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SumTotal Systems Reports First-Quarter Results GAAP Revenue Grows 45% Year on Year, Non-GAAP Revenue Up 55%
MOUNTAIN VIEW, Calif. – SumTotal™ Systems, Inc. (Nasdaq: SUMT), the largest provider of talent, learning and business performance technologies and services, announced its financial results for the first quarter ended March 31, 2006.
First-Quarter 2006 Results
On a Generally Accepted Accounting Principles (“GAAP”) basis, total revenue for the first quarter of 2006 was $24.3 million, an increase of 45% from the $16.7 million reported in the first quarter of 2005. License revenue was $7.3 million in the first quarter of 2006, an increase of 31% from $5.5 million in the same quarter one year ago. Net loss, on a GAAP basis, for the first quarter of 2006 was $4.4 million, or $0.18 per share on both a basic and diluted basis, compared to a net loss of $2.6 million, or $0.13 per share in the same quarter one year ago.
On a non-GAAP basis, in the first quarter of 2006, revenue increased by 55% to $26.3 million from non-GAAP revenue of $17.0 million as reported for the first quarter of 2005. License revenue was $8.3 million on a non-GAAP basis, an increase of 47% from $5.6 million in the same quarter one year ago. Non-GAAP net income for the first quarter was $0.9 million, or $0.04 per share on both a basic and diluted basis, compared to a net loss of $0.7 million, or $0.04 per share on both a basic and diluted basis for the first quarter a year ago.
Deferred revenue on a GAAP basis at the end of the first quarter increased 40% year over year to end the quarter at $26.4 million, compared to $18.8 million for the same quarter of the previous year.
Non-GAAP results exclude the impact of certain non-cash accounting adjustments and one-time charges primarily related to acquisition accounting. These are described in more detail in the attached exhibits.
“The first quarter of 2006 was a solid start to what we believe will be an exciting year for SumTotal,” said Donald Fowler, SumTotal’s chief executive officer. “During the quarter, we continued to execute on our plan, focusing on growing license and service revenue with new marquee customers and channels, while leveraging our installed base. Our focus on growing our recurring revenue base is also paying dividends with over 45% of our revenue in the first quarter coming from this stream. This improves the predictability of our business and provides a strong foundation for solid growth. With our current level of momentum and footprint in the learning management market, we are well positioned to expand our talent management offering and capture additional market opportunities.”
Recent Highlights
- Released the newest version of its award-winning enterprise software suite, SumTotal 7.2. The new platform will enable employers to manage talent, learning and performance across their workforces.
- Signed a $13 million contract, the largest in SumTotal's history, to deliver learning and performance management software and services over eight years to the first customer under SumTotal's partnership with ExcellerateHRO, the jointly owned human resources outsourcing business of EDS and Towers Perrin.
- Named the top provider of training and development outsourcing by HRO Today Magazine.
- Promoted David Crussell to chief operating officer to drive the next level of growth and customer success in the company’s core learning market.
- Resolved patent dispute with IpLearn, LLC, releasing SumTotal from all claims related to the pending litigation.
- Added new customer wins in North America including Charles Schwab, Wegmans Food Markets, Petco, Quicken Loans and MultiCare Health Systems.
- Expanded its international presence with new marquee customers, including DHL Mexico, Kuwait News Agency, ICICI Bank Limited and Tarsus Representaciones.
Guidance
For the second quarter of 2006, SumTotal Systems estimates its GAAP revenue will be between $23.6 million and $25.6 million. On a non-GAAP basis, revenue is estimated to be between $25 million and $27 million. GAAP net loss is estimated between $3.1 million, or $0.12 per share, and $2.1 million, or $0.08 per share. On a non-GAAP basis, net income is estimated to be between $1.5 million, or $0.06 per share, and $2.5 million, or $0.10 per share. The reconciling items between GAAP and non-GAAP income (loss) are estimated to be a $1.4 million adjustment to revenue, $2.2 million amortization of intangibles and $1.0 million for stock-based compensation.
