PLATO Learning Reports Third Quarter 2009 Results
PLATO Learning, Inc. — Tuesday, September 01, 2009
Third Quarter Year-Over-Year Highlights: Subscription Orders Grow 33% to $23.5 Million
MINNEAPOLIS--(via BUSINESS WIRE)--PLATO Learning, Inc. (NASDAQ:TUTR), a leading provider of K–adult e-learning solutions, today announced unaudited results for its fiscal 2009 third quarter ended July 31, 2009.
Total revenue for the third quarter was $16.7 million, compared to $18.6 million in the third quarter of 2008. Subscription revenue increased $1.6 million, or 17%, to $10.8 million on the Company’s growing base of subscription customers, while revenues from legacy perpetual products and related software maintenance declined $2.9 million, or 46%, to $3.5 million, as sales of these non-strategic products and services continue their natural decline. Continued improvements in gross margins and operating efficiencies resulted in the Company reporting its third consecutive quarter of profitability. Net income for the third quarter was $184,000, or $0.01 per share, compared to a net loss of ($2.1) million, or ($0.09) per share, a year ago. The third quarter 2008 net loss includes restructuring charges of $0.8 million, or $0.04 per share. Subscription orders grew 33% to $23.5 million compared to $17.7 million in the prior year quarter. Total orders for the quarter grew 13% to $31.2 million.
Vin Riera, PLATO Learning President and CEO said, “Our fiscal third quarter occurs during the primary buying season in the education market, and we are pleased to report strong financial results for this important period in our business. Compared to our third quarter last year, subscription orders and revenues grew at double-digit rates, gross margins improved, operating expenses declined, cash balances grew, and we achieved our third consecutive quarter of profitability.”
Mr. Riera continued, “During the quarter, we added 176 school districts and community colleges as first-time subscribers to PLE™. Although the budget environment remains difficult for our customers, we continued to experience strong new and recurring demand in the quarter for instructional solutions delivered on PLE™. Compared to the third quarter of 2008, total PLE™ orders grew nearly 50% to $21.3 million. Nearly two-thirds of PLE orders in the quarter came from new customers or expansions of existing customer installations, with the remainder coming from our increasing base of renewing customers. Our renewal rate in the third quarter was approximately 90%, and our dollar weighted average subscription term increased to 18.5 months, from 13.9 months in the third quarter of 2008. We view both these measures as strong indicators of the effectiveness and long-term value of our solutions to our customers.”
Subscription margins in the third quarter improved 12 percentage points to 62%, resulting in an improvement in total gross margins for the quarter to 57%, compared to 50% in the same quarter last year. The improvement in subscription margins reflects 17% growth in subscription revenues, and a decline in subscription product amortization. Operating expenses in the third quarter decreased 10% to $9.4 million, compared to non-GAAP operating expenses before restructuring charges of $10.4 million in the same quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measure), were $3.4 million in the third quarter of 2009, compared to adjusted EBITDA of $3.1 million in the third quarter of 2008.
Cash and cash equivalents at July 31, 2009 totaled $14.2 million, an increase of $3.9 million from the end of the second quarter 2009, and a $2.3 million increase from the end of the third quarter 2008, reflecting the growth in orders and lower spending in the quarter. The third quarter 2009 represented the Company’s first reported year-over-year increase in cash balances since the fourth quarter of fiscal 2005.
In light of the Company’s strong third quarter performance, it now expects fiscal year 2009 subscription order growth to be in the range of 25% to 30%, versus growth in the mid-teens as previously expected. Cash balances are expected to increase from $14.2 million at the end of the third quarter, to between $25 million and $27 million at fiscal year end, up from previous expectations of approximately $20 million. The Company’s expectations for fiscal 2009 subscription revenue remain unchanged at low double-digit growth given the nature of subscription revenue recognition, the timing of orders, and the effect of longer subscription contracts on near-term revenue. Profitability for fiscal 2009 remains the Company’s goal; however, specific earnings guidance is not being provided.
A conference call to discuss this announcement is scheduled for today, September 1, 2009, at 9:00 am CT (10:00 am ET). The dial-in number for this call is 877-941-2068 in the U.S. and Canada, and 480-629-9712 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 September 1, 2009, until midnight September 8, 2009. 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 4145401#. 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.
Contact: PLATO Learning, Inc., Rob Rueckl, 952-832-1000, Chief Financial Officer