Our response to this need is something we call Multi-Modal Learning. This is a learning concept that brings together SkillSoft’s vast resources and technological expertise in a way that is most effective for meeting the needs of the individual learner and supporting the corporate learning objectives. Quite simply, MML offers learners a wide range of formal and informal learning opportunities that are suited to a variety of personal learning styles; and thanks to a flexible, integrated delivery platform, the learner can easily choose the right resources for their needs at that time. SkillSoft is uniquely positioned to deliver the MML concept for a number of reasons: Rich content resources – Extensive libraries of IT and business skills courseware, IT and business ReferenceWare collections, simulations, online mentoring, certification practice tests, etc. Everything you need to SURROUND the learner with high quality educational resources. BUILD What truly brings it all together is the ability of the learner to pick and choose the right learning resource for his or her needs at any given moment in time. In order to do this, we have provided: A robust learning platform that helps learners efficiently access learning resources, track performance, collaborate, and manage progress through certification and other program requirements Through the Search-and-Learn TM functionality of our Skillport platform, learners can see the full range of assets available under a given topic while conducting a single search; so courseware, books, printed Job Aids, the entire range of materials are shown in one place. For those who are using a third party LMS, all of the learning assets are available to be accessed by the Learning Management System through that system’s native search capability. And, SkillSoft is continuing to investigate ways that we can bring the full integrated search functionality to all all systems. As mentioned before, SkillSoft has the largest global support organization in the industry. More than 160 experienced professionals, all SkillSoft employees, help clients with every aspect of planning, implementation, and ongoing use of MML. The goal of SkillSoft’s MML program is to put learning resources at the fingertips of every employees in a way that’s more efficient and usable than any other solution on the market. So, even as our content resources continue to expand, they are also continually more accessible and usable by individual learners.
Books24x7’s ITPro, BusinessPro, FinancePro, and OfficeEssentials Referenceware libraries give subscribers online access to more than 4,900 unabridged books and reports from more than 85 publishers, including AMACOM, ASTD, Harvard Business School Publishing, McGraw-Hill, Sybex, and John Wiley & Sons. Approximately 25 to 45 titles are added to the libraries each week. Subscribers get access to all new titles added throughout the duration of their subscription period. ReferencePoints, developed by SkillSoft Press, are 40 to 60 page documents on emerging technologies, offered to provide information on these topics in advance of the traditional book publishing cycle. Examples of ReferencePoints include: Oracle 11i, Natural Language Processing, and computer telephony integration. Collaboration features give users the ability to set up and share bookshelves, make and share notations, send email notices, and bookmark.
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Ahead of the Learning Curve Investor Presentation Harris Nesbitt Education Conference Chuck Moran, President and CEO Tom McDonald, CFO September 14, 2004
Safe Harbor This presentation includes information that constitutes forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements. Factors that could cause or contribute to such differences include difficulties in integrating the organizations of SmartForce and SkillSoft, competitive pressures, changes in customer demands or industry standards, adverse economic conditions, loss of key personnel, litigation and other risk factors disclosed under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations - Future Operating Results” in SkillSoft's Quarterly Report on Form 10-Q for the quarter ended July 31, 2004, as filed with the Securities and Exchange Commission. The forward-looking statements provided by the Company in this presentation represent the Company’s views as of September 14, 2004. The Company anticipates that subsequent events and developments may cause the Company’s views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this presentation.
