SAN FRANCISCO, Jan. 28 -- DigitalThink, Inc. (NASDAQ:DTHK) , the leader in custom e-learning for Fortune 1000 companies, today announced financial results for its third quarter of fiscal 2004.
Revenues for the third quarter of fiscal 2004 were $10.6 million, down 4 percent from revenues of $11.0 million in the same period last year. Total costs and expenses were $13.7 million in the quarter ended December 31, 2003, compared with $12.9 million for the same period last year. The company reported a net loss for the third quarter of 2004 of $3.1 million, or a loss of $0.06 per share, compared with a net loss for the same period last year of $1.8 million, or a loss of $0.04 per share.
Revenues for the first nine months of fiscal 2004 were $33.5 million, compared with $30.7 million for the same period last year. Total expenses were $51.3 million, compared with $40.3 million in the same period last year. Net loss for the first nine months of fiscal 2004 was $17.7 million or a loss of $0.39 per share, compared with a net loss of $59.6 million, or a loss of $1.45 per share, for the same period last year, including the cumulative effect of the accounting change for the implementation of Statement of Financial Accounting Standard No. 142. Net loss for the nine months ended December 31, 2002, excluding the cumulative effect of such accounting change, was $9.4 million or $0.23 per share.
"We are seeing very positive signs in the custom e-learning business and more importantly in our business," said Michael Pope, president and chief executive officer of DigitalThink. "More companies are looking to move custom instructor-led training to custom e-learning. This is evidenced by our positive booking trends over the last three quarters and the 23 new customers we saw in the December quarter. Our list of referenceable customers is long and deep and we are proud to be able to deliver custom e-learning that produces positive business results for our customers."
"We are beginning to see more companies look to outsource their training to providers that are experts in the field. DigitalThink is ideally positioned to capitalize on this outsourcing opportunity as e-learning courseware services are seen as a critical component of the growing outsourced training trend. We are also seeing renewed interest in the partner channel as evidenced by the most recent announcement of our joint retail solution with BearingPoint. We are making progress with other software and outsourcing companies as well. That said, we do face a significant challenge in our relationship with our customer EDS."
"EDS is our largest customer first signed under a master agreement in July of 2000," continued Pope. "We have a valid and binding contract with EDS that runs through June 2005. Many times over our three-year relationship we have renegotiated the master agreement with EDS by amending and expanding our service offering, in all cases with the best interests of our customer in mind. EDS alleges that DigitalThink is currently in default under the master agreement. We strongly believe there is no basis for these allegations. The dispute is not over quality of courseware or level of service concerns. EDS, however, has indicated it may attempt to terminate the remaining portion of the contract."
"This current discussion does not surprise me, as we have renegotiated many times in the past. We are currently in negotiations with EDS to provide a business resolution to the matter using the process provided for in our contract. If we are unable to reach a mutually-agreeable business resolution regarding this matter we intend to pursue all breach of contract and other claims we have against EDS. Obviously, a business resolution is our preferred outcome."
"Rest assured, we are not standing still at DigitalThink. Customer concentration risk is not new to this company. As such, we have assessed the situation of what DigitalThink looks like without EDS many times in the past. We have a plan that we believe will enable us to serve our clients and fulfill on our mission of providing outstanding customer service and custom e- learning. Our plan would require significant expense reductions, including headcount reductions and lease terminations."
"In summary, you should understand four points: one, we see positive trends in our business conditions; two, there is an issue with EDS that we are taking all possible steps to resolve amicably; three, we believe we have an extremely strong case should we have to resort to a legal resolution; and four, most importantly, we have a plan for DigitalThink`s continued execution for our customers and our shareholders should EDS go away as a customer," concluded Pope.
Recent Highlights
Quarter highlights at DigitalThink include:
-- Adding 23 new customers and expanding business with over 49 existing
customers.
-- Being ranked the 22nd fastest growing technology company in North
America on the 2003 Deloitte Technology Fast 500 list.
-- Releasing our upgraded on-demand L5 Learning Delivery System, which
includes performance improvements and quality enhancements, making this
release a significant contribution to the overall e-Learning industry
and an immediately benefit to DigitalThink customers.
-- Announcing a jointly developed solution with BearingPoint exclusively
for retailers. This solution brings together DigitalThink`s expertise
in custom e-learning and delivery and BearingPoint`s extensive blended
learning consulting and systems integration experience; as well as
their established enterprise productivity capability in the retail
industry.
About DigitalThink
DigitalThink is the leader in custom e-learning for Fortune 1000 companies. DigitalThink provides the right combination of courseware development, do-it-yourself capabilities, learning delivery, and industry- specific expertise. DigitalThink`s customers include ADP Dealer Services, BearingPoint, Circuit City, EDS, Kinko`s, Mazda, and Red Hat. When learning matters, the proven choice is DigitalThink.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act
1995:
The statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including statements regarding DigitalThink`s expectations, anticipations, beliefs, hopes, intentions or strategies regarding the future. Forward-looking statements include statements regarding DigitalThink`s expectations for fiscal 2004 and are based on management`s projections and beliefs regarding DigitalThink`s sales strategies, product capabilities, ability to control expenses, ability to recognize revenues from backlog, future sales, the applicability of DigitalThink`s solutions to existing and prospective customers, growth of future enrollments, and the growth of the e-learning market. All forward-looking statements included in this release are based upon information available to DigitalThink as of the date hereof, and DigitalThink assumes no obligation to update any such forward-looking statement. Actual results could differ materially from DigitalThink`s current expectations. Factors that could cause or contribute to such differences include, but are not limited to, our limited operating history, expected fluctuation of our quarterly revenues, our ability to recognize revenues in accordance with our expectations, our ability to maintain our relationships with our principal customers, successful hiring and retention of qualified staff in both the US and India, the continued success of our alliance program, and other factors and risks discussed in the Company`s Annual Report on Form 10-K for the fiscal year ended March 31, 2003, and subsequently filed quarterly reports on Form 10-Q, including (without limitation) under the captions, "Risk Factors" and "Management`s Discussion and Analysis of Financial Condition and Results of Operations" which is on file with the Securities and Exchange Commission (the "SEC") and available at the SEC`s website at www.sec.gov.
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