Skillsoft Reports First Quarter Fiscal 2011 Results
-- FIRST QUARTER REVENUE OF $76.9 MILLION AND NET INCOME OF $12.6 MILLION
-- FIRST QUARTER DILUTED EPS OF $0.13
-- FIRST QUARTER ADJUSTED EBITDA OF $29.4 MILLION
-- REDUCED DEBT BY $45.1 MILLION IN THE FIRST QUARTER
-- CASH, RESTRICTED CASH AND INVESTMENTS OF $92.5 MILLION
NASHUA, N.H.--(BUSINESS WIRE)-- SkillSoft PLC (NASDAQ:SKIL), a leading Software as a Service (SaaS) provider of on-demand e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses, today announced financial results for its first fiscal quarter of fiscal 2011.
FISCAL 2011 FIRST QUARTER RESULTS
The Company reported total revenue of $76.9 million for its first quarter ended April 30, 2010 of its fiscal year ending January 31, 2011 (fiscal 2011), which represented a 1% increase over the $76.4 million reported in its first quarter of the fiscal year ended April 30, 2009 (fiscal 2010).
On a US generally accepted accounting principles (US GAAP) basis, the Company's net income was $12.6 million, or $0.13 per basic and diluted share, for the first quarter of fiscal 2011 as compared to net income of $18.8 million, or $0.19 per basic and diluted share, for the first quarter of fiscal 2010.
Gross margin increased slightly to 91% in the fiscal 2011 first quarter from 90% in the fiscal 2010 first quarter, primarily due to product mix.
Research and development expenses increased to $9.7 million in the fiscal 2011 first quarter from $9.0 million in the fiscal 2010 first quarter. This increase was primarily due to additional outside service contractors and outsource partner expenses and an increase in compensation expense. Research and development expenses were 13% of revenue for the fiscal 2011 first quarter as compared to 12% for the fiscal 2010 first quarter.
Sales and marketing expenses increased to $24.8 million in the fiscal 2011 first quarter from $22.4 million in the fiscal 2010 first quarter. This increase was primarily due to the hiring of additional field sales personnel and an increase in demand generation marketing expenses. Sales and marketing expenses were 32% of revenue for the fiscal 2011 first quarter as compared to 29% for the fiscal 2010 first quarter.
General and administrative expenses increased to $8.5 million in the fiscal 2011 first quarter from $7.8 million in the fiscal 2010 first quarter. The increase in general and administrative expenses was primarily due to an increase in professional expenses and compensation related expenses. General and administrative expenses were 11% of revenue for the fiscal 2011 first quarter as compared to 10% for the fiscal 2010 first quarter.
Acquisition related expenses for the fiscal 2011 first quarter were $5.3 million. These expenses related primarily to professional fees incurred in connection with the pending acquisition of the Company.
The Company's interest expense was $2.4 million for the fiscal 2011 first quarter and for the fiscal 2010 first quarter. Interest expense remained flat as a result of the additional principal payments on the Company's long-term debt, which were offset by the accelerated non-cash debt amortization charges. Additionally, on May 7, 2010 the Company paid the remaining outstanding debt balance of $39.3 million.
The Company's effective tax rate was 31.7% for the fiscal 2011 first quarter, which consisted of a cash tax provision of approximately $2.1 million (11.5%) and a non-cash tax provision of approximately $3.7 million (20.1%). This compares to a 22.6% effective tax rate for the fiscal 2010 first quarter, which consisted of a cash tax provision of approximately $2.2 million (9.0%) and a non-cash tax provision of approximately $3.3 million (13.6%). Included in the effective tax rate for the fiscal 2010 first quarter is approximately $0.4 million (1.6%) of discrete reductions to international tax based accruals. The increase in the effective tax rate is primarily the result of increased year over year amortization of tax charges associated with the business realignment that took effect at the beginning of fiscal 2010.
