TUTR Plato Learning (MM)

PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of K�adult e-learning solutions, today announced unaudited results for its fiscal 2009 second quarter ended April 30, 2009.

Total revenue for the second quarter was $15.5 million, compared to $16.2 million in the second quarter of 2008. Subscription revenue increased 15% to $9.7 million from $8.5 million in the second quarter last year. Revenues from legacy perpetual products and related software maintenance declined $1.4 million, or 30%, to $3.2 million, as sales of these non-strategic products and services continue to naturally decline. Continued improvements in gross margins and operating efficiencies resulted in the Company reporting its second consecutive quarter of profitability. Net income for the second quarter was $123,000, or $0.01 per share, compared to a net loss of ($6.5) million, or ($0.27) per share, a year ago. The second quarter 2008 net loss includes restructuring charges of $1.6 million, or $0.07 per share. Subscription orders grew 55% to $11.2 million compared to $7.2 million in the prior year quarter. Total orders for the quarter grew 22% to $15.9 million, compared to $13.1 million in the second quarter of fiscal 2008.

Vin Riera, PLATO Learning President and CEO said, �The achievement of two consecutive quarters of profitability during the seasonally slow period of the education market is an indication of the financial benefits of the Software-as-a-Service (SaaS) business model. We continued to deliver solid increases in subscription orders and revenues in the quarter, and the operating leverage we�ve achieved in our business has resulted in significant improvements in gross margins and operating expenses compared to a year ago.

�In addition to the significant improvements in our financial results, we continued to experience very strong demand for instructional solutions delivered on PLE� despite a difficult funding environment. PLE� orders grew 74% in the quarter to $9.8 million, compared to $5.6 million in the second quarter of 2008. Orders from new PLE� customers and expansions of existing customer installations increased 22% to $5.6 million. Renewal orders in the quarter increased to $4.2 million from $1.0 million in the second quarter of 2008. Our renewal rate in the second quarter exceeded 90%, and we experienced a number of customers who renewed expiring subscriptions early, or extended existing subscription periods, which we view as a strong indication of the long-term value of our solutions to our customers.�

During the quarter, the Company added 78 school districts and community colleges as first-time subscribers to PLE�, bringing the total PLE� customer base to nearly 1,300 educational institutions across the U.S., a 37% increase over the second quarter of fiscal 2008. New PLATO Learning customers accounted for 51 of the total PLE� customers added in the quarter, comparable to the 49 new PLATO Learning customers added in the second quarter of 2008. The number of customers migrating from legacy PLATO products to PLE� declined from 80 to 27, a natural trend given the number of legacy customers that have already made this transition. More than 1,200 customers using the Company�s legacy subscription platform or purchasing support for legacy perpetual products remain candidates for transitioning to PLE�.

Subscription margins in the second quarter improved 14 percentage points to 57%, resulting in an improvement in total gross margins for the quarter to 55%, compared to 43% in the same quarter last year. The improvement in subscription margins reflects 15% growth in subscription revenues, and a decline in subscription product amortization. Operating expenses in the second quarter decreased nearly 30% to $8.4 million, compared to non-GAAP operating expenses of $11.7 million in the same quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measure), were $3.3 million in the second quarter of 2009, compared to adjusted EBITDA of negative $0.4 million in the second quarter of 2008.

Cash and cash equivalents at April 30, 2009 totaled $10.2 million, down $2.1 million from the beginning of the quarter, and above the range of $9.0 to $10.0 million expected by the Company. The quarterly decline in cash reflects the normal seasonality of the education market.

Outlook

Mr. Riera continued, �The general economic climate and outlook for education spending remains somewhat uncertain, but our solid start to the fiscal year and proximity to our seasonally strong second half of the fiscal year provides us better visibility to full year subscription order results. As a result, we now expect the percentage growth in subscription orders to be in the mid-teens versus the high-single-digit growth previously expected. Our expectation for subscription revenue for the year remains unchanged at low double-digit growth given the nature of subscription revenue recognition, the timing of orders in the back half of our fiscal year, and longer subscription periods. We continue to expect cash balances to end the year at or slightly above $20 million.

