OAKLAND, Calif., April 2, 2013 (GLOBE NEWSWIRE) -- Scientific Learning Corporation (OTCQB:SCIL), a leading provider of technologies for accelerated learning, today announced financial results for the fourth quarter and year ended December 31, 2012.
Total revenue in the fourth quarter of 2012 was $7.1 million, compared to $7.7 million in the fourth quarter of 2011. Total booked sales for the fourth quarter were $4.8 million, compared to $5.6 million in the fourth quarter of 2011. Operating income in the fourth quarter of 2012 was $0.3 million compared to a loss of $(3.7) million for the same period of 2011. Net income in the fourth quarter of 2012 was $0.8 million, or $0.03 per share, compared to a net loss of $(3.8) million, or $(0.20) per share, in the fourth quarter of 2011. Adjusted EBITDA was a gain of $1.2 million in the fourth quarter of 2012 compared to a loss of $(3.0) million in the same period of 2011.
"Rapid customer transition to our new on demand platform (MySciLEARN) continues with 76% converted as we established a record peak of over 95,000 student training sessions per day," stated Bob Bowen, Chairman and CEO. "In the fourth quarter of 2012 we achieved our goal of being cash flow from operations positive for the quarter and plan to be cash flow from operations positive in 2013 on realistic sales targets. Our employees' commitment to our important mission is inspiring."
Fourth Quarter 2012 Metrics:
- The number of active school sites increased approximately 13% year over year to almost 3,500 sites
- Subscription revenue increased 62% over fourth quarter 2011
- K-12 transaction volume decreased 7% over fourth quarter 2011
- As of December 31, 2012, 76% of the Company's active K-12 school sites are accessing Fast ForWord or Reading Assistant via the new on-demand, SaaS platform known as MySciLEARN, up from about 70% at the end of September, 2012
- As of December 31, 2012 the number of employees was 140 compared to 240 on December 31, 2011
"We are anticipating first quarter comparisons to be difficult. The education funding environment remains tight, and in addition we had two unusual large transactions in the first quarter of 2012 totaling nearly $1 million that will not repeat in the first quarter this year." stated Mr. Bowen.
"We have decided that the company would benefit from some more permanent financing and are in the process of completing an approximately $4.5 million debt financing with insiders and our largest shareholders," stated Bob Bowen. "We look forward to announcing the close of the financing soon."
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, http://www.scientificlearning.com/investorinfo.
Conference Call Information
A conference call to discuss fourth quarter 2012 financial results is scheduled for today, April 2, 2013 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 (877) 878-2695 (domestic) or (253) 237-1145 (international) and use conference ID # 31279456 ten 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.
About Scientific Learning Corporation
We accelerate learning by applying proven research on how the brain learns. Scientific Learning's results are demonstrated in over 270 research studies and protected by over 55 patents. Learners can realize achievement gains of up to two years in as little as three months and maintain an accelerated rate of learning even after the programs end.
Today, learners have used over 3.7 million Scientific Learning software products. We provide our offerings directly to parents, K-12 schools and learning centers, and in more than 45 countries around the world. For more information, visit http://www.scientificlearning.com/.
The Scientific Learning Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=15680
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 future profitability and cash flow, expectations for the first quarter of 2013 and our plans for securing more permanent financing. 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 amount and duration of federal stimulus funding; the acceptance of new products and product changes in existing and new markets; acceptance of subscription and other recurring offerings; seasonality and sales cycles in Scientific Learning's markets; 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 its Report on Form 10-K for the year ended December 31, 2012 (Part I, Item 1A, Risk Factors) filed April 1, 2013. 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 | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands) | ||
| (Audited) | ||
|
December 31, 2012 |
December 31, 2011 |
|
