Online information-technology (IT) educator SkillSoft (NASDAQ:SKIL) reports Q1 2007 earnings results tomorrow. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.
What analysts say:
- Buy, sell, or waffle? Three analysts follow little SkillSoft. Two rate it a buy; one a hold.
- Revenues. Analysts expect sales to rise just 1% year over year, to $53.8 million.
- Earnings. They're looking for profits to remain flat at $0.02 per share.
What management says:
In the company's March report on fiscal 2006, CEO Chuck Moran pronounced himself "pleased" that SkillSoft hit its revenue and earnings targets for the year, but he acknowledged that the company still needs to improve. Moran used the dreaded "challenging" adjective to describe the business environment. In the coming year, SkillSoft aims to grow sales and earnings and improve shareholder value through three kinds of acquisitions:
- New customers
- New companies (and by extension, one presumes, their customers)
- Its own shares, in "opportunistic" buybacks
What management does:
The first two initiatives intend to finally perk up the company's flatlined sales. Tomorrow's results aren't the only ones expected to plateau; for all of last year, sales grew just 2%. Whether or not the sales growth emerges, though, you have to admit that SkillSoft's third initiative has paid off pretty well so far. Spending $22 million to acquire 6.1 million shares last year, the company paid an average of $3.61 per stub -- meaning it's already made a 52% gain on its investment in itself.
|
Margins % |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
1/06 |
|---|---|---|---|---|---|---|
|
Gross |
90.5 |
89.8 |
89.4 |
89.1 |
88.7 |
88.3 |
|
Op. |
2.1 |
7.8 |
7.6 |
10.5 |
12.5 |
13.3 |
|
Net |
(8) |
(9.5) |
(9.8) |
0.3 |
1.1 |
16.3 |
One Fool says:
Before we close and await tomorrow's results, I want to point out what's going on in the margins table above. As usual, this table reflects rolling, or trailing-12-month, results. An event in one quarter makes its effects known over the succeeding three quarters.
Although the aim of this chart is to smooth results over time, in order to better show you the trend that's forming, large one-time events can nonetheless throw a spanner into the works. For example, the rolling operating margin took a big leap about 15 months ago, because until the January 2005 quarter, SkillSoft was still working through the effects of an operating loss that had occurred a year before. Likewise, you'll notice the big bounce in net margins in January 2006. Be aware that this wasn't from any sudden improvement in profitability; it simply took four quarters for the results to shed the effects of $32 million worth of restructuring charges and asset writedowns taken in the January 2005 quarter. Just a word to the Foolish.
Competitors:
By its own admission, SkillSoft is a small fish in a big pond -- and it's swimming with some pretty big sharks. Here are a few of SkillSoft's self-described competitors:
- Cisco (NASDAQ:CSCO)
- IBM (NYSE:IBM)
- Microsoft (NASDAQ:MSFT)
- Oracle (NASDAQ:ORCL)
- Saba Software (NASDAQ:SABA)
- SAP (NYSE:SAP)
Further skillful Foolishness:
- Size up SkillSoft's most recent results.
- Learn to buy before it's too late.
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Fool contributor Rich Smith does not own shares of any company named above.