�We are very pleased to have achieved profitability in the first half of the year. Profitability for fiscal 2009 remains our goal; however, we are not providing specific earnings guidance at this time,� Mr. Riera concluded.

Conference Call

A conference call to discuss this announcement is scheduled for today, June 1, 2009, at 3:45 pm CT (4:45 pm ET). The dial-in number for this call is 866-225-8754 in the U.S. and Canada, and 480-629-9723 internationally. Attendees should call 10 minutes prior to the start of the call and inform the operator they are participating in PLATO Learning�s call. A recording of the call will be available from 6:00 pm CT (7:00 pm ET) on June 1, 2009, until midnight June 8, 2009. To access the recording, call 800-406-7325 in the U.S. and Canada and 303-590-3030 internationally. At the prompt, enter pass code number 4086959#. Additionally, the webcast will be available for replay on the investor relations section of PLATO Learning�s web site at www.plato.com/Investor-Relations/Conference-Calls.aspx.

About PLATO Learning

PLATO Learning is a leading provider of computer-based and e-learning instruction for kindergarten through adult learners, offering curricula in reading, writing, math, science, social studies, and life and job skills. Learn more about PLATO Learning by visiting www.plato.com.

The announcement includes the use of non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures have been used in this announcement because the Company believes they are useful to investors by providing greater transparency to supplemental information used in the Company�s internal financial and operational analysis. Investors are encouraged to review the reconciliations attached to this announcement of the non-GAAP financial measures used in this announcement to their most directly comparable GAAP financial measures.

This announcement includes forward-looking statements. PLATO Learning has based these forward-looking statements on its current expectations and projections about future events. Although PLATO Learning believes that its assumptions made in connection with the forward-looking statements are reasonable, no assurances can be given that its assumptions and expectations will prove to have been correct. These forward-looking statements are subject to various risks, uncertainties and assumptions. PLATO Learning undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward looking statements made are subject to the risks and uncertainties as those described in the Company's most recent filings with the Securities and Exchange Commission on Forms 10-K and 10-Q. Actual results may differ materially from anticipated results.

PLATO�, Straight Curve� and Academic Systems� are registered trademarks of PLATO Learning, Inc. PLATO Learning is a trademark of PLATO Learning, Inc.

