Renaissance Learning misses estimates
Renaissance Learning, Inc. (Nasdaq: RLRN), provider of technology to support personalized practice and progress monitoring in reading, math and writing for pre-K-12 schools and districts, reported third-quarter earnings below Wall Street’s expectations.
For the three months ended Sept. 30, the Wisconsin Rapids, Wis.-based firm recorded net income of $1.4 million, or $0.05 per share, while an analyst polled by Thomson Financial had forecasted earnings of $0.08 per share. For the third quarter of 2006, net income was $2.1 million, or $0.07 per share.
Revenues were $25.8 million, an increase of 2.5% from third quarter 2006 revenues of $25.2 million. An analyst on Wall Street polled by Thomson Financial was projecting revenues of $26.32 million.
Renaissance said in a press release that its transition to subscription software pricing delayed revenue recognition during the third quarter, but despite that, the company had a good quarter from an operations standpoint. Deferred revenue increased by $8.9 million in the third quarter to reach an all time high of $38.5 million.
The company, however, noted that it recorded its first quarterly revenue growth, excluding the impact of acquisitions, since the fourth quarter of 2003 and new school adoptions of Accelerated Reader and Accelerated Math increased compared with the same quarter last year.
Service revenues were up 27%; laptop orders were down 4% for the quarter, but the company said that the loss was narrower than previously experienced declines.
Renaissance said it’s experiencing substantial growth in order dollars per school for schools who have upgraded to Accelerated Reader and Accelerated Math. The firm noted that customer schools upgrading from former versions of Accelerated Reader to AR Enterprise have increased their annual reading product purchases by an average of slightly over $1,000 per school, and said it expects this trend to continue.
Renaissance, however, said that the transition to Enterprise has introduced greater seasonality to its software orders. As a result, the firm anticipates a higher percentage of annual subscription orders in the second and third quarters, as opposed to the first and fourth quarters, which have historically been the company’s strongest for quiz and math content orders.
Going forward, the company said it expects earnings per share for the fourth and first quarters to be “similar” to last year, as the company said it expects software sales will be adversely affected. Specifically, Renaissance said it believes many schools looking to upgrade to Enterprise are holding back on purchasing quizzes and other products until they make a decision on Enterprise. Renaissance said that as a result, software sales have declined by approximately $3 million so far this year.
The company had earnings of $0.06 and $0.05 for the fourth quarter and first quarters during the prior year respectively. An analyst polled by Thomson Financial is forecasting earnings of $0.08 for both quarters.
For the full year 2008, the company said it expects order growth of 15% to 20% and expects operating cash flow to continue to exceed earnings in 2008.
Shares of Renaissance (RLRN) slipped 6.99%, or 0.89, to $11.84 at 12:12 p.m. ET. Shares of Renaissance have been trading in the range of $10.55 to $18.80 for the past 52 weeks.
