Plato Learning (MM) (NASDAQ:TUTR)
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PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of K–adult
e-learning solutions, today announced results for its fiscal 2008 fourth
quarter and year ended October 31, 2008.
Total revenue for the fourth quarter was $17.4 million, compared to
$18.2 million in the fourth quarter of 2007, reflecting lower perpetual
license fees and maintenance revenues from legacy products. Subscription
revenue for the quarter increased 34% to $9.5 million, from $7.1 million
in the fourth quarter of last year. Total orders for the fourth quarter
declined 20% to $20.7 million, compared to $25.9 million for the fourth
quarter of fiscal 2007. Subscription orders for the quarter decreased 5%
to $13.0 million.
Vin Riera, PLATO Learning President and CEO said, “While we began the
fourth quarter tracking to expectations, we experienced delays in buying
decisions midway through the quarter, reflecting the overall economy and
state budgetary constraints. At the same time, we continue to see many
positive trends in our business. For the full fiscal year, we grew
subscription revenue 46 percent, generated 20 percent growth in
subscription orders, and increased our PLATO Learning Environment™
(PLE™) customer base by 65 percent. The fourth quarter marks our third
consecutive quarter of margin improvement, contributing to a substantial
decline in our fourth quarter net loss and $8 million in free cash flow.
“While the market remains challenging, our innovative and proven
learning solutions address core instructional programs needed by
schools, funded largely by federal and state level programs targeting
school improvement, reduced drop-out rates and the increased use of
technology in schools. Furthermore, we are seeing increasing benefit
from steps we have taken to significantly reduce our cost structure and
ended the fiscal year with a strong balance sheet that includes $20
million in cash. Finally, while we expect market uncertainty to
continue, we are optimistic about the potential of our
software-as-a-service (SaaS) business model, which provides us with a
high base of potential renewals. As such, we believe we are well
positioned to continue to grow our subscription business in fiscal 2009.”
During the fourth quarter, PLATO Learning added 145 school districts and
community colleges as new subscribers to its PLE™ SaaS platform, growing
its total PLE™ customer base to more than 1,200 educational institutions
across the U.S., a 65% increase over the fourth quarter of fiscal 2007.
New PLATO Learning customers accounted for more than half of the total
PLE™ customers added in the quarter. Registered users of PLE™ grew to
1.2 million at October 31, 2008, a 138% increase compared to this time
last year.
Subscription margins in the fourth quarter improved 14 percentage points
to 52.0%. Non-GAAP total gross margin for the quarter, which excludes
impairment charges, improved to 47.2% from 45.8% as the effect on gross
margin of lower perpetual license fee revenues offset some of the gains
in subscription margins. Non-GAAP operating expenses, which excludes
restructuring, impairment and other costs, declined to $10.0 million in
the fourth quarter of 2008 from $11.6 million in the fourth quarter of
2007.
Non-GAAP net loss for the fourth quarter, which excludes impairment and
restructuring charges totaling $9.4 million, improved to ($1.7) million,
or ($0.07) per share, versus ($3.2) million, or ($0.13) per share in the
fourth quarter of fiscal 2007. Reported net loss for the quarter was
($11.1) million, or ($0.46) per share, compared to ($0.17) per share in
the fourth quarter of fiscal 2007. Impairment charges in the fiscal 2008
fourth quarter totaled $6.5 million, reflecting weaker than expected
sales of the Company’s Straight Curve Math product and write-downs of
legacy purchased intangible assets. Restructuring and other charges in
the quarter totaled $2.9 million related to the implementation of
operating efficiencies enabled by the transition to the SaaS business
model, and to the Company’s CEO transition. These restructuring
activities and impairments are expected to result in approximately $8.0
million in cash and non-cash savings in fiscal 2009.
Cash and cash equivalents at October 31, 2008 were $20.0 million.
For the fiscal 2008 full year, total orders declined 7% to $72.1
million. Revenues totaled $68.4 million for the year, compared to $69.6
million in fiscal 2007. The revenue decline reflects lower perpetual
license fees and maintenance revenues from legacy products. Total
non-GAAP cost of revenue and operating expenses in fiscal 2008, which
excludes charges related to restructuring, impairment and other charges,
were $80.0 million, compared to $85.0 million in fiscal 2007. Non-GAAP
net loss, which excludes impairment, restructuring and other charges,
was ($11.7) in fiscal 2008, or ($0.49) per share, compared to a non-GAAP
net loss of ($14.8) million, or ($0.62) per share, for fiscal 2007.
These results are provided on a preliminary basis. The Company is
currently conducting an evaluation of goodwill reported on the Company’s
balance sheet related to multiple acquisitions made by the Company from
2000 - 2003, prior to the Company’s strategic shift to the SaaS business
model. The non-cash goodwill impairment charge, if any, that might
result from this evaluation would not impact the Company's day-to-day
business operations, liquidity or long-term SaaS strategy.