Conference Call
SumTotal will host an investor conference call and webcast on Tuesday, May 2, 2006, at 2:00 p.m. (Pacific Time) / 5:00 p.m. (Eastern Time) to discuss the financial results for the first quarter ended March 31, 2006. A live audio webcast is available to investors and the public at: www.sumtotalsystems.com/company/investors.
In addition to the webcast, a telephone replay will be available on Tuesday, May 2, 2006, beginning at approximately 5:00 P.M. (Pacific Time) through the close of business (Pacific Time) on Tuesday, May 9, 2006. Investors and other interested parties can access the replay by dialing the U.S. toll-free number: 800-405-2236, access code: 11058409. The international dial-in number is +1 303-590-3000, access code: 11058409.
About SumTotal Systems Inc.
SumTotal Systems, Inc. (NASDAQ: SUMT) is the largest provider of talent, learning and business performance technologies and services. SumTotal deploys mission-critical solutions that align learning with organizational and business goals to generate significant bottom-line results. With more than 17 million users worldwide, SumTotal has helped accelerate performance and profits for more than 1,500 of the world’s best-known companies and government agencies including Accenture, Aetna, Cendant, DaimlerChrysler, Delta Air Lines, Harley-Davidson, Microsoft, Novartis, PNC Bank, U.S. Army, U.S. Air Force, U.S. Navy, U.S. Coast Guard, U.S. Bancorp, United Airlines, Vodafone, Wachovia and Wyeth. SumTotal has offices in the United States, London, Paris, Singapore, Sydney, Tokyo, Hong Kong and Hyderabad, India. For more information about SumTotal's products and services, visit www.sumtotalsystems.com.
SumTotal and the SumTotal logo are trademarks or registered trademarks of SumTotal Systems, Inc. or its affiliates in the United States or other countries. Other names may be trademarks of their respective owners.
SAFE HARBOR STATEMENT/ FORWARD-LOOKING
Information in this press release and the accompanying conference call contains forward-looking statements and management’s estimation regarding the numbers for the first quarter ended March 31, 2006. These statements represent SumTotal Systems’ expectations or beliefs concerning its results and future events, and include statements, among others, regarding its financial guidance regarding estimated GAAP and non-GAAP revenue, loss, profitability, backlog, expenses, charges related to stock-based compensation, amortization of intangibles, revenue adjustments and results of adopting SFAS No. 123R; continued growth in deferred revenue balance and pipeline; the company’s competitive position, including its market share and leadership position; the company’s ability to execute; and the company’s product leadership. These statements are not historical facts or guarantees of future performance or events; are based on current expectations, estimates, beliefs, assumptions, goals and objectives; and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed or implied by these statements. Readers of this press release and listeners to the accompanying conference call are cautioned not to place undue reliance on any forward-looking statements. Additional factors that could cause actual results to differ include, but are not limited to, (i) the ability to successfully expand product distribution and service offerings and increase market share; (ii) failure to maintain or increase quarterly bookings or revenue or maintain expense levels; (iii) unanticipated changes to the company’s estimated charges related to stock-based compensation, amortization of intangibles, revenue adjustments and results of adopting SFAS No. 123R; (iv) failure to comply with the covenants in the company’s credit facility that could result in a default, thereby causing a foreclosure or sale of our assets; (v) the acceptance of SumTotal Enterprise Suite 7.2 and future product offerings; (vi) the ability to successfully implement the company’s solutions; (vii) significant current and expected additional competition causing, among other things, pricing pressure; (viii) future litigation that may result in additional expenses, potential adverse judgments or injunctions enjoining the shipment of the company’s products; (ix) the ability to attract and retain highly qualified employees, and the risk of losing employees; (x) the inability to fix in a timely fashion unanticipated bugs, errors or defects that materially impact the functionality or usability of our product line, or unanticipated problems in customer upgrades to the new product line; (xi) other market conditions that include risks and uncertainties such as risks associated with financial, economic, political, terrorist activity and other uncertainties; and (xii) other events and other important factors disclosed previously and from time to time in SumTotal Systems’ filings with the Securities and Exchange Commission, including the company’s annual report on Form 10-K, and Form 8-Ks. SumTotal Systems assumes no obligation to update the information in this press release or in the accompanying conference call.