SkillSoft Overview <ul><li>SkillSoft is the largest public company in the world with a sole focus on e-Learning </li></ul><ul><li>Uniquely positioned to help global enterprises leverage e-learning for maximum impact over the long-term </li></ul><ul><li>Dual excellence in e-learning content & technology </li></ul><ul><ul><li>Content </li></ul></ul><ul><ul><ul><li>60,000+ hours of high-quality e-learning content in 15 languages </li></ul></ul></ul><ul><ul><ul><li>Offerings cover full spectrum of enterprise learning needs with courseware, SkillSimulations, 24x7 live online mentoring and Referenceware® by Books24x7® </li></ul></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><ul><li>SkillPort , a flexible platform for customizing, delivering, managing and reporting on e-learning </li></ul></ul></ul><ul><ul><ul><li>Search-and-Learn™ technology gives learners an integrated view of all learning assets </li></ul></ul></ul><ul><ul><ul><li>SkillSoft® Dialogue™ Virtual Classroom technology to support blended learning and rapid learning program development </li></ul></ul></ul>
SkillSoft Corporate Highlights <ul><li>Largest direct sales & support organization in e-learning industry with approximately 200 quota carrying direct sales reps </li></ul><ul><li>Approximately 18% of revenue invested in R&D annually </li></ul><ul><li>Ownership of all major content and technology products </li></ul><ul><li>Systematic customer feedback process ensures market focus </li></ul><ul><li>Serving Global 5000 customer base* </li></ul><ul><li>Over 5 million registered learners </li></ul>* Excluding SmartCertify Direct business unit which serves the retail market
Strong Cross-Industry Appeal A Sampling Of SkillSoft’s 2,000+ Customers Aerospace & Defense Cessna Northrop Grumman Automotive Honda Toyota Computer Hewlett Packard NEC Consumer Products Castrol Del Monte Foods Electronic Components Aegis Flextronics Solectron Consulting & Business Services Accenture ADP Booz Allen Hamilton Deloitte IKON CSC Experion IBM SAIC Unisys Financial Services ING Mellon Financial PSCU Financial Services Government US Air Force US Army Australian Government Healthcare CIGNA Humana McKesson Saint Barnabas Media Yahoo! Young & Rubicam Pharmaceuticals Merck Staffing K-Force Manpower Robert Half Telecommunications Avaya Marconi TELUS
Trends in Learning – Across Our Customer Base <ul><li>Learning programs are increasingly aligned with business strategy </li></ul><ul><li>“ Speed-to-learning” more important than ever </li></ul><ul><li>Business metrics are superceding traditional measurement of completions and scores </li></ul><ul><li>Informal learning has emerged as a critical need </li></ul><ul><li>The ability to discover and access learning assets is just as important as the assets themselves </li></ul><ul><li>Blended learning is taking on a new meaning </li></ul><ul><li>Integration is major goal and challenge </li></ul>
How Business Professionals Naturally Learn On-the-Job Consult Reference Material The Internet Knowledge bases Books, manuals & Reports Ask Others Experts & mentors Managers & coaches Peers Practice & Use Practice new skills on-the-job Learning from experience Refine skills over time Formal Learning Directed, goal oriented To pursue certification, credential or degree To learn a major new skill set For career enhancement *U.S. Bureau of Labor & Statistics Books24x7 Referenceware Search-and-Learn™ Mentoring SkillSoft ® Dialogue™ SkillSims RolePlays Courseware Collections Blended Learning Toolkits SkillSoft ® Dialogue™ Informal Learning - 70% of workplace learning* Formal Learning
SkillSoft Multi-Modal Learning <ul><li>A strategy that provides “multiple learning modalities” to meet the needs of today’s diverse enterprise </li></ul><ul><li>Combines an array of content types from a variety of sources (internally developed or off-the-shelf) for formal and informal learning needs </li></ul><ul><li>Leverages sophisticated Search-and-Learn technology </li></ul><ul><li>Helps learners get what they need, when they need it, so they can get back to work </li></ul>
SkillSoft Courseware Collections <ul><li>Over 2,200 business skills course titles </li></ul><ul><ul><li>Market -leading depth, breadth, currency and continual reinvestment </li></ul></ul><ul><ul><li>Localized in 14 languages </li></ul></ul><ul><ul><li>Award-winning instructional design </li></ul></ul><ul><ul><li>Collection Includes SkillSimulations, Job Aids, SkillBriefs, Blended Learning Toolkits, 24x7x365 online mentoring for Project Management Certification </li></ul></ul><ul><li>More than 2,100 IT course titles </li></ul><ul><ul><li>Over 80 major IT certification exams covered </li></ul></ul><ul><ul><li>Localized in 11 languages </li></ul></ul><ul><ul><li>Content partnerships with Cisco, Microsoft, Oracle </li></ul></ul><ul><ul><li>Includes Express Guide™ Manuals, TestPrep Exams and 24x7x365 online mentoring for IT certifications </li></ul></ul>Business Solution Areas: Professional Effectiveness Management/Leadership Project Management Sales & Customer-Facing Skills Business Strategy & Operations Finance Human Resources Environmental Safety & Health Financial Services Workplace Compliance IT Solution Areas: Software Development Operating Systems & Servers Internet & Network Technologies Enterprise Database Systems Web Design Desktop Computer Skills