Guidance
“While our current view of 2009 has been complicated by the effect of
economic conditions on school budgets, we believe we can achieve high
single-digit subscription order and revenue growth in fiscal 2009, and
continued improvement in subscription margins. On the spending side, we
expect total costs and expenses to decline by nearly $8 million and our
capital product investment to moderate to between $5 million and $6
million. We’re beginning 2009 with a healthy cash balance of over $20
million and expect free cash flow in Fiscal 2009 to be flat to
positive,” Mr. Riera concluded.
Conference Call
A conference call to discuss this announcement is scheduled for today,
December 3, 2008, at 7:45 a.m. CDT (Central Daylight Time). The dial-in
number for this call is 800-218-8862 in the U.S. and Canada, and
303-242-0002 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
6:00 p.m. CDT on December 3, 2008, until midnight on December 10, 2008.
To access the recording, call 800-405-2236 in the U.S. and Canada and
303-590-3000 internationally. At the prompt, enter pass code number
11123001#.
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/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. 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
market. PLATO Learning’s online educational software 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 sales representatives located throughout the U.S., as well as
international distributors in Canada, the United Kingdom and South
Africa. For more information, please visit 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 is a trademark of PLATO Learning,
Inc.
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended
Twelve Months Ended
October 31,
October 31,
2008
2007
2008
2007
REVENUES
Subscriptions
$
9,530
$
7,128
$
35,221
$
24,173
License fees
1,345
4,060
8,458
17,712
Services
6,508
7,002
24,722
27,747
Total revenues
17,383
18,190
68,401
69,632
COST OF REVENUES
Subscriptions
4,616
4,465
18,674
15,540
License fees
1,217
2,184
5,277
8,396
Services
3,350
3,215
12,432
13,052
Impairment charges
5,085
531
5,085
531
Total cost of revenues
14,268
10,395
41,468
37,519
GROSS PROFIT
3,115
7,795
26,933
32,113
OPERATING EXPENSES
Sales and marketing
6,450
7,167
27,632
29,849
General and administrative
2,456
3,112
10,366
12,095
Product maintenance and development
754
922
4,060
4,334
Amortization of intangibles
388
388
1,550
1,740
Restructuring, impairment & other charges (benefit)
4,312
288
6,747
(478
)
Total operating expenses
14,360
11,877
50,355
47,540
OPERATING LOSS
(11,245
)
(4,082
)
(23,422
)
(15,427
)
Other income, net
66
242
254
1,159
LOSS BEFORE INCOME TAXES
(11,179
)
(3,840
)
(23,168
)
(14,268
)
Income tax (benefit) expense
(88
)
158
368
608
NET LOSS
$
(11,091
)
$
(3,998
)
$
(23,536
)
$
(14,876
)
LOSS PER SHARE
Basic and diluted
$
(0.46
)
$
(0.17
)
$
(0.99
)
$
(0.63
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted
23,908
23,774
23,854
23,754
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
October 31,
October 31,
2008
2007
ASSETS
Current assets:
Cash and cash equivalents
$
20,018
$
24,297
Accounts receivable, net
6,834
11,752
Other current assets
7,409
7,759
Total current assets
34,261
43,808
Equipment and leasehold improvements, net
3,589
5,615
Product development costs, net
24,086
30,266
Goodwill
71,865
71,865
Identified intangible assets, net
3,723
7,983
Other long-term assets
3,309
3,243
Total assets
$
140,833
$
162,780
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
3,085
$
4,608
Accrued compensation
3,996
5,453
Other accrued liabilities
6,909
4,245
Deferred revenue
36,005
36,094
Total current liabilities
49,995
50,400
Long-term deferred revenue
8,916
8,506
Deferred income taxes
3,504
3,139
Total liabilities
62,415
62,045
Stockholders' equity:
Common stock
240
238
Additional paid-in capital
171,143
169,927
Treasury stock at cost
(315
)
(205
)
Accumulated deficit
(91,429
)
(67,893
)
Accumulated other comprehensive loss
(1,221
)
(1,332
)
Total stockholders' equity
78,418
100,735
Total liabilities and stockholders' equity
$
140,833
$
162,780
PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Twelve Months Ended
October 31,
2008
2007
OPERATING ACTIVITIES:
Net loss
$
(23,536
)
$
(14,876
)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Deferred income taxes
368
608
Impairment charges
6,674
531
Depreciation and amortization
16,945
16,150
Provision for doubtful accounts
-
(553
)
Stock-based compensation
1,012
1,174
