PLATO Learning, Inc. (NASDAQ:TUTR), a leading provider of K�adult
computer-based and e-learning solutions, announced today that it
expects orders for the fourth quarter ended October 31, 2006, to
total approximately $25.5 million, versus $33.1 million for the
fourth quarter of 2005. As a result of fewer orders and a shift in
order mix to subscription versus perpetual license fee products,
revenues for the fourth quarter 2006 are expected to total
approximately $22.5 million to $23.5 million, versus $33.7 million
in the fourth quarter of 2005. Net loss for the quarter is expected
to be between ($2.0) million and ($3.0) million, compared to net
earnings of $2.2 million in the fourth quarter of 2005, excluding
asset impairment, restructuring and other charges in both periods.
Last year�s reported net loss for the fourth quarter was ($13.9)
million, including $16.1 million of asset impairment, restructuring
and other charges. The company�s cash and marketable securities
position remained strong and is expected to grow from the end of
third quarter 2006 to approximately $33.0 million. Deferred revenue
is also expected to grow to $42.0 million to $43.0 million,
compared to $39.1 million at the end third quarter this year and
$40.4 million at year-end 2005, reflecting the shift from perpetual
license fee to subscription orders. The Company�s previous guidance
for the fourth quarter was order growth over the fourth quarter
2005, revenues of $24.0 million to $29.0 million, a range of $1.5
million net earnings to a net loss of ($2.5) million, and growth in
cash and marketable securities and deferred revenue over the
amounts at the end of fiscal third quarter 2006. Mike Morache,
President and CEO said, �The size of our sales pipeline throughout
the quarter was sufficient to achieve an increase in orders over
last year�s fourth quarter and, in fact, was larger than the third
quarter 2006 pipeline, which generated over $34.0 million of
orders. We fell short of our expectations due to the length of time
required to close transactions, caused by greater than anticipated
effects of several key factors. Much of the business moved to
future periods and our pipeline remains strong going into fiscal
2007.� The key factors that affected orders during fourth quarter
more than anticipated were as follows: 1) The number of large
orders declined causing the average value of orders to decrease.
Lower price points for subscription products versus perpetual
license products were not offset by greater transaction volume and
multi-year agreements, which did occur in third quarter 2006. 2)
Straight CurveTM Mathematics was introduced in third quarter with
very positive reviews; however, the release did not align well with
schools� buying cycles and required new selling techniques for the
sales force, both of which affected sales more than anticipated. 3)
The new online management system, the PLATO Learning EnvironmentTM,
was introduced late in the third quarter. Though early acceptance
was strong, some current customers delayed their purchasing
decisions to wait for additional features, scheduled to be released
in the next several months. This resulted in both an accelerated
decline in perpetual license sales and lower than anticipated
subscription sales. 4) The new sales organization continued to
mature, but was not able to close the number of forecasted
transactions that a more experienced organization would have
closed; therefore, transactions were deferred to future periods.
�As I�ve discussed in the past, we are going through simultaneous
transitions that are essential for future growth, including
replacing legacy products, introducing new product lines and
platforms, entering new market segments, converting from a
perpetual license to a subscription based business model, and
establishing a new sales organization. These transitions will
result in variable financial results during the transition period,
but we firmly believe in our strategy and capability for long-term
success. To that end, we will continue to aggressively invest in
our product development strategy,� said Morache. �Given our current
level of performance, we are taking actions to further reduce the
operating costs of the business until we see sustained improvements
in orders and sales productivity. The sales force has been
re-aligned and reduced to put more focus on the highest potential
geographic markets, and the inside sales function has been assigned
the territories where the potential is less concentrated. The
realignment and the availability of our new products for the prime
selling season in 2007 are expected to drive strong order growth in
fiscal year 2007 over 2006,� said Morache. Final revenues and
operating results for the fourth quarter will be announced on
December 12, 2006, following completion of the Company�s regular
quarterly closing and analysis procedures and audit by the
Company�s independent auditors. Final results could vary from those
currently projected. The company also expects to provide guidance
for fiscal year 2007 at that time. Conference Call A conference
call to discuss this announcement is scheduled for today at 3:45
p.m. CST (Central Standard Time). The dial-in number for this call
is 1-888-230-1059 in the U.S. and Canada, and 1-612-332-0630
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 7:15 p.m. CST on
November 9, 2006, until midnight on November 16, 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 848128. 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 American 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.
