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I will be shocked if SKIL continues on its own for much longer

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May 22, 2009 – Comments (0) | RELATED TICKERS: SKIL.DL

There are way too many bigger software companies that eat software stocks under $1B for lunch whenever they see a small player making huge gains in a short time period. One quick beast to look at is Oracle which has been swallowing smaller players like as if its one giant fish eating all the smaller fish.

 

SKIL net income doubled  over same period a year ago. Keep in mind this is during a recession???

FIRST QUARTER REVENUE OF $76.4 MILLION AND NET INCOME OF $18.8 MILLION

Related QuotesSymbolPriceChangeSKIL8.38+1.18{"s" : "skil","k" : "c10,l10,p20,t10","o" : "","j" : ""}

- FIRST QUARTER DILUTED EPS OF $0.19

- FIRST QUARTER ADJUSTED EBITDA OF $32.7 MILLION

- REDUCED DEBT BY $18.3 MILLION IN THE FIRST QUARTER AND REPURCHASED 1.3 MILLION SHARES FOR $9.4 MILLION

- CASH, RESTRICTED CASH AND INVESTMENTS OF $81.2 MILLION

NASHUA, N.H., May 21 /PRNewswire-FirstCall/ -- SkillSoft PLC (Nasdaq: SKIL - News), 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 2010.

FISCAL 2010 FIRST QUARTER RESULTS

The Company reported total revenue of $76.4 million for its first quarter ended April 30, 2009 of its fiscal year ending January 31, 2010 (fiscal 2010), which represented a 6% decrease over the $81.6 million reported in its first quarter of the fiscal year ended January 31, 2009 (fiscal 2009). Revenue for the first quarter was negatively impacted by approximately $5.2 million due to the change in foreign exchange rates during the first quarter as compared to the foreign exchange rates during the first quarter of fiscal 2009. The Company's total deferred revenue at April 30, 2009 was approximately $174.0 million as compared to approximately $185.6 million at April 30, 2008. The 6% or approximately $11.6 million decrease in deferred revenue is due to the change in foreign exchange rates at April 30, 2009 as compared to foreign exchanges rates at April 30, 2008.

On a US generally accepted accounting principles (US GAAP) basis, the Company's net income was $18.8 million, or $0.19 per basic and diluted share, for the first quarter of fiscal 2010 as compared to net income of $7.1 million, or $0.07 per basic and $0.06 per diluted share, for the first quarter of fiscal 2009.

"We are pleased that our fiscal 2010 first quarter results came in ahead of the EPS range we forecasted in March 2009 for this period. Our positive start in the first quarter of fiscal 2010 reflects our focus on EPS, cash flow and adjusted EBITDA targets during these challenging economic times," said Chuck Moran, President and Chief Executive Officer. "For fiscal 2010, in response to the cautious customer spending environment, we are moving forward with our plan to add sales resources by hiring more than twenty field sales people and at least five additional tele-sales people. These additional resources will increase our cost structure in subsequent quarters as compared to the first quarter due to the fact that our hiring is not yet completed and a full quarter cost impact was not recognized in the first quarter," commented Moran.

Gross margin increased to 90% for the Company's fiscal 2010 first quarter as compared to 87% for the fiscal 2009 first quarter. The increase in gross margin for the fiscal 2010 first quarter includes a reduction in amortization of intangible assets related to acquired technology and capitalized software development costs of 2% of revenue, or $1.7 million.

Research and development expenses decreased to $9.0 million in the fiscal 2010 first quarter from $13.5 million in the fiscal 2009 first quarter. This decrease was primarily due to reductions in research and development personnel, outside service contractors and outsource partners. Research and development expenses were 12% of revenue for the fiscal 2010 first quarter as compared to 17% for the fiscal 2009 first quarter.

Sales and marketing expenses decreased to $22.4 million in the fiscal 2010 first quarter from $29.7 million in the fiscal 2009 first quarter. This decrease was primarily due to reductions in commission expense, non field sales personnel and demand generation marketing expenses. A further decrease is due to a major customer event held in the prior year's first quarter that will be a second quarter event in fiscal 2010. Sales and marketing expenses were further reduced by the change in foreign exchange rates during the first fiscal quarter of fiscal 2010 as compared to the first fiscal quarter of fiscal 2009 by approximately $1.7 million. Sales and marketing expenses were 29% of revenue for the fiscal 2010 first quarter as compared to 36% for the fiscal 2009 first quarter.

General and administrative expenses decreased to $7.8 million in the fiscal 2010 first quarter from $8.9 million in the fiscal 2009 first quarter. The decrease in general and administrative expenses was primarily due to a decrease in legal fees and professional expenses incurred in connection with the feasibility analysis related to the Company's business realignment strategy, a reduction in accounting and tax service fees related to ongoing operations and a decrease in consulting and contractor expenses. General and administrative expenses were 10% of revenue for the fiscal 2010 first quarter as compared to 11% for the fiscal 2009 first quarter.