Other adjustments
103
3
Changes in operating assets and liabilities:
Accounts receivable
4,918
6,322
Other current and long-term assets
37
(385
)
Accounts payable
(1,523
)
(78
)
Other current and long-term liabilities
1,216
(3,020
)
Deferred revenue
321
3,786
Total adjustments
30,071
24,538
Net cash provided by operating activities
6,535
9,662
INVESTING ACTIVITIES:
Capitalized internal product development costs
(10,670
)
(15,698
)
Purchased product development
-
(475
)
Purchases of equipment and leasehold improvements
(338
)
(1,750
)
Net cash used in investing activities
(11,008
)
(17,923
)
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock, net of repurchases
109
203
Payment of debt financing fees
-
(523
)
Repayments of capital lease obligations
(25
)
(47
)
Net cash provided by (used in) financing activities
84
(367
)
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
110
(169
)
Net decrease in cash and cash equivalents
(4,279
)
(8,797
)
Cash and cash equivalents at beginning of period
24,297
33,094
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
20,018
$
24,297
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Order Information ($000s)
Three Months Ended October 31,
Twelve Months Ended October 31,
2008
2007
% Change
2008
2007
% Change
Order Value:
Subscriptions
$
12,999
$
13,659
(5
%)
$
43,585
$
36,368
20
%
License fees
1,501
4,625
(68
%)
7,886
16,931
(53
%)
Services
6,237
7,654
(19
%)
20,637
24,377
(15
%)
$
20,737
$
25,938
(20
%)
$
72,108
$
77,676
(7
%)
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Deferred Revenue Balances ($000s)
As of October 31,
2008
2007
% Change
Subscriptions
$
41,694
$
32,938
27
%
License fees
467
622
(25
%)
Services
11,705
15,563
(25
%)
Total
53,866
49,123
10
%
Less: Amounts not billed under non-cancelable subscription
agreements
(8,945
)
(4,523
)
98
%
Net deferred revenue
$
44,921
$
44,600
1
%
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP Net Loss and Loss Per Share to Non-GAAP
Net Loss
and Loss Per Share Before Restructuring, Impairment and Other
Charges
($000s, except per share amounts)
Three Months Ended
Twelve Months Ended
October 31,
October 31,
2008
2007
2008
2007
Net loss, as reported
$
(11,091
)
$
(3,998
)
$
(23,536
)
$
(14,876
)
Restructuring, impairment and other charges
9,397
819
11,832
53
Net loss before restructuring, impairment and other charges
$
(1,694
)
$
(3,179
)
$
(11,704
)
$
(14,823
)
Loss per share (basic and diluted):
Loss per share, as reported
$
(0.46
)
$
(0.17
)
$
(0.99
)
$
(0.63
)
Restructuring, impairment and other charges per share
0.39
0.04
0.50
0.01
Loss per share before restructuring, impairment and other charges
$
(0.07
)
$
(0.13
)
$
(0.49
)
$
(0.62
)
Basic and diluted (GAAP) weighted average common shares outstanding
23,908
23,774
23,854
23,754
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating
Expenses
Before Restructuring, Impairment and Other Charges ($000s)
Three Months Ended
Twelve Months Ended
October 31,
October 31,
2008
2007
% Change
2008
2007
% Change
Total operating expenses
$
14,360
$
11,877
21
%
$
50,355
$
47,540
6
%
Restructuring, impairment and other charges (benefit)
4,312
288
1397
%
6,747
(478
)
(1512
%)
Operating expenses before restructuring, impairment and other
charges (benefit)
$
10,048
$
11,589
(13
%)
$
43,608
$
48,018
(9
%)
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit
Before Impairment Charges ($000s)
Three Months Ended
Twelve Months Ended
October 31,
October 31,
2008
2007
% Change
2008
2007
% Change
Gross profit, as reported
$
3,115
$
7,795
(60
%)
$
26,933
$
32,113
(16
%)
Impairment charges
5,085
531
858
%
5,085
531
858
%
Gross profit before impairment charges
$
8,200
$
8,326
(2
%)
$
32,018
$
32,644
(2
%)
Gross margin, as reported
18
%
43
%
(25
%)
39
%
46
%
(7
%)
Gross margin effect of impairment charges
29
%
3
%
26
%
8
%
1
%
7
%
Gross margin, excluding impairment charges
47
%
46
%
1
%
47
%
47
%
0
%
PLATO Learning, Inc.
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP Cash Flow Provided By Operating
Activities To Non-GAAP Free Cash Flow ($000)
Three Months Ended
Twelve Months Ended
October 31,
October 31,
2008
2007
2008
2007
Cash flow provided by operating activities
$
9,999
$
6,684
$
6,535
$
9,662
Capitalized internal product development costs
(1,929
)
(3,980
)
(10,670
)
(15,698
)
Purchased product development
-
(475
)
-
(475
)
Purchases of equipment and leasehold improvements
(20
)
(279
)
(338
)
(1,750
)
Free Cash Flow
$
8,050
$
1,950
$
(4,473
)
$
(8,261
)