SkillSoft Reports First Quarter Fiscal 2008 Results

Including Revenue of $57.1 Million and EPS of $0.07; NETg Acquisition Completed

The Company reported total revenue of $57.1 million for the first quarter of the fiscal 2008, which represented a 4% increase over the $54.7 million reported in the first quarter of the fiscal year ended January 31, 2007 (fiscal 2007). Substantially all of the Company's revenues were from its Multi-Modal Learning segment, including $56.9 million for the first quarter of fiscal 2008, which represented an 8% increase over the $52.9 million of Multi- Modal Learning segment revenue reported in the first quarter of fiscal 2007. The first quarter of fiscal 2008 is the last quarter that will include revenues from the Company's Retail Certification segment as a result of the amortization of the deferred revenue retained by the Company following the sale of certain assets related to SmartCertify in the first quarter of the fiscal year ended January 31, 2006 (fiscal 2006). Deferred revenue at April 30, 2007 was approximately $123 million compared to approximately $118 million at April 30, 2006. The increase in deferred revenue reflects an increase in billing, including approximately $0.9 million from the SkillSoft Leadership Development Channel acquired from Targeted Learning Corporation (LDC), which was partially offset by a reduction of approximately $3.5 million of deferred revenue due to the SmartCertify disposition at the end of the fiscal 2006 first quarter. Therefore, deferred revenue supporting our Multi-Model Learning segment at April 30, 2007 grew year over year by approximately 8% compared to 6% growth in the prior year.

The Company's net income was $7.5 million, or $0.07 per basic and diluted share, for the fiscal 2008 first quarter. The fiscal 2008 first quarter net income includes restatement expenses of approximately $0.9 million for legal fees incurred in connection with the ongoing SEC investigation regarding the restatement of the SmartForce historical financial statements including the costs incurred to respond to the SEC's inquiries related to the historical option granting practices of the former SmartForce. Significant non-cash charges included in the fiscal 2008 first quarter results were $4.1 million, which consisted of $0.8 million for amortization of intangible assets and capitalized software development costs, $1.4 million of stock -based compensation expense and $1.9 million for the non-cash provision for income tax. SkillSoft reported net income of $4.1 million, or $0.04 per basic and diluted share, for the first quarter of fiscal 2007. The fiscal 2007 first quarter net income included restatement expenses for the ongoing SEC investigation of approximately $0.3 million. Significant non-cash charges included in the fiscal 2007 first quarter results were $5.7 million, which consisted of $2.1 million for amortization of intangible assets and capitalized software development costs, $1.8 million of stock-based compensation expense and $1.8 million for the non-cash provision for income tax.

"We are pleased with our execution at the start of the new fiscal year and believe that our earnings performance is a reflection of that success,"
commented Chuck Moran, President and Chief Executive Officer. "We are also excited about the addition of the new video based product line, Leadership Development Channel, acquired in our first quarter which we are optimistic will provide future revenue contributions. Additionally, the closing of the NETg acquisition presents the combined company with great opportunity, and integrating NETg successfully while realizing the maximum cost synergies available is the number one priority for SkillSoft. As such, it will be the company's main operational focus for the remainder of fiscal 2008."

Gross margin increased to 88% for the Company's fiscal 2008 first quarter, compared to 85% for its fiscal 2007 first quarter. Included in cost of revenues in the first quarter of fiscal 2008 and the first quarter of fiscal 2007 is the amortization of intangible assets related to acquired technology and capitalized software development costs of $0.2 million and $1.7 million, respectively, which was previously recorded within operating expense under the caption "amortization of intangible assets." The amortization didn't impact the gross margin percentage for the fiscal 2008 first quarter and reduced the gross margin 3% for the fiscal 2007 first quarter. The gross margin percentage is impacted mainly by the mix of royalty-bearing content and SkillSoft hosting capacity needed to meet our existing and new customer solution requirements.

