Human Resources: SumTotal Systems Reports Second Quarter 2007 Results

    MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--July 31, 2007--SumTotal(R)
Systems (NASDAQ:SUMT), a global provider of talent and learning
management solutions, announced its financial results for the second
quarter ended June 30, 2007.

    Second Quarter 2007 Results

    On a Generally Accepted Accounting Principles (GAAP) basis, total
revenue for the second quarter of 2007 was $30.2 million, an increase
of 20% from the $25.1 million reported in the second quarter of 2006.
GAAP net loss was $1.5 million, or $0.05 per share on a basic and
diluted basis, compared to a net loss of $2.3 million, or $0.09 per
share on a basic and diluted basis in the same quarter of 2006.
Subscription and support revenue increased 29% to $15.1 million from
$11.7 million in the second quarter of 2006.

    Deferred revenue increased 28% year-over-year to end the second
quarter of 2007 at $35.9 million, compared to $28.1 million for the
same quarter of the previous year.

    Cash flow from operating activities for the quarter was $6.5
million compared to $4.4 million for the same period last year.

    Non-GAAP revenue in the second quarter increased 15% to $30.5
million from $26.5 million reported for the second quarter of 2006.
Non-GAAP net income was $1.9 million, or $0.06 on a diluted basis,
compared to net income of $2.3 million, or $0.09 on a diluted basis in
the same quarter of 2006. Subscription and support revenue increased
22% to $15.4 million from $12.6 million in the same quarter last year.

    Non-GAAP results exclude the impact of certain one-time charges
primarily related to restructuring activities, and non-cash accounting
adjustments and charges primarily related to acquisition accounting,
stock-based compensation, and any related income tax effects. A
reconciliation to the GAAP results is provided in the attached
statements.

    "In the second quarter, we achieved record revenue, record
deferred revenue, and record cash flow from operating activities,"
said Don Fowler, SumTotal's chief executive officer. "By focusing on
our strategy, we hope to continue to produce strong results and to end
the year with a revenue growth rate at or above the levels of the rest
of the market."

    Second Quarter Business Highlights

    -- Signed additional North American customers, including
        ExxonMobil, Hyundai Information Service North America, Legg
        Mason Technology Services, Random House, Wyndham Worldwide
        Operations, and Yamaha Motor Corporation.

    -- Signed new and additional international customers including
        Buenos Aires-based Tenaris, a global manufacturer of steel
        pipes for the oil, gas and automotive industries, Dubai-based
        hotel and hospitality management company Jumeirah
        International, London-headquartered Kingfisher Information
        Technology Services, and Tokyo-based Nippon Digital Design.

    -- Signed new and additional federal, state and local government
        customers with the U.S. Army, Maryland Aviation
        Administration, Maryland Transit Administration, and San
        Bernardino County, Calif.

    -- Named as one of the leading vendors in the employee
        performance management market by IT research firm Gartner.
        Received recognition from industry analyst Bersin & Associates
        for not only possessing the only complete suite of learning
        functionality but also being the industry's largest LMS
        vendor.

    -- Raised $35.1 million in an oversubscribed registered direct
        offering marketed to a select group of both new and existing
        shareholders.

    Third Quarter Guidance

    For the third quarter of 2007, SumTotal Systems estimates its GAAP
revenue will be between $28.8 million and $30.8 million. GAAP net loss
is estimated to be between $2.4 million, or $0.07 per share on both a
basic and diluted basis, and $1.4 million, or $0.04 per share on both
a basic and diluted basis.

    On a non-GAAP basis, revenue is estimated to be between $29.0
million and $31.0 million. Non-GAAP net income is estimated to be
between $1.0 million or $0.03 per share on a diluted basis, and $2.0
million, or $0.06 per share on a diluted basis. The reconciling items
between the GAAP loss and non-GAAP income are estimated to be a $0.2
million adjustment to revenue, $2.1 million for amortization of
intangibles, and $1.1 million for stock-based compensation.

    Full Year 2007 Guidance

    For the fiscal year of 2007, SumTotal Systems estimates its GAAP
revenue will be between $125.0 million and $129.0 million. GAAP net
loss is estimated to be between $4.8 million, or $0.16 per share on
both a basic and diluted basis, and $1.8 million, or $0.06 per share
on both a basic and diluted basis.

    On a non-GAAP basis, revenue is estimated to be between $126.0
million and $130.0 million. Non-GAAP net income is estimated to be
between $9.0 million or $0.28 per share on a diluted basis, and $12.0
million, or $0.37 per share on a diluted basis. The reconciling items
between the GAAP loss and non-GAAP income are estimated to be a $1.0
million adjustment to revenue, $8.4 million for amortization of
intangibles, and $4.4 million for stock-based compensation.