An important leverage covenant included in our credit facility is adjusted EBITDA. Adjusted EBITDA for the fiscal 2011 first quarter was $29.4 million as compared to $32.7 million for the fiscal 2010 first quarter. For the fiscal 2011 first quarter, our trailing 12 month debt to adjusted EBITDA ratio was approximately 0.3. Adjusted EBITDA for the fiscal 2011 first quarter is calculated by taking net income ($12.6 million) and adding back depreciation and amortization ($1.1 million), amortization of intangible assets and capitalized software development costs ($0.9 million), acquisition related expense ($5.3 million), stock-based compensation ($1.4 million), interest expense ($2.4 million), provision for income taxes ($5.9 million), and deducting other income and interest income ($0.2 million).
SkillSoft had approximately $92.5 million in cash, cash equivalents, short-term investments and restricted cash as of April 30, 2010 as compared to $83.0 million as of January 31, 2010. This increase is primarily due to cash provided by operations of $49.9 million, proceeds from the exercise of stock options of $3 million and proceeds from the employee stock purchase plan of $1.7 million. The increase was partially offset by principal payments on long term debt of $45.1 million.
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 2011 first quarter. On a net basis, which considers only receivable balances for which revenue has been recorded; DSOs were 5 days in the fiscal 2011 first quarter as compared to 6 days in the year ago period and 11 days in the fourth quarter of fiscal 2010. On a gross basis, which considers all items billed as receivables, DSOs were 77 days in both the fiscal 2011 and the fiscal 2010 first quarter and 160 days in the fourth quarter of fiscal 2010. The slight decrease in net basis DSOs is due to improvements in customer collection efforts.
FISCAL 2011 OUTLOOK
As a reminder, since February 12, SkillSoft has been in an "offer period" for the purposes of the Irish Takeover Rules. During the offer period, SkillSoft is subject to restrictions on the making of public statements. If SkillSoft publishes any financial guidance which enables the calculation of future profits or losses, the Irish Takeover Rules require the preparation and publication of onerous reports from SkillSoft's auditors and financial advisers. The preparation of such reports would have resulted in a delay to the issue of our earnings release. Consequently, the Company will not be providing guidance with respect to fiscal 2011 or its second quarter of fiscal 2011 ending July 31, 2010.
Supplemental financial information is available on SkillSoft's web site www.skillsoft.com.
Conference Call
Management will not conduct a conference call to discuss the Company's fiscal 2011 first quarter financial and operating results and the financial outlook for fiscal 2011.
About SkillSoft
SkillSoft PLC (NASDAQ:SKIL) is a leading SaaS provider of on-demand e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. SkillSoft enables business organizations to maximize business performance through a combination of comprehensive e- learning content, online information resources, flexible learning technologies and support services.
Content offerings include business, IT, desktop, compliance and consumer/SMB courseware collections, as well as complementary content assets such as Leadership Development Channel video products, KnowledgeCenter(TM) portals, virtual instructor-led training services and online mentoring services. SkillSoft's Books24x7(R) product offering includes access to more than 25,000 digitized IT and business books, as well as book summaries and executive reports. Technology offerings include the SkillPort(R) learning management system, Search-and-Learn(R), SkillSoft(R) Dialogue(TM) and virtual classroom.
SkillSoft courseware content described herein is for information purposes only and is subject to change without notice. SkillSoft has no obligation or commitment to develop or deliver any future release, upgrade, feature, enhancement or function described in this press release except as specifically set forth in a written agreement.
SkillSoft, the SkillSoft logo, SkillPort, Search-and-Learn, SkillChoice, Books24x7, ITPro, BusinessPro, OfficeEssentials, GovEssentials, EngineeringPro, FinancePro, AnalystPerspectives, ExecSummaries, ExecBlueprints, Express Guide Dialogue and inGenius are trademarks or registered trademarks of SkillSoft PLC in the United States and certain other countries. All other trademarks are the property of their respective owners, countries.
