,791) $ (5,899) $ (3,197) $ (22,480) Income taxes 150�
150� 150� 150� 600� Interest, net (433) (373) (400) (444) (1,650)
Depreciation and amortization 4,111� 3,766� 3,894� 3,592� 15,363�
Restructuring, impairment and other charges 9,822� 21� 259� 80�
10,182� Stock-based compensation 612� 222� 480� 316� 1,630�
Adjusted EBITDA $ 2,669� $ 1,995� $ (1,516) $ 497� $ 3,645� � �
Year Ended Q4-2005 Q3-2005 Q2-2005 Q1-2005 �October 31,2005 Net
Loss: $ (13,895) $ (311) $ (2,954) $ (10,527) $ (27,687) Income
taxes 410� 150� 150� 150� 860� Interest, net (394) (205) (140)
(197) (936) Depreciation and amortization 4,374� 5,074� 4,585�
4,984� 19,017� Restructuring, impairment and other charges 16,098�
200� 632� 2,289� 19,219� Stock-based compensation -� -� 39� -� 39�
Adjusted EBITDA $ 6,593� $ 4,908� $ 2,312� $ (3,301) $ 10,512� � �
� � � � � � � � �
Plato Learning (MM) (NASDAQ:TUTR)
Historical Stock Chart
From Jun 2024 to Jul 2024
Plato Learning (MM) (NASDAQ:TUTR)
Historical Stock Chart
From Jul 2023 to Jul 2024