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 2,272 | $ 5,871 |
| Accounts receivable, net | 2,446 | 4,433 |
| Prepaid expenses and other current assets | 1,484 | 1,709 |
| Total current assets | 6,202 | 12,013 |
| Property and equipment, net | 2,028 | 3,326 |
| Goodwill | 4,568 | 4,568 |
| Other intangible assets, net | -- | 518 |
| Other assets | 260 | 1,438 |
| Total assets | $ 13,058 | $ 21,863 |
| Liabilities and stockholders' equity (net capital deficiency) | ||
| Current liabilities: | ||
| Accounts payable | $ 715 | $ 881 |
| Accrued liabilities | 1,981 | 3,556 |
| Loan payable | 800 | -- |
| Deferred revenue, short-term | 10,964 | 12,606 |
| Total current liabilities | 14,460 | 17,043 |
| Deferred revenue, long-term | 2,521 | 4,716 |
| Warrant Liability | 534 | -- |
| Other liabilities | 771 | 785 |
| Total liabilities | 18,286 | 22,544 |
| Stockholders' equity (net capital deficiency): | ||
| Common stock and additional paid in capital | 95,839 | 90,735 |
| Accumulated deficit | (101,069) | (91,419) |
| Accumulated other comprehensive income | 2 | 3 |
| Total stockholders' equity (net capital deficiency) | (5,228) | (681) |
| Total liabilities and stockholders' equity (net capital deficiency) | $ 13,058 | $ 21,863 |
| SCIENTIFIC LEARNING CORPORATION | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except per share data) | ||||
| (Unaudited) | (Audited) | |||
| Three Months Ended December 31, | Year Ended December 31, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Revenues: | ||||
| Subscriptions | $ 1,640 | $ 1,015 | $ 4,524 | $ 2,407 |
| License | 1,852 | 2,234 | 8,770 | 20,002 |
| Service and support | 3,589 | 4,462 | 14,849 | 18,670 |
| Total revenues | 7,081 | 7,711 | 28,143 | 41,079 |
| Cost of revenues: | ||||
| Cost of subscription | 317 | 273 | 1,110 | 613 |
| Cost of license | 239 | 422 | 974 | 1,412 |
| Cost of service and support | 952 | 2,240 | 5,704 | 8,663 |
| Total cost of revenues | 1,508 | 2,935 | 7,788 | 10,688 |
| Gross profit | 5,573 | 4,776 | 20,355 | 30,391 |
| Operating expenses: | ||||
| Sales and marketing | 2,734 | 3,904 | 15,368 | 17,979 |
| Research and development | 1,100 | 2,523 | 6,998 | 10,324 |
| General and administrative | 1,412 | 2,070 | 7,549 | 8,413 |
| Restructuring | 0 | -- | 1,462 | -- |
| Total operating expenses | 5,246 | 8,497 | 31,377 | 36,716 |
| Operating income(loss) | 327 | (3,721) | (11,022) | (6,325) |
| Interest and other income, net | 465 | 2 | 1,560 | 13 |
| Income(loss) before income tax | 792 | (3,719) | (9,462) | (6,312) |
| Provision for income taxes | 19 | 35 | 188 | 164 |
| Net income(loss) | $ 773 | $ (3,754) | $ (9,650) | $ (6,476) |
| Net income(loss) per share: | ||||
| Basic and diluted income(loss) per share | $ 0.03 | $ (0.20) | $ (0.43) | $ (0.34) |
| Weighted average shares used in computation of per share data: | ||||
| Basic weighted average shares outstanding | 23,395 | 18,943 | 22,310 | 18,870 |
| Diluted weighted average shares outstanding | 23,395 | 18,943 | 22,310 | 18,870 |
| SCIENTIFIC LEARNING CORPORATION | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (In thousands) | ||||
| (Unaudited) | (Audited) | |||
| Three Months Ended December 31, | Year Ended December 31, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Operating Activities: | ||||
| Net income (loss) | $ 773 | $ (3,754) | $ (9,650) | $ (6,476) |
| Adjustments to reconcile net income(loss) to cash used in operating activities | ||||
| Depreciation and amortization | 580 | 534 | 2,446 | 1,924 |
| Investment impairment charge | -- | -- | 200 | -- |
| Capitalized software impairment charge | 116 | -- | 116 | -- |
| Fixed asset impairment charge | 23 | -- | 23 | -- |
| Stock-based compensation | 200 | 225 | 815 | 1,232 |
| Change in fair value of warrant | (479) | -- | (1,834) | -- |
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | 2,163 | 3,871 | 1,987 | 620 |
| Prepaid expenses and other current assets | (663) | (80) | 225 | 409 |
| Other assets | 785 | (7) | 807 | 62 |
| Accounts payable | 208 | 135 | (166) | 338 |
| Accrued liabilities | (1,209) | (569) | (1,575) | (642) |
| Deferred revenue | (2,256) | (2,139) | (3,837) | (4,549) |
| Other liabilities | 110 | (46) | (14) | (72) |
| Net cash provided by (used in) operating activities | 351 | (1,830) | (10,457) | (7,154) |
| Investing Activities: | ||||
| Purchases of property and equipment, net | (122) | (365) | (598) | (2,138) |
| Purchases of investments | -- | (680) | -- | (5,313) |
| Sales and maturities of investments | -- | 6,277 | -- | 14,832 |
| Net cash provided by (used in) investing activities | (122) | 5,232 | (598) | 7,381 |
