SumTotal® Systems, Inc., the largest provider of talent, learning and business performance technologies and services, announced its financial results for the second quarter ended June 30, 2006.
Second-Quarter 2006 Results
On a Generally Accepted Accounting Principles (“GAAP”) basis, total revenue for the second quarter of 2006 was $25.1 million, an increase of 58% from the $15.9 million reported in the second quarter of 2005. License revenue was $7.6 million in the second quarter of 2006, an increase of 49% from $5.1 million in the same quarter one year ago. Net loss, on a GAAP basis, for the second quarter of 2006 was $2.3 million, or $0.09 per share on both a basic and diluted basis, compared to a net loss of $3.4 million, or $0.16 per share in the same quarter one year ago.
Deferred revenue on a GAAP basis at the end of the second quarter increased 43% year over year to end the quarter at $28.1 million, compared to $19.7 million for the same quarter of the previous year.
On a non-GAAP basis, in the second quarter of 2006 revenue increased by 66% to $26.5 million from revenue of $16.0 million as reported for the second quarter of 2005. License revenue was $8.3 million on a non-GAAP basis, an increase of 60% from $5.2 million in the same quarter one year ago. Non-GAAP net income for the second quarter was $2.3 million, or $0.09 per share on both a basic and diluted basis, compared to a non-GAAP net loss of $2.4 million, or $0.11 per share on both a basic and diluted basis for the second quarter a year ago.
Non-GAAP results exclude the impact of certain non-cash accounting adjustments and one-time charges primarily related to acquisition accounting. A reconciliation to the GAAP results is provided in the attached statements.
“Our second quarter growth and profitability demonstrates the strength of our business model and our continued ability to execute,” said Donald Fowler, SumTotal’s chief executive officer. “We experienced solid sales activity across our targeted market segments with particularly strong contributions from the retail, financial services and manufacturing segments. We continued to grow our recurring revenue base to a new high of over 47% of total revenues in the second quarter. We are pleased with the progress we have made to date and the acceptance of our talent management platform, and remain enthusiastic about our ability to achieve our long-term growth objectives.”
During the second quarter, SumTotal Systems:
- Added North American customer wins, including solutions for talent management, with new customers such as: Alticor Inc., California Chamber of Commerce, Grant Thornton, ExecellerateHRO, Shaw Industries, Inc., The Timken Company, BlueLinx Corporation and The Weather Channel.
- Continued SumTotal Enterprise Suite Version 7 upgrades and installed base growth with more than 200 customers who have purchased or upgraded to SumTotal 7. Current quarter upgrades include Eaton Corporation, Eastman Kodak Company and Toys “R” Us, Inc.
- Expanded its international presence in new and existing markets:
- Entered the China market with learning and talent management for Liaoning Mobile, a wholly owned subsidiary of China Mobile Limited. China Mobile Limited is the leading mobile services provider in mainland China. Liaoning Mobile purchased licenses from SumTotal and its partner HP Education.
- Entered into a contract with leading global consulting and IT services company Satyam Computer Services Ltd. and partner C&S, making SumTotal 7 the backbone for the Satyam Learning Center, which supports all of their global locations.
- Expanded its Indian operation, opening a state-of-the-art office in Hyderabad, India. This new, high-tech R&D facility boasts a cutting-edge technology infrastructure.
- Strengthened its product leadership by becoming the first learning and talent management company to join the Google Enterprise Professional program, integrating the Google Search Appliance within SumTotal 7 to increase access to formal and informal knowledge and learning.
- Filed a Form S-3 shelf registration statement with the Securities and Exchange Commission for an aggregate maximum of $75 million.
For the third quarter of 2006, SumTotal Systems estimates its GAAP revenue will be between $25.5 million and $27.5 million. On a non-GAAP basis, revenue is estimated to be between $26.0 million and $28.0 million. GAAP net loss is estimated between $1.9 million, or $0.08 per share, and $0.9 million, or $0.04 per share. On a non-GAAP basis, net income is estimated to be between $2.0 million, or $0.08 per share, and $3.0 million, or $0.12 per share. The reconciling items between GAAP and non-GAAP income (loss) are estimated to be a $0.5 million adjustment to revenue, $2.2 million for amortization of intangibles and $1.2 million for stock-based compensation.
SumTotal will host an investor conference call and webcast on Tuesday, August 1, 2006, at 2:00 pm. (Pacific Time) / 5:00 pm. (Eastern Time) to discuss the financial results for the second quarter ended June 30, 2006. A live audio webcast is available to investors and the public at SumTotal Systems website.
In addition to the webcast, a telephone replay will be available on Tuesday, August 1, 2006, beginning at approximately 5:00 pm. (Pacific Time) through the close of business (Pacific Time) on Tuesday, August 8, 2006. Investors and other interested parties can access the replay by dialing the U.S. toll-free number: 800-405-2236, access code: 11065300. The international dial-in number is +1 303-590-3000, access code: 11065300.