The Company's interest income decreased to $0.1 million in the fiscal 2010 first quarter from $0.6 million in the fiscal 2009 first quarter. The decrease in interest income was primarily due to a decline in interest rates and a reduction in interest bearing investments. The Company's interest expense decreased to $2.4 million for the fiscal 2010 first quarter as compared to $4.0 million for the fiscal 2009 first quarter. This decrease was primarily due to principal payments made to reduce the Company's outstanding debt.

The Company's effective tax rate was 22.6% 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. This compares to a 38.6% effective tax rate for the fiscal 2009 first quarter, which consisted of a cash tax provision of approximately $0.9 million (8.1%) and a non-cash tax provision of approximately $3.6 million (30.5%). The decrease in the current year effective tax rate is primarily due to the geographic distribution of worldwide earnings.

An important leverage covenant included in our credit facility is adjusted EBITDA. Adjusted EBITDA for the fiscal 2010 first quarter was $32.7 million as compared to $24.3 million for the fiscal 2009 first quarter. For the fiscal 2010 first quarter, our trailing 12 month debt to adjusted EBITDA ratio was approximately 0.9. Adjusted EBITDA for the fiscal 2010 first quarter is calculated by taking net income ($18.8 million) and adding back depreciation and amortization ($1.3 million), amortization of intangible assets and capitalized software development costs ($2.5 million), stock-based compensation ($1.6 million), interest expense ($2.4 million), provision for income taxes ($5.5 million), and other expense net of interest income ($0.6 million).

SkillSoft had approximately $81.2 million in cash, cash equivalents, short-term investments, restricted cash and long-term investments as of April 30, 2009 as compared to $42.7 million as of January 31, 2009. This increase is primarily due to cash provided by operations of $65.0 million. The increase was partially offset by principal payments on long term debt of $18.3 million, payment of $9.4 million to repurchase shares and purchases of property and equipment of $1.0 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 2010 first quarter. On a net basis, which considers only receivable balances for which revenue has been recorded; DSOs were 6 days in the fiscal 2010 first quarter as compared to 19 days in the year ago period and 9 days in the fourth quarter of fiscal 2009. On a gross basis, which considers all items billed as receivables, DSOs were 77 days in the fiscal 2010 first quarter as compared to 109 days in the year ago quarter and 159 days in the fourth quarter of fiscal 2009. The decrease in gross and net basis DSOs is due to improvements in customer collection efforts.

FISCAL 2010 AND FISCAL 2010 SECOND QUARTER OUTLOOK

As a result of reported revenues for the fiscal 2009 first quarter, the Company now anticipates annual revenues to be in the range of $300 million to $310 million as compared to the annual revenue range of $300 million to $312 million as set forth in its press release issued on March 16, 2009. Additionally the Company anticipates that its provision for income taxes is expected to be $18 million to $21 million or approximately 24% to 27% of pre-tax net income as compared to $19 million to $21 million or approximately 25% to 27% of pre-tax net income as set forth in its press release issued on March 16, 2009. The non-cash tax provision is expected to be $12 million to $14 million or approximately 16% to 18% of pre-tax net income as compared to $13 million to $14 million or 17% to 18% of pre-tax net income as set forth in its press release issued on March 16, 2009. The revised tax provision outlook is due to the expected geographic distribution of worldwide revenues and earnings. The Company continues to anticipate its adjusted net income for fiscal 2010 will be between $55.0 million and $58.0 million, or $0.55 to $0.58 per basic and diluted share. Adjusted net income represents GAAP net income, excluding foreign exchange gains or losses.

For the second quarter of fiscal 2010 ending July 31, 2009, the Company currently anticipates revenue to be in the range of $75.0 to $77.0 million. The Company also currently anticipates adjusted net income for the fiscal 2010 second quarter to be between $13.0 million and $14.0 million, or $0.13 to $0.14 per basic and diluted share.

The adjusted EBITDA projected range for fiscal 2010 remains unchanged at $100.0 million to $105.0 million as set forth in its press release issued on March 16, 2009. Adjusted net income and adjusted EBITDA are non-GAAP financial measures within the meaning of applicable SEC regulations. SkillSoft is presenting these measures for fiscal 2010 because it believes that these measures present investors and debt holders with meaningful information about the Company's historical and projected operating performance for fiscal 2010.

The earnings outlook for the second quarter of fiscal 2010 and the annual fiscal 2010 results also does not take into account the potential positive or negative impact from changes in currency exchange rates after April 30, 2009, the potential negative impact of the resolution of litigation matters, potential restructuring charges or the potential impact of any future acquisitions or divestitures, including potential non-recurring acquisition related expenses and the amortization of any purchased intangibles and deferred compensation charges resulting from a future acquisition transaction. The outlook also does not take into account the effect of a public offering or other financing arrangement, our share buyback program or debt restructuring that could impact interest income/expenses and/or outstanding shares and thereby the Company's EPS outlook.


 

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