PLATO Learning, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) � � � � � � Three Months Ended Six Months Ended April 30, April 30, 2009 2008 2009 2008 REVENUES Subscriptions $ 9,726 $ 8,475 $ 19,594 $ 16,444 License fees 1,006 1,509 2,010 3,760 Services � 4,775 � � 6,261 � � 9,940 � 12,176 � Total revenues � 15,507 � � 16,245 � � 31,544 � 32,380 � � COST OF REVENUES Subscriptions 4,182 4,816 8,071 9,465 License fees 418 1,097 856 2,520 Services � 2,335 � � 3,314 � � 4,763 � 5,910 � Total cost of revenues � 6,935 � � 9,227 � � 13,690 � 17,895 � � GROSS PROFIT � 8,572 � � 7,018 � � 17,854 � 14,485 � � OPERATING EXPENSES Sales and marketing 5,604 7,521 11,491 14,526 General and administrative 1,872 2,701 4,295 5,651 Software maintenance and development 708 1,101 1,274 2,177 Amortization of intangibles 213 388 427 775 Restructuring � - � � 1,635 � � - � 1,635 � Total operating expenses � 8,397 � � 13,346 � � 17,487 � 24,764 � � OPERATING INCOME (LOSS) 175 (6,328 ) 367 (10,279 ) � Other (expense) income, net � (52 ) � 7 � � 15 � 199 � � INCOME (LOSS) BEFORE INCOME TAXES 123 (6,321 ) 382 (10,080 ) � Income tax expense � - � � 152 � � - � 304 � � NET INCOME (LOSS) $ 123 � $ (6,473 ) $ 382 $ (10,384 ) � INCOME (LOSS) PER SHARE Basic $ 0.01 � $ (0.27 ) $ 0.02 $ (0.44 ) Diluted $ 0.01 � $ (0.27 ) $ 0.02 $ (0.44 ) � WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic � 24,067 � � 23,812 � � 24,024 � 23,800 � Diluted � 24,114 � � 23,812 � � 24,277 � 23,800 � PLATO Learning, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (In thousands) � � � � � April 30, October 31, 2009 2008 � ASSETS � Current assets: Cash and cash equivalents $ 10,245 $ 20,018 Accounts receivable, net 6,368 6,834 Other current assets � 5,752 � � 7,408 � Total current assets 22,365 34,260 � Equipment and leasehold improvements, net 3,101 3,589 Software development costs, net 22,111 24,086 Identified intangible assets, net 3,054 3,723 Other long-term assets � 2,753 � � 3,309 � Total assets $ 53,384 � $ 68,967 � � LIABILITIES AND STOCKHOLDERS' EQUITY � Current liabilities: Accounts payable $ 1,579 $ 3,085 Accrued compensation 3,005 3,996 Other accrued liabilities 2,299 6,909 Deferred revenue � 27,662 � � 36,005 � Total current liabilities 34,545 49,995 � Long-term deferred revenue � 7,649 � � 8,916 � Total liabilities � 42,194 � � 58,911 � � Stockholders' equity: Common stock 241 240 Additional paid-in capital 171,861 171,143 Treasury stock at cost (319 ) (315 ) Accumulated deficit (159,408 ) (159,790 ) Accumulated other comprehensive loss � (1,185 ) � (1,222 ) Total stockholders' equity � 11,190 � � 10,056 � Total liabilities and stockholders' equity $ 53,384 � $ 68,967 � PLATO Learning, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) � � � � � � � Six Months Ended April 30, 2009 2008 OPERATING ACTIVITIES: Net income (loss) $ 382 � $ (10,384 )

Adjustments to reconcile net income (loss) to net cash used in�operating activities:

Deferred income taxes - 304 Depreciation and amortization 6,023 8,685 Stock-based compensation 645 76 Other adjustments (175 ) 9 Changes in operating assets and liabilities: Accounts receivable 656 5,439 Other current and long-term assets 2,122 1,175 Accounts payable (1,506 ) (567 ) Other current and long-term liabilities (5,596 ) (558 ) Deferred revenue � (9,610 ) � (8,770 ) Total adjustments � (7,441 ) � 5,793 � Net cash used in operating activities � (7,059 ) � (4,591 ) � INVESTING ACTIVITIES: Capitalized software development costs (2,348 ) (6,679 ) Purchases of equipment and leasehold improvements � (468 ) � (223 ) Net cash used in investing activities � (2,816 ) � (6,902 ) � FINANCING ACTIVITIES: Net proceeds from issuance of common stock, net of repurchases 70 123 Repayments of capital lease obligations � (5 ) � (20 ) Net cash provided by financing activities � 65 � � 103 � �

EFFECT OF CURRENCY EXCHANGE RATE CHANGES�ON CASH AND CASH EQUIVALENTS

� 37 � � 31 � � Net decrease in cash and cash equivalents (9,773 ) (11,359 ) � Cash and cash equivalents at beginning of period 20,018 24,297 � � CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,245 � $ 12,938 �

PLATO Learning, Inc.