SumTotal Systems, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
March 31, December 31,
2006 2005
--------- ------------
Assets
-----------------------------------------------
Current assets:
Cash, cash equivalents and restricted cash $ 17,795 $ 18,489
Short term investments 653 657
Accounts receivable, net 20,717 25,207
Prepaid expenses and other current assets 3,938 3,484
--------- ---------
Total current assets 43,103 47,837
Property and equipment, net 4,181 4,210
Goodwill 62,306 62,306
Intangible assets, net 23,378 25,705
Other assets 1,472 1,489
--------- ---------
Total assets $134,440 $141,547
========= =========
Liabilities and Stockholders' Equity
-----------------------------------------------
Current liabilities:
Accounts payable $ 3,039 $ 2,845
Accrued compensation and benefits 5,524 5,509
Other accrued liabilities 2,452 4,048
Restructuring accrual 866 1,831
Deferred revenue 25,322 26,354
Provision for litigation settlement 718 970
Notes payable 4,889 4,877
--------- ---------
Total current liabilities 42,810 46,434
Non-current liabilities
Other accrued liabilities, non-current 220 176
Restructuring accrual, non-current 702 808
Deferred revenue, non-current 1,091 369
Provision for litigation settlement, non-
current 2,137 2,333
Notes payable, non-current 12,031 13,125
--------- ---------
Total liabilities 58,991 63,245
Commitments and contingencies - -
Stockholders' equity 75,449 78,302
--------- ---------
Total liabilities and stockholders'
equity $134,440 $141,547
========= =========
SumTotal Systems, Inc.
GAAP Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three-Months Ended
March 31,
-------------------
2006 2005
--------- --------
Revenue:
License $ 7,279 $ 5,543
Service and maintenance 17,022 11,197
-------- --------
Total revenue 24,301 16,740
-------- --------
Cost of revenue:
License 180 154
Service and maintenance 8,712 5,166
Amortization of intangible assets 2,327 1,388
-------- --------
Total cost of revenue 11,219 6,708
-------- --------
Gross margin 13,082 10,032
-------- --------
Operating expenses:
Research and development 4,099 2,920
Sales and marketing 7,243 6,204
General and administrative 5,811 3,628
-------- --------
Total operating expenses 17,153 12,752
-------- --------
Loss from operations (4,071) (2,720)
Interest expense (435) -
Interest income 163 165
Other expense, net (76) (46)
-------- --------
Loss before provision for income taxes (4,419) (2,601)
Provision for income taxes 17 11
-------- --------
Net loss $(4,436) $(2,612)
======== ========
Net loss per share, basic and diluted $ (0.18) $ (0.13)
======== ========
Weighted average common shares outstanding, basic
and diluted 24,698 20,797
======== ========
SumTotal Systems, Inc.
Non-GAAP Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three-Months
Ended March 31
-----------------
2006 2005
-------- --------
Revenue:
License $ 8,286 5,636
Service and maintenance 18,036 11,370
-------- --------
Total revenue 26,322 17,006
-------- --------
Cost of revenue:
License 180 160
Service and maintenance 8,474 5,152
-------- --------
Total cost of revenue 8,654 5,312
-------- --------
Gross margin 17,668 11,694
-------- --------
Operating expenses:
Research and development 3,976 2,897
Sales and marketing 7,001 6,103
General and administrative 5,408 3,534
-------- --------
Total operating expenses 16,385 12,534
-------- --------
Income (loss) from operations 1,283 (840)
Interest expense (435) -
Interest income 163 165
Other expense, net (76) (46)
-------- --------
Income (loss) before provision for income taxes 935 (721)
Provision for income taxes 17 11
-------- --------
Net income (loss) $ 918 $ (732)
======== ========
Net income (loss) per share, basic $ 0.04 $ (0.04)
======== ========
Net income (loss) per share, diluted $ 0.04 $ (0.04)
======== ========
Weighted average common shares outstanding, basic 24,698 20,797
======== ========
Weighted average common shares outstanding, diluted 25,094 20,797
======== ========
SumTotal Systems, Inc.