    Conference Call

    SumTotal will host an investor conference call and webcast on
Tuesday, July 31, 2007, at 2:00 p.m. (Pacific Time) / 5:00 p.m.
(Eastern Time) to discuss the financial results for the second
quarter. A live audio webcast is available to investors and the public
at www.sumtotalsystems.com under the Investor Relations section.

    In addition to the webcast, a telephone replay will be available
on Tuesday, July 31, 2007, beginning at approximately 5:00 p.m.
(Pacific Time) through the close of business (Pacific Time) on
Tuesday, August 7, 2007. Investors and other interested parties can
access the replay by dialing the U.S. toll-free number: 877-519-4471,
access code: 8987764. The international dial-in number is
973-341-3080, access code: 8987764.

    About SumTotal Systems, Inc.

    SumTotal Systems, Inc. (NASDAQ:SUMT) is a global provider of
talent and learning management solutions. SumTotal deploys
mission-critical solutions designed to align goals, develop skills,
assess performance, plan for succession and set compensation.
SumTotal's solutions aim to accelerate performance and profits for
more than 1,500 companies and governments of all sizes, including six
of the world's 10 biggest pharmaceutical makers, six of the 10 largest
automotive companies in the world, four of the five branches of the
U.S. Armed Forces, three of the world's top five airlines, five of the
six largest US commercial banks, and two of the world's top five
specialty retailers. Mountain View, Calif.-based SumTotal has offices
across Asia, Australia, Europe and North America. For more information
about SumTotal's products and services, visit www.sumtotalsystems.com.

   SumTotal, the SumTotal logo, TotalLMS, and Results-On-Demand are
registered trademarks or trademarks of SumTotal Systems, Inc. and/or
its affiliates in the United States and/or other countries. Other
names may be trademarks of their respective owners.

    Safe Harbor/Forward-Looking Statement

    Information in this press release and the accompanying conference
call contain forward-looking statements and management's estimation
regarding future performance of the company, including without
limitation, financial estimates for the third quarter ending
September 30, 2007, and the 2007 fiscal year. These statements
represent the company's current expectations or beliefs concerning its
future results, and include statements, among others, regarding its
financial guidance for estimated GAAP and non-GAAP revenue; loss and
income; growth of recurring revenue base; the company's competitive
position and business model, including its market share and its
ability to grow its subscriptions and support business, including
internationally and in the performance management market; and the
company's ability to execute and the strength and scale of its
business model. These statements are not historical facts or
guarantees of future performance or events; are based on current
expectations, estimates, beliefs, assumptions, goals and objectives;
and involve known and unknown risks, uncertainties and other factors
that may cause actual results to be materially different from the
results expressed or implied by these statements. Readers of this
press release and listeners to the accompanying conference call are
cautioned not to place undue reliance on any forward-looking statement
or statements. Additional factors that could cause actual results to
differ include, but are not limited to, (i) failure to close expected
transactions for the company's solutions and products either in the
third quarter of fiscal 2007 or thereafter, and the timing of
recognizing revenue from such transactions; (ii) the ability to
successfully manage and increase growth outside of the United States
and significant current and expected additional competition; (iii)
inaccurately estimating the speed, ability or cost of the company
transitioning its product offerings to on-demand subscriptions and a
recurring revenue model; (iv) the need to continue to expand product
distribution and services offerings and the acceptance of such
products and offerings, including, but not limited to, SumTotal 7.6;
(v) the company's inability to grow its business and revenue, and to
accurately predict the timing and expense of growing them, especially
for on-demand subscriptions and its recently acquired performance
management product; (vi) unexpected expenses or failure to implement
in a timely fashion, or at all, the requisite steps to control
expenses; (vii) the company's ability to recruit and retain key
personnel, including management, to support our current business and
future growth; (viii) the company's ability to protect its
intellectual property rights and claims that the company has infringed
the intellectual property rights of others; (ix) adoption of new
accounting regulations and standards that may affect reported earnings
and operating income; (x) the lengthening of the company's sales cycle
and increased difficulties in negotiating sales contracts on terms
favorable to us and the uncertain timing of such sales; (xi) the level
of corporate spending and changes in general economic conditions that
affect demand for computer software and services in general which may
disproportionately affect the market for our products; (xii) other
market conditions that include risks and uncertainties such as risks
associated with financial, economic, political, terrorist activity and
other uncertainties associated with operating a global business; and
(xiii) other events and other important factors disclosed previously
and from time to time in SumTotal Systems' filings with the Securities
and Exchange Commission, including the company's annual report for
fiscal year 2006 on Form 10-K filed on March 16, 2007, its quarterly
report on Form 10-Q filed on May 9, 2007, its Prospectus Supplement
filed on Form 424B2 filed on May 21, 2007, Form S-3/As filed on
September 28, 2006, and October 2, 2006, and its Form 8-Ks. The
forward-looking statements contained in this release and the
accompanying conference are made as of the date of this press release
and conference call, and the company assumes no obligation to update
the information in either the press release or the accompanying
conference call.