Research and development expense increased to $10.2 million in the fiscal 2008 first quarter from $10.0 million in the fiscal 2007 first quarter. This increase was primarily due to an increase of $0.4 million related to our new LDC operations for video content development, which was partially offset by a reduction of $0.2 million in stock -based compensation expense compared to the fiscal 2007 first quarter.

Sales and marketing expenses decreased to $22.5 million in the fiscal 2008 first quarter from $23.3 million in the fiscal 2007 first quarter. This decrease was primarily due to a net decrease of approximately $0.7 million of commission expense, travel expense, productivity consulting expense and marketing expense, as well as a decrease of $0.3 million of stock -based compensation expense compared to the fiscal 2007 first quarter.

General and administrative expenses decreased to $6.9 million in the fiscal 2008 first quarter from $7.3 million in the fiscal 2007 first quarter. This decrease was primarily due to a decrease of $0.4 million in business systems software development expense compared to the fiscal 2007 first quarter. The Company's effective tax rate for the three months ended April 30, 2007 was 26.1%.

The Company's effective cash tax rate included in the above effective tax rate is approximately 7.6% for such period. The Company exceeded the top end of its previously released effective tax rate range due to a non-recurring adjustment to the non-cash provision for income taxes related to the utilization of acquired SmartForce Net operating losses (NOLs) in prior periods.

SkillSoft had approximately $135.3 million in cash, cash equivalents, short -term investments, restricted cash and long-term investments as of April 30, 2007 as compared to $127.8 million as of January 31, 2007. This increase primarily reflects cash provided by operations of $5.8 million and cash provided by financing activities of $5.2 million in the three months ended April 30, 2007. These increases were partially offset by purchases of property and equipment of $0.4 million and net cash used to purchase LDC operations of $3.9 million. The cash provided by operations for the quarter ended April 30, 2007 and the cash balance as of April 30, 2007 reflect the final payment of $15.25 million for the 2002 securities class action settlement. In May 2007, SkillSoft used approximately $79 million of this cash balance in payment of the purchase price and related expenses for the NETg acquisition.

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 2008 first quarter. On a net basis, which considers only receivable balances for which revenue has been recorded, DSOs were 11 days in the fiscal 2008 first quarter as compared to 11 days in the year ago period and 12 days in the fourth quarter of fiscal 2007. On a gross basis, which considers all items billed as receivables, DSOs were 81 days in the fiscal 2008 first quarter compared to 78 days in the year ago quarter and 151 days in the fourth quarter of fiscal 2007.

About SkillSoft

SkillSoft PLC (Nasdaq: SKIL) is a leading provider of e-learning and performance support solutions for global enterprises, government, education and small to medium -sized businesses. SkillSoft enables business organizations to maximize business performance through a combination of comprehensive e - learning content, online information resources, flexible learning technologies and support services. Content offerings include business, IT, desktop, compliance and consumer/SMB courseware collections, as well as complementary content assets such as Leadership Development Channel video products, KnowledgeCenter(TM) portals, virtual instructor -led training services and online mentoring services. The Books24x7(R) division offers online access to more than 15,000 digitized IT and business books, as well as book summaries and executive reports. Technology offerings include the SkillPort(R) learning management system, Search -and-Learn(R), SkillSoft(R) Dialogue(TM) virtual classroom, and SkillView(R) competency management software.

SkillSoft courseware content described herein is for information purposes only and is subject to change without notice. SkillSoft has no obligation or commitment to develop or deliver any future release, upgrade, feature, enhancement or function described in this press release except as specifically set forth in a written agreement.

SkillSoft, the SkillSoft logo, SkillPort, Search-and-Learn, SkillChoice, Books24x7, ITPro, BusinessPro, OfficeEssentials, GovEssentials, EngineeringPro, FinancePro, AnalystPerspectives ExecSummaries, ExecBlueprints, Express Guide and Dialogue are trademarks or registered trademarks of SkillSoft PLC in the United States and certain other countries. All other trademarks are the property of their respective owners.