Books24x7 ™ Referenceware ® <ul><li>Largest collection of books online and most flexible licensing model </li></ul><ul><ul><li>Over 6,200 unabridged titles </li></ul></ul><ul><ul><li>Over 2,000 ReferencePoints </li></ul></ul><ul><ul><li>1.1 Million pages of new content added in 2003 </li></ul></ul><ul><li>Utilization in 2003 </li></ul><ul><ul><li>Over 35 million pages served </li></ul></ul><ul><ul><li>Nearly 1 million hours of instant learning </li></ul></ul><ul><ul><li>Average use 16.6 minutes/session </li></ul></ul><ul><li>New in 2004 </li></ul><ul><ul><li>ExecSummaries™ Collections </li></ul></ul><ul><ul><li>EngineeringPro™ Collection </li></ul></ul>
SkillPort Learning Management System <ul><li>SkillPort™: scalable, reliable, flexible </li></ul><ul><ul><li>Strong management and reporting capabilities relevant to managing e-learning and blended learning programs </li></ul></ul><ul><ul><li>Fast time-to-learning, with low IT support requirements </li></ul></ul><ul><ul><li>Search-and-Learn™ provides unified discovery/view/access of all e-learning assets on system </li></ul></ul><ul><ul><li>Custom content support and localized interface </li></ul></ul><ul><ul><li>Coming in 2004: modules for managing instructor-led training and credentialing programs </li></ul></ul><ul><ul><li>A platform proving value – chosen by over 60% of our customers </li></ul></ul>
Commitment to Interoperability <ul><li>We actively work to support customers on 3 rd party LMS’s </li></ul><ul><ul><li>Several hundred customers successfully using our content with 3 rd party LMS’s </li></ul></ul><ul><li>All courseware architectures are AICC and SCORM certified </li></ul><ul><ul><li>SkillSoft is the only major e-learning content provider certified with SCORM </li></ul></ul><ul><li>Established relationships with major LMS providers </li></ul><ul><li>Interoperability Lab allows testing of pre-release courseware on major LMS systems </li></ul>
SkillSoft ® Dialogue™ Newest Addition to SkillSoft’s e-learning Solution <ul><li>What It Is </li></ul><ul><ul><li>Virtual classroom technology for delivering online & recorded learning events </li></ul></ul><ul><ul><li>Rapid publishing toolkit that allows customers to mix/match portions of SkillSoft content products with their own content to create new learning events targeted to specific customer needs </li></ul></ul><ul><li>Supports our customers’ need for blended learning programs </li></ul><ul><li>Leverages SkillSoft’s existing assets and deep knowledge of instructional design </li></ul><ul><li>Available to customers in late 2004 </li></ul><ul><li>Enabling technology for future SkillSoft blended learning products </li></ul>
Financial Highlights <ul><li>Cash of $87 million at 7/31/2004 </li></ul><ul><li>Guaranteed Revenue Backlog at 1/31/04 for FY05 of approximately $170M or approximately 75% of FY05 Revenue Target </li></ul><ul><li>Costs to support SEC investigation and re-filing of tax returns relating to the restatement of SmartForce historical financial statements ongoing at $500K per quarter </li></ul><ul><li>65% renewal rate FY04/CY03 used to model FY05/CY04 </li></ul><ul><li>121% Upgrade Rate FY04/CY03 used to model FY05/CY04 </li></ul><ul><li>Reseller revenue recognition based on sell through seasonality was skewed to the 4 th quarter of FY04 </li></ul><ul><li>Well Positioned for Future Free Cash Flow Generation and Profitability </li></ul><ul><li>Updated FY05 projected annual tax rate to 4.5% - 6.0% from previously projected 28% - 32%; US Fed NOL’s of $350M </li></ul><ul><li>Investment of $6.5M in FY05 for launch of new Virtual Classroom product offering </li></ul>
Fiscal 2005 Target *Pro forma cash EPS (non-GAAP) represents GAAP Net Income without amortization and non-cash tax expense
Fiscal 2005 Tax Provision <ul><li>Highlights: </li></ul><ul><li>SkillSoft strategy is to maximize cash by minimizing the CASH effective tax rate </li></ul><ul><li>Utilized $22M of NETg settlement reducing taxable income in FY05 </li></ul><ul><li>Updated FY05 projected annual tax rate to 4.5% - 6.0% from previously projected 28% - 32%; US Fed NOL’s of $350M </li></ul><ul><li>Acquired NOL (SmartForce) are the oldest and must be used first (FIFO) and have an annual limitation cap </li></ul><ul><li>Skillsoft historic NOL’s serve to drive the effective tax rate significantly lower than acquired NOL’s </li></ul><ul><li>Tax benefit for acquired NOL’s utilized reduces Goodwill </li></ul><ul><li>For financial statement purposes SkillSoft will provide full tax expense (non-cash) on any profit sheltered by acquired NOL </li></ul><ul><li>Limitations on utilization of acquired NOL per year </li></ul><ul><li>NOL generated as SkillSoft standalone and as a combined company after 9/6/2002 can be used against income to reduce tax expense </li></ul>
Estimated Tax Schedule Until Skillsoft fully executes on FY05 and finalizes its outlook on FY06, it would be premature to predict the mix of NOL utilization.