OAKLAND, Calif., May 3, 2012 (GLOBE NEWSWIRE) -- Scientific Learning Corporation (Nasdaq:SCIL), a leading provider of technologies for accelerated learning, today announced financial results for the first quarter ended March 31, 2012.
Total revenue in the first quarter of 2012 was $7.1 million, compared to $10.4 million in the first quarter of 2011. Total booked sales for the first quarter of 2012 were $4.6 million, compared to $8.1 million in the first quarter of 2011. Net loss in the first quarter of 2011 was ($5.0 million), or ($0.26) per share, compared to a net loss of ($2.4 million), or ($0.13) per share, in the first quarter of 2011. Adjusted EBITDA was ($4.1 million) in the first quarter of 2012 compared to ($1.4 million) in the first quarter of 2011.
First Quarter 2012 Operating Metrics:
- Transaction volume increased by 61% over first quarter 2011
- Recurring revenue increased 1% and comprised 43% of total revenue, compared to 29% in the first quarter 2011 which included a large 7-figure deal with 5 years of support
- As of March 31, 2012, approximately 29% of the Company's active K-12 school sites are accessing Fast ForWord via the new on-demand, SaaS platform known as MySciLEARN
"The past two quarters have been challenging given the seasonality in our core K-12 market and the transition in our business model, but we are pleased with the progress we have been making in the business," said Andy Myers, Chief Executive Officer of Scientific Learning. "Our MySciLEARN on-demand platform is far exceeding the expectations of our customers in terms of usability and performance, and it enables us to build and deploy more quality applications alongside Fast ForWord and Reading Assistant in the future. We continue to see an increase in overall transaction volume, which is inherent to our transition to a subscription business. We also saw a 43% increase in active sites on the new platform over the last 90 days, which represents a blend of both new customers and existing customer migrations. We expect a meaningful contribution from perpetual license sales, particularly in the next two quarters, as we continue to build our base of recurring revenue and reduce costs. We believe that our recent financing activities give us the runway to complete a successful transition to becoming a profitable, growing SaaS business."
A conference call to discuss first quarter 2012 financial results is scheduled for today, May 3, 2012 at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. Investors and analysts interested in participating in the call are invited to dial (866) 652-3154 (domestic) or (706) 634-7311 (international), Conference ID # 72508258, approximately 10 minutes prior to the start of the call. The conference call will be available live on the Investor Information portion of the Company's website at http://www.scilearn.com/investorinfo. A replay of this teleconference will be made available on the Scientific Learning website approximately two hours following the conclusion of the call. To hear the replay by phone, please call (855) 859-2056 (domestic) and (404) 537-3406 (international) and enter Conference ID # 72508258.
Booked sales and Adjusted EBITDA are both non-GAAP measures. Additional information on these non-GAAP measures and reconciliations are included at the end of this earnings release and in the investor information section of our website, www.scientificlearning.com.
About Scientific Learning Corporation
We accelerate learning by applying proven research on how the brain learns. Scientific Learning's results are demonstrated in over 250 research studies and protected by over 55 patents. Learners can realize achievement gains of up to 2 years in as little as 3 months and maintain an accelerated rate of learning even after the programs end.
Today, learners have used over 3 million Scientific Learning software products. We provide our offerings directly to parents, K–12 schools and learning centers, and in more than 40 countries around the world. For more information, visit http://www.scilearn.com/ or call toll-free (888) 358-0212.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to the safe harbor created by the federal securities laws. Such statements include, among others, statements relating to customer acceptance of the on-demand platform, our development of future software applications, transaction volume, our transition to a subscription SAAS business, our ability to migrate customers to our new on-demand platform, levels of recurring revenue and perpetual license sales, cost reductions, the sufficiency of our financial resources and future levels of growth and profitability. Such statements are subject to substantial risks and uncertainties. Actual events or results may differ materially as a result of many factors, including but not limited to: general economic and financial conditions (including current adverse conditions in government budgets and the general economy); availability of funding to purchase the Company's products and generally available to schools, including the expiration of federal stimulus funding; unexpected challenges in product development; the acceptance of existing and new products and product changes in existing and new markets; acceptance of subscription and other recurring offerings; competition; the extent to which the Company's marketing, sales and implementation strategies are successful; personnel changes; the Company's ability to continue to demonstrate the efficacy of its products, and other risks detailed in the Company's SEC reports, including but not limited to the Report on Form 10-K for the year ended December 31, 2011 (Part I, Item 1A, Risk Factors), filed March 30, 2012. The Company disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise.