SkillSoft PLC and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited, In thousands except share and per share data)
Three Months Ended
April 30,
2010 2009
Revenues $ 76,918 $ 76,439
Cost of revenues (1) 7,083 7,473
Cost of revenues - amortization of 32 32
intangible assets
Gross profit 69,803 68,934
Operating expenses:
Research and development (1) 9,669 8,998
Selling and marketing (1) 24,804 22,411
General and administrative (1) 8,493 7,757
Amortization of intangible assets 896 2,455
Acquisition related expenses 5,322 -
Restructuring - 52
Total operating expenses 49,184 41,673
Other (expense) income, net 111 (618)
Interest income 82 70
Interest expense (2,370) (2,445)
Income before provision for income 18,442 24,268
taxes
Provision for income taxes - cash 2,130 2,201
Provision for income taxes - non-cash 3,709 3,288
Net income $ 12,603 $ 18,779
Basic income per share $ 0.13 $ 0.19
Diluted income pershare $ 0.13 $ 0.19
Basic weighted average common shares 95,064,748 97,740,295
outstanding
Diluted weighted average common shares 99,097,950 99,095,854
outstanding
(1) The following summarizes the departmental
allocation of the stock-based compensation
Cost of revenues $ 13 $ 21
Research and development 201 269
Selling and marketing 523 635
General and administrative 705 696
$ 1,442 $ 1,621
SkillSoft PLC
Condensed Consolidated Balance Sheets
(Unaudited, In thousands)
April 30, 2010 January 31, 2010
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and $ 89,722 $ 80,241
short-term investments
Restricted cash 2,767 2,786
Accounts receivable, net 67,827 141,828
Deferred tax assets 18,881 28,902
Prepaid expenses and other current 23,435 23,447
assets
Total current assets 202,632 277,204
Property and equipment, net 5,877 6,288
Goodwill 238,550 238,550
Intangible assets, net 4,300 5,227
Deferred tax assets 57,142 49,127
Other assets 9,951 9,835
Total assets $ 518,452 $ 586,231
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term $ 404 $ 865
debt
Accounts payable 3,095 4,519
Accrued expenses 27,118 41,386
Deferred revenue 172,786 200,369
Total current liabilities 203,403 247,139
Long term debt 38,860 83,500
Other long term liabilities 6,016 4,432
Total long-term liabilities 44,876 87,932
Total stockholders' equity 270,173 251,160
Total liabilities and stockholders' $ 518,452 $ 586,231
equity
SkillSoft PLC
Condensed Consolidated Statements of Cash Flows
(Unaudited, In thousands)
Three Months Ended
April 30,
2010 2009
Cash flows from operating activities:
Net income $ 12,603 $ 18,779
Adjustments to reconcile net income to net
cash provided by operating activities:
Share-based compensation 1,442 1,621
Depreciation and amortization 1,070 1,283
Amortization of intangible assets 928 2,487
Provision for (recovery) of bad 109 (37)
debts
Provision for income taxes - 3,709 3,288
non-cash
Non-cash interest expense 1,822 297
Tax effect related to exercise of (323) (5)
non-qualified stock options
Changes in current assets and
liabilities, net of acquisitions
Accounts receivable 73,768 81,169
Prepaid expenses, other current 307 985
assets and other assets
Accounts payable (1,424) (3,429)
Accrued expenses and other (16,671) (12,271)
long-term liabilities
Deferred revenue (27,399) (29,183)
Net cash provided by operating 49,941 64,984
activities
Cash flows from investing activities:
Purchases of property and (230) (986)
equipment
Purchases of investments (2,553) (600)
Maturity of investments 1,850 1,100
Decrease (increase) in restricted 19 (38)
cash
Net cash used in investing (914) (524)
activities
Cash flows from financing activities:
Exercise of stock options 2,990 269
Proceeds from employee stock 1,666 1,164
purchase plan
Principal payments on long term (45,101) (18,293)
debt
Acquisition of treasury stock - (9,399)
Tax effect related to exercise of 323 5
non-qualified stock options
Net cash used in financing (40,122) (26,254)
activities
Effect of exchange rate changes on (130) 730
cash and cash equivalents
Net increase in cash and cash 8,775 38,936
equivalents
Cash and cash equivalents, 76,682 37,853
beginning of period
Cash and cash equivalents, end of $ 85,457 $ 76,789
period
Source: SkillSoft
Released May 20, 2010