(NASDAQ:TUTR), a leading provider of K-adult computer-based and
e-learning solutions, announced today that it expects orders for
the fourth quarter ended October 31, 2006, to total approximately
$25.5 million, versus $33.1 million for the fourth quarter of 2005.
As a result of fewer orders and a shift in order mix to
subscription versus perpetual license fee products, revenues for
the fourth quarter 2006 are expected to total approximately $22.5
million to $23.5 million, versus $33.7 million in the fourth
quarter of 2005. Net loss for the quarter is expected to be between
($2.0) million and ($3.0) million, compared to net earnings of $2.2
million in the fourth quarter of 2005, excluding asset impairment,
restructuring and other charges in both periods. Last year's
reported net loss for the fourth quarter was ($13.9) million,
including $16.1 million of asset impairment, restructuring and
other charges. The company's cash and marketable securities
position remained strong and is expected to grow from the end of
third quarter 2006 to approximately $33.0 million. Deferred revenue
is also expected to grow to $42.0 million to $43.0 million,
compared to $39.1 million at the end third quarter this year and
$40.4 million at year-end 2005, reflecting the shift from perpetual
license fee to subscription orders. The Company's previous guidance
for the fourth quarter was order growth over the fourth quarter
2005, revenues of $24.0 million to $29.0 million, a range of $1.5
million net earnings to a net loss of ($2.5) million, and growth in
cash and marketable securities and deferred revenue over the
amounts at the end of fiscal third quarter 2006. Mike Morache,
President and CEO said, "The size of our sales pipeline throughout
the quarter was sufficient to achieve an increase in orders over
last year's fourth quarter and, in fact, was larger than the third
quarter 2006 pipeline, which generated over $34.0 million of
orders. We fell short of our expectations due to the length of time
required to close transactions, caused by greater than anticipated
effects of several key factors. Much of the business moved to
future periods and our pipeline remains strong going into fiscal
2007." The key factors that affected orders during fourth quarter
more than anticipated were as follows: 1) The number of large
orders declined causing the average value of orders to decrease.
Lower price points for subscription products versus perpetual
license products were not offset by greater transaction volume and
multi-year agreements, which did occur in third quarter 2006. 2)
Straight Curve(TM) Mathematics was introduced in third quarter with
very positive reviews; however, the release did not align well with
schools' buying cycles and required new selling techniques for the
sales force, both of which affected sales more than anticipated. 3)
The new online management system, the PLATO Learning
Environment(TM), was introduced late in the third quarter. Though
early acceptance was strong, some current customers delayed their
purchasing decisions to wait for additional features, scheduled to
be released in the next several months. This resulted in both an
accelerated decline in perpetual license sales and lower than
anticipated subscription sales. 4) The new sales organization
continued to mature, but was not able to close the number of
forecasted transactions that a more experienced organization would
have closed; therefore, transactions were deferred to future
periods. "As I've discussed in the past, we are going through
simultaneous transitions that are essential for future growth,
including replacing legacy products, introducing new product lines
and platforms, entering new market segments, converting from a
perpetual license to a subscription based business model, and
establishing a new sales organization. These transitions will
result in variable financial results during the transition period,
but we firmly believe in our strategy and capability for long-term
success. To that end, we will continue to aggressively invest in
our product development strategy," said Morache. "Given our current
level of performance, we are taking actions to further reduce the
operating costs of the business until we see sustained improvements
in orders and sales productivity. The sales force has been
re-aligned and reduced to put more focus on the highest potential
geographic markets, and the inside sales function has been assigned
the territories where the potential is less concentrated. The
realignment and the availability of our new products for the prime
selling season in 2007 are expected to drive strong order growth in
fiscal year 2007 over 2006," said Morache. Final revenues and
operating results for the fourth quarter will be announced on
December 12, 2006, following completion of the Company's regular
quarterly closing and analysis procedures and audit by the
Company's independent auditors. Final results could vary from those
currently projected. The company also expects to provide guidance
for fiscal year 2007 at that time. Conference Call A conference
call to discuss this announcement is scheduled for today at 3:45
p.m. CST (Central Standard Time). The dial-in number for this call
is 1-888-230-1059 in the U.S. and Canada, and 1-612-332-0630
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 7:15 p.m. CST on
November 9, 2006, until midnight on November 16, 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 848128. 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 American 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(R) 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.
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