| SCIENTIFIC LEARNING CORPORATION | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands) | ||
| (Unaudited) | ||
| March 31, | December 31, | |
| 2012 | 2011 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 8,120 | $ 5,871 |
| Accounts receivable, net | 2,216 | 4,433 |
| Prepaid expenses and other current assets | 1,725 | 1,709 |
| Total current assets | 12,061 | 12,013 |
| Property and equipment, net | 3,129 | 3,326 |
| Goodwill | 4,568 | 4,568 |
| Other intangible assets, net | 389 | 518 |
| Other assets | 1,431 | 1,438 |
| Total assets | $ 21,578 | $ 21,863 |
| Liabilities and stockholders' equity (net capital deficiency) | ||
| Current liabilities: | ||
| Accounts payable | $ 1,449 | $ 881 |
| Accrued liabilities | 3,455 | 3,556 |
| Deferred revenue | 10,363 | 12,606 |
| Total current liabilities | 15,267 | 17,043 |
| Deferred revenue, long-term | 4,496 | 4,716 |
| Warrant liability | 2,406 | -- |
| Other liabilities | 734 | 785 |
| Total liabilities | 22,903 | 22,544 |
| Stockholders' equity (net capital deficiency): | ||
| Common stock and additional paid in capital | 95,128 | 90,735 |
| Accumulated deficit | (96,455) | (91,419) |
| Accumulated other comprehensive income | 2 | 3 |
| Total stockholders' equity (net capital deficiency) | (1,325) | (681) |
| Total liabilities and stockholders' equity (net capital deficiency) | $ 21,578 | $ 21,863 |
| SCIENTIFIC LEARNING CORPORATION | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (In thousands, except per share data) | ||
| (Unaudited) | ||
| Three Months Ended March 31, | ||
| 2012 | 2011 | |
| Revenues: | ||
| Subscriptions | $ 763 | $ 250 |
| Licenses | 2,331 | 5,227 |
| Service and support | 3,992 | 4,958 |
| Total revenues | 7,086 | 10,435 |
| Cost of revenues: | ||
| Cost of subscriptions | 263 | 45 |
| Cost of licenses | 244 | 315 |
| Cost of service and support | 1,836 | 2,248 |
| Total cost of revenues | 2,343 | 2,608 |
| Gross profit | 4,743 | 7,827 |
| Operating expenses: | ||
| Sales and marketing | 4,889 | 4,916 |
| Research and development | 2,570 | 2,904 |
| General and administrative | 2,218 | 2,343 |
| Total operating expenses | 9,677 | 10,163 |
| Operating loss | (4,934) | (2,336) |
| Interest and other income (expense), net | (59) | 12 |
| Loss before provision for income taxes | (4,993) | (2,324) |
| Provision for income taxes | 43 | 39 |
| Net loss | $ (5,036) | $ (2,363) |
| Net loss per share: | ||
| Basic net loss per share | $ (0.26) | $ (0.13) |
| Diluted net loss per share | $ (0.26) | $ (0.13) |
| Weighted average shares used in computation of per share data: | ||
| Basic weighted average shares outstanding | 19,157 | 18,749 |
| Diluted weighted average shares outstanding | 19,157 | 18,749 |
| SCIENTIFIC LEARNING CORPORATION | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| (Unaudited) | ||
| Three Months Ended March 31, | ||
| 2012 | 2011 | |
| Operating Activities: | ||
| Net loss | $ (5,036) | $ (2,363) |
| Adjustments to reconcile net loss to cash used in operating activities | ||
| Depreciation and amortization | 614 | 475 |
| Stock-based compensation | 263 | 456 |
| Change in fair value of warrant | 38 | -- |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 2,217 | 1,711 |