Supplemental Financial Information

(Unaudited)

� � � � � � � � � � � � � Order Value ($000) � � � � � � � � Three Months Ended April 30, Six Months Ended April 30, 2009 2008

%Change

2009 2008

%Change

� Subscriptions 11,242 7,238 55 % 17,916 12,877 39 % � License fees 907 2,444 (63 %) 1,938 3,927 (51 %) � Services : Professional services 1,947 1,144 70 % 3,142 2,318 36 % Software maintenance 1,077 1,507 (29 %) 2,258 3,050 (26 %) Other � 759 � 763 (1 %) � 1,518 � 1,525 0 % Total Services � 3,783 � 3,414 11 % � 6,918 � 6,893 0 % � $ 15,932 $ 13,096 22 % $ 26,772 $ 23,697 13 % � � � � � � � � � � � � � � � � � � � � � Reconciliation of Deferred Revenue to Non-GAAP Deferred Revenue Backlog ($000): � � � � As of April 30, 2009 2008 % Change � Total Deferred Revenue $ 35,311 $ 35,830 (1 %) �

Add: Unbilled amounts due under�non-cancelable subscription agreements

� 13,370 � 5,869 128 % � Deferred Revenue Backlog $ 48,681 $ 41,699 17 % � Components of Deferred Revenue Backlog: Subscriptions $ 39,696 $ 29,965 32 % � License fees 222 1,319 (83 %) � Services � 8,763 � 10,415 (16 %) � Deferred Revenue Backlog $ 48,681 $ 41,699 17 % � � � � � � � � � � �

PLATO Learning, Inc.

Supplemental Financial Information

(Unaudited)

� � � � � � � � � � � � � Revenue Details ($000s) � � � � � � � � Three Months Ended April 30, Six Months Ended April 30, 2009 2008

%Change

2009 2008

%Change

� Subscriptions 9,726 8,475 15 % 19,594 16,444 19 % � License fees 1,006 1,509 (33 %) 2,010 3,760 (47 %) � Services: Professional services 1,798 2,377 (24 %) 3,749 4,320 (13 %) Software maintenance 2,229 3,136 (29 %) 4,696 6,361 (26 %) Other � 748 � 748 0 % � 1,495 � � 1,495 0 % Total services � 4,775 � 6,261 (24 %) � 9,940 � � 12,176 (18 %) � $ 15,507 $ 16,245 (5 %) $ 31,544 $ 32,380 (3 %) � � � � � � � � � � � � � � � � � � � � �

�

Reconciliation of 2008 GAAP Net Loss and Loss Per Share to Non-GAAP Net Loss�and Loss Per Share Before Restructuring Charges

($000s, except per share amounts) � � �

Three MonthsEnded April 30,

Six MonthsEnded April 30,

2008 2008 Net loss, as reported $ (6,473 ) $ (10,384 ) Restructuring charges � 1,635 � � 1,635 � Net loss before restructuring charges $ (4,838 ) $ (8,749 ) � Loss per share (basic): Loss per share, as reported $ (0.27 ) $ (0.44 ) Restructuring charges � 0.07 � � 0.07 � Loss per share before restructuring charges $ (0.20 ) $ (0.37 ) � � � � � � � � � �

PLATO Learning, Inc.

Supplemental Financial Information

(Unaudited)

� Reconciliation of 2008 GAAP Operating Expenses to Non-GAAP Operating Expenses

�Before Restructuring Charges ($000s)

� � � Three Months Six Months Ended April 30, Ended April 30, 2008 2008 Total operating expenses $ 13,346 $ 24,764 Restructuring charges � 1,635 � 1,635

Operating expenses before restructuring charges

$ 11,711 $ 23,129 � � � � � � � Reconciliation of GAAP Net Income To 2009 Non-GAAP Earnings before � Interest, Taxes, Depreciation and Amortization ("EBITDA") and 2008 Non-GAAP Adjusted EBITDA ($000) � Three Months Ended � Six Months Ended April 30, April 30, 2009 � 2008 2009 � 2008 Net income (loss) $ 123 $ (6,473 ) $ 382 $ (10,384 ) Income taxes - 152 - 304 Interest, net 49 (11 ) (32 ) (203 ) Depreciation and amortization � 3,140 � 4,281 � � 5,936 � � 8,597 � EBITDA $ 3,312 (2,051 ) $ 6,286 � (1,686 ) Restructure charges � 1,635 � � 1,635 � Adjusted EBITDA $ (416 ) $ (51 ) � � � � � � � � �