SkillSoft reports
revenues rise

17 Jun 2003

E-learning software vendor SkillSoft has reported a modest increase in revenues for the first quarter of US$43.6m over fiscal fourth quarter 2003 of US$42.9m.

The company reported a gross margin of 87pc for its fiscal 2004 fourth quarter compared to 94pc for the fiscal 2003 fourth quarter a year ago, due to the fact that the figure a year earlier was revealed before the merger with Irish e-learning company SmartForce last year.

The latest figures from SkillSoft exclude the major costs associated with litigation battle that ensued following its acquisition of SmartForce, whereby investors are suing over alleged financial malpractice at the Irish firm which resulted in investors allegedly buying shares on the back of false financial information. The costs associated with this legal battle in terms of legal fees and damage in the marketplace could run to beyond $250m.

SkillSoft’s net loss was $12.6m, or $0.13 per diluted share for the quarter ended April 30, 2003. This net loss includes a restructuring charge of $1.2m or $0.01 per diluted share, costs in connection with the pending restatement of the historical SmartForce financial statements of $5.4m or $0.05 per diluted share, and a charge of $2.2 million or $0.02 per diluted share for the settlement of its IP Learn litigation. For the comparable year ago period, the company had a net profit of $282,000, or $0.02 per basic and diluted share.

“Our better-than-anticipated first quarter results clearly demonstrate the success of our strategy – to attract and retain customers by providing the most comprehensive e-Learning offering in the market,” commented Chuck Moran, president and CEO.

“A cornerstone of our success has always been customer satisfaction, which we believe leads to higher renewal rates. We continue to make progress toward our goal of improving our renewal rates in fiscal 2004 over our fiscal 2003 reported level of 55pc. Furthermore, our sales force – enabled with an offering no other company can match – is energized as their hard work and commitment is beginning to show in new customer wins.”

For the fiscal year ending January 31, 2004, SkillSoft is currently anticipating revenue to be at the higher end of its previously disclosed range of between $185 and $190m. Quarterly revenue distribution for the remainder of fiscal 2004, Q2 to Q4, is targeted at 24pc, 25pc, 28pc of the annual range, respectively.

The company continues to anticipate that its net loss for fiscal 2004 will be between to $0.22 and $0.23 per basic and diluted share. The company’s outlook excludes the potential negative impact of the resolution of any other litigation matters, as well as the potential impact of any future acquisitions, including potential non-recurring acquisition related-related expenses and the amortization of any purchased intangibles and deferred compensation charges resulting from an acquisition transaction

Last month, SkillSoft admitted that legal fees arising from the purchase of SmartForce cost the company approximately $5.1m, and major net losses due to goodwill impairment in the marketplace came to $250.1m.

The company had earlier told the US stock exchange watchdog, the Securties and Exchange Commission (SEC) that it would have to delay filing its audited financial results due to accounting problems caused by alleged dodgy accounting practices at SmartForce.

The legal battle in which SkillSoft unexpectedly became embroiled arose out of allegations by at least three US law firms that senior executives at SmartForce failed to provide investors with correct financial details and that untrue statements about the company’s finances were made in order to induce investors to buy shares.

By John Kennedy