| Prepaid expenses and other current assets | (16) | 124 |
| Other assets | (32) | 46 |
| Accounts payable | 568 | (29) |
| Accrued liabilities | (101) | (671) |
| Deferred revenue | (2,463) | (1,974) |
| Other liabilities | (51) | (30) |
| Net cash used in operating activities | (3,999) | (2,255) |
| Investing Activities: | ||
| Purchases of property and equipment, net | (249) | (372) |
| Purchases of investments | -- | (2,379) |
| Maturities of investments | -- | 3,000 |
| Net cash provided by (used in) investing activities | (249) | 249 |
| Financing Activities: | ||
| Borrowings under bank line of credit | 3,000 | -- |
| Repayment of borrowings under bank line of credit | (3,000) | -- |
| Proceeds from exercise of options | 1 | -- |
| Proceeds from the issuance of common stock, net | 6,511 | 4 |
| Net settlement of common stock | (14) | (26) |
| Net cash provided by financing activities | 6,498 | (22) |
| Effect of exchange rate changes on cash and cash equivalents | (1) | |
| Increase (decrease) in cash and cash equivalents | 2,249 | (2,028) |
| Cash and cash equivalents at beginning of period | 5,871 | 5,415 |
| Cash and cash equivalents at end of period | $ 8,120 | $ 3,387 |
| Scientific Learning Corporation | ||
| Supplemental Information | ||
| Reconciliation of Booked Sales, Revenue and Change in Deferred Revenue | ||
| $s in thousands | ||
| Three months ended March 31, | ||
| 2012 | 2011 | |
| Booked sales | $ 4,615 | $ 8,083 |
| Less: revenues | 7,086 | 10,435 |
| Other adjustments | 8 | 378 |
| Net decrease in total deferred revenue | $ (2,463) | $ (1,974) |
| Beginning balance in total deferred revenue | $ 17,322 | $ 21,871 |
| Ending balance in total deferred revenue | $ 14,859 | $ 19,897 |
Booked sales is a non-GAAP financial measure that we believe to be a useful measure of the current level of business activity both for management and for investors. Booked sales equals the total value (net of allowances) of software and services invoiced in the period. Because a significant portion of our revenue is recognized over a period of months, booked sales is a good indicator of current activity. The table above shows the reconciliation of booked sales, revenue, and changes in deferred revenue.
| Reconciliation of Net Loss to Adjusted EBITDA | ||
| $s in thousands | ||
| Three months ended March 31, | ||
| 2012 | 2011 | |
| Net loss | $ (5,036) | $ (2,363) |
| Adjustments to reconcile to Adjusted EBITDA: | ||
| Provision for income taxes1 | 43 | 39 |
| Interest and other (income) expense, net2 | 59 | (12) |
| Depreciation and amortization3 | 614 | 475 |
| Stock-based compensation4 | 263 | 456 |
| Adjusted EBITDA | $ (4,057) | $ (1,405) |
Earnings before interest, taxes, depreciation, amortization and stock-based compensation expense (Adjusted EBITDA) is a non-GAAP financial measure we believe to be a useful measure of the resources available to the Company in the current period. We also believe that Adjusted EBITDA will be useful in allowing investors to compare our performance with that of other companies. The table above shows a reconciliation of Adjusted EBITDA to net loss, the closest GAAP measure.