Reconciliation of GAAP to Non-GAAP Condensed Consolidated
Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three-Months Ended Three-Months Ended
March 31, 2006 March 31, 2005
------------------------- -------------------------
GAAP Adjust- Non- GAAP Adjust- Non-
ments GAAP ments GAAP
-------- -------- ------- -------- -------- -------
Revenue:
License $7,279 $1,007 A $8,286 $5,543 $93 A $5,636
Service and
maintenance 17,022 1,014 A 18,036 11,197 173 A 11,370
-------- ------- ------- -------- ------- -------
Total revenue 24,301 2,021 26,322 16,740 266 17,006
-------- ------- ------- -------- ------- -------
Cost of revenue:
License 180 180 154 6 A 160
Service and
maintenance 8,712 (238)B 8,474 5,166 (14)B 5,152
Amortization of
intangible
assets 2,327 (2,327)C - 1,388 (1,388)C -
-------- ------- ------- -------- ------- -------
Total cost of
revenue 11,219 (2,565) 8,654 6,708 (1,396) 5,312
-------- ------- ------- -------- ------- -------
Gross margin 13,082 4,586 17,668 10,032 1,662 11,694
-------- ------- ------- -------- ------- -------
Operating expenses:
Research and
development 4,099 (123)B 3,976 2,920 (23)B 2,897
Sales and
marketing 7,243 (242)B 7,001 6,204 (101)B 6,103
General and
administrative 5,811 (403)B 5,408 3,628 (94)B 3,534
-------- ------- ------- -------- ------- -------
Total operating
expenses 17,153 (768) 16,385 12,752 (218) 12,534
-------- ------- ------- -------- ------- -------
Loss from
operations (4,071) 5,354 1,283 (2,720) 1,880 (840)
Interest expense (435) (435) - -
Interest income 163 163 165 165
Other expense, net (76) (76) (46) (46)
-------- ------- ------- -------- ------- -------
Income (loss)
before provision
for income taxes (4,419) 5,354 935 (2,601) 1,880 (721)
Provision for
income taxes 17 17 11 11
-------- ------- ------- -------- ------- -------
Net income
(loss) $(4,436) $5,354 $918 $(2,612) $1,880 $(732)
======== ======= ======= ======== ======= =======
Net income (loss)
per share, basic $(0.18) $0.04 $(0.13) $(0.04)
======== ======= ======== =======
Net income (loss)
per share, diluted $(0.18) $0.04 $(0.13) $(0.04)
======== ======= ======== =======
Weighted average
common shares
outstanding, basic 24,698 24,698 20,797 20,797
======== ======= ======== =======
Weighted average
common shares
outstanding,
diluted 24,698 25,094 20,797 20,797
======== ======= ======== =======
Footnotes:
(1) SumTotal Systems includes these non-GAAP financial measures
because we believe these measures are useful to investors in that
they allow for greater transparency to certain line items in our
financial statements. We have historically reported similar non-
GAAP financial measures to our investors and believe that the
inclusion of comparative numbers provides consistency in our
financial reporting. Investors are encouraged to review the
reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP financial measures as provided herein.
(2) The non-GAAP results the impact of certain non-cash items related
to purchase accounting, non-cash expenses for stock-based
compensation including SFAS 123R, and certain non recurring cash
items such as restructuring charges and litigation settlements.
(3) SumTotal Systems' management refers to these non-GAAP financial
measures, such as non-GAAP operating margins and net income, in
making operating decisions because the measures provide meaningful
supplemental information regarding our operational performance and
our ability to invest in research and development and fund
acquisitions and capital expenditures. In addition, these non-GAAP
financial measures facilitate management's internal comparisons to
our historical operating results and comparisons to competitors'
operating results. Investors are encouraged to review the
reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP financial measures as provided herein.
A To include Pathlore and Docent, Inc.'s deferred revenue and costs
that were excluded as a result of adjustments to fair value as
part of acquisition accounting
B To exclude amortization of stock-based compensation.
C To exclude amortization of acquired intangible assets.
Media Contacts
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Lauren.sell@porternovelli.com
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