Adjusted EBITDA should not be considered in isolation or as a substitute for analysis for our results as reports under GAAP. Adjusted EBITDA has the following differences from net loss, the closest GAAP measure:
1 Provision for income taxes is a required expense for all businesses. We excluded in it order to allow investors to evaluate our operating results without regard to our tax obligations.
2 Because we have borrowed and invested money, interest income and expense is a necessary element of our costs and ability to generate profits and cash flows. We excluded interest income and expense in order to allow investors to evaluate our operating results without regard to our financing methods. Other income and expense includes change in the fair value of our warrants, foreign exchange gain and loss as well as gain and loss on disposal of fixed assets, all of which we believe are not indicative of our core operating performance and are not meaningful in comparison to our past operating performance.
3 Depreciation and amortization are necessary elements of our costs and our ability to generate profits; and the assets being depreciated and amortized will often have to be replaced in the future. Adjusted EBITDA does not reflect any cash requirements for such replacements. See below for allocation of non-cash charges.
4 Stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. We exclude stock-based compensation because we believe it is not an indicator of the performance of our core operations. See below for allocation of non-cash charges.
| Non-Cash Charges | |||
| $s in thousands | Three months ended March 31, 2012 | ||
|
Depreciation & Amortization |
Stock-based Compensation |
Total | |
| Included in: | |||
| Cost of products | $ 154 | $ 1 | $ 155 |
| Cost of service and support | -- | 6 | 6 |
| Operating expenses | 460 | 256 | 716 |
| Total | $ 614 | $ 263 | $ 877 |
| $s in thousands | Three months ended March 31, 2011 | ||
|
Depreciation & Amortization |
Stock-based Compensation |
Total | |
| Included in: | |||
| Cost of products | $ 138 | $ -- | $ 138 |
| Cost of service and support | -- | 9 | 9 |
| Operating expenses | 337 | 447 | 784 |
| Total | $ 475 | $ 456 | $ 931 |
| Recurring Revenue | |||
| Three months ended March 31, | |||
| 2012 | 2011 | ||
| Recurring revenue1 | $ 3,037 | $ 3,003 | |
| Non-recurring revenue2 | 4,049 | 7,432 | |
| Total revenues | $ 7,086 | $ 10,435 | |
| Recurring revenue as a % of total revenue | 43% | 29% | |
| Non-recurring revenue as a % of total revenue | 57% | 71% | |
1 Recurring revenue is GAAP revenue recognized in the current period. It is predictable revenue that is likely to continue in future reporting periods. We derive recurring revenue from subscription fees paid by US and international customers to access our applications, on-line consumer products, and web-delivered reporting tools and from support & maintenance fees paid by our customers, who previously purchased perpetual software products.
2 Non-recurring revenue is GAAP revenue recognized in the current period. It is revenue that is not predictable and uncertain to continue in the future. We derive recurring revenue from perpetual software licenses, non-recurring consulting contracts, OEM agreements, and other contracts.
| Booked sales of recurring contracts | ||
| Three months ended March 31, | ||
| 2012 | 2011 | |
| Recurring booked sales1 | $ 2,031 | $ 2,210 |
| Non-recurring booked sales2 | 2,584 | 5,873 |
| Total booked sales | $ 4,615 | $ 8,083 |
| Recurring booked sales as a % of total booked sales | 44% | 27% |
| Non-recurring booked sales as a % of total booked sales | 56% | 73% |
Booked sales is a non-GAAP financial measure that we believe to be a useful measure of the current level of business activity both for management and for investors. Booked sales equals the total value (net of allowances) of software and services invoiced in the period. Please see first table above for reconciliation of total booked sales, total revenue, and total change in deferred revenue.
1 Booked sales of recurring contracts is a non-GAAP measure of predictable sales that generate recurrent revenue, which is a GAAP measure defined above.
2 Non-recurring booked sales are sales that are not predictable and uncertain to continue in the future. We derive recurring booked sales from perpetual software licenses, non-recurring consulting contracts, OEM agreements, and other contracts.