| Financing Activities: | ||||
| Borrowings under bank line of credit | 700 | -- | 8,597 | -- |
| Repayment of borrowings under bank line of credit | (1,297) | -- | (7,797) | -- |
| Proceeds from exercise of options | 26 | 193 | 178 | 370 |
| Proceeds from issuance of common stock, net | -- | -- | 6,512 | -- |
| Net settlement of common stock | 0 | (32) | (33) | (144) |
| Net cash provided by (used in) financing activities | (571) | 161 | 7,457 | 226 |
| Effect of exchange rate changes on cash and cash equivalents | (3) | 3 | (1) | 3 |
| Increase (decrease) in cash and cash equivalents | (345) | 3,566 | (3,599) | 456 |
| Cash and cash equivalents at beginning of period | 2,617 | 2,305 | 5,871 | 5,415 |
| Cash and cash equivalents at end of period | $ 2,272 | $ 5,871 | $ 2,272 | $ 5,871 |
| Scientific Learning Corporation | ||||||||
| Supplemental Information | ||||||||
| (Unaudited) | ||||||||
| Reconciliation of Booked Sales, Revenue and Change in Deferred Revenue | ||||||||
| $s in thousands | ||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||
| 2012 | 2011 | 2012 | 2011 | |||||
| Booked sales | $ 4,825 | $ 5,583 | $ 24,305 | $ 35,950 | ||||
| Less: revenue | (7,081) | (7,711) | (28,143) | (41,079) | ||||
| Adjustments | 1 | (12) | 1 | 580 | ||||
| Net decrease in current and long-term deferred revenue | $ (2,255) | $ (2,140) | $ (3,837) | $ (4,549) | ||||
| Beginning balance in current and long-term deferred revenue | $ 15,740 | $ 19,462 | $ 17,322 | $ 21,871 | ||||
| Ending balance in current and long-term deferred revenue | $ 13,485 | $ 17,322 | $ 13,485 | $ 17,322 | ||||
| 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 December 31, | Year Ended December 31, | |||||||
| 2012 | 2011 | 2012 | 2011 | |||||
| Net income (loss) | $ 773 | $ (3,754) | $ (9,650) | $ (6,476) | ||||
| Adjustments to reconcile to Adjusted EBITDA: | ||||||||
| Provision for income taxes1 | 19 | 35 | 188 | 164 | ||||
| Interest and other (income) expense, net2 | 14 | 2 | 74 | 13 | ||||
| Depreciation and amortization3 | 580 | 534 | 2,446 | 1,924 | ||||
| Stock-based compensation4 | 200 | 225 | 815 | 1,232 | ||||
| Change in fair value of warrant5 | (479) | -- | (1,834) | -- | ||||
| Restructuring6 | -- | -- | 1,462 | -- | ||||
| Impairment charge7 | 139 | -- | 339 | -- | ||||
| Adjusted EBITDA | $ 1,246 | $ (2,958) | $ (6,160) | $ (3,143) | ||||
| 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 foreign exchange gain 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. | ||||||||
| 5 Change in fair value of warrant is the change in the fair value of our common stock warrants which were issued on March 28, 2012. The fair value was estimated using the Black-Scholes Merton option pricing model, which requires the input of highly subjective assumptions as determined by the Company's management which we believe is not indicative of our core operating performance and is not meaningful in comparison to our past operating performance. | ||||||||
| 6 Restructuring charge consists of severance and related benefits incurred as related to a reduction in force completed in the third quarter of 2012 which we believe is not indicative of our core operating performance and is not meaningful in comparison to our past operating performance. | ||||||||
| 7 Impairment charge consisting of a write off of an investment which was deemed to be impaired as of June 30, 2012 due to the financial condition of the company with which this investment was for. In addition, the charge includes fixed asset impairment charges related to software and fixed assets that were deemed impaired during 2012. | ||||||||
| Scientific Learning Corporation | ||||||||||||
| Supplemental Information | ||||||||||||
| (Unaudited) | ||||||||||||
| Non-Cash Charges | ||||||||||||
| $s in thousands | Three Months Ended December 31, 2012 | Year Ended December 31, 2012 | ||||||||||
|
Depreciation & Amortization |
Stock-based Compensation |
Total |
Depreciation & Amortization |
Stock-based Compensation |
Total | |||||||
| Included in: | ||||||||||||
| Cost of subscriptions and licenses | $ 160 | $ 1 | $ 161 | $ 633 | $ 5 | $ 638 | ||||||
| Cost of service and support | $ -- | $ 1 | 1 | -- | 14 | 14 | ||||||
| Operating expenses | $ 420 | $ 198 | 618 | 1,813 | 796 | 2,609 | ||||||
| Total | $ 580 | $ 200 | $ 779 | $ 2,446 | $ 815 | $ 3,260 | ||||||
| $s in thousands | Three Months Ended December 31, 2011 | Year Ended December 31, 2011 | ||||||||||
|
Depreciation & Amortization |
Stock-based Compensation |
Total |
Depreciation & Amortization |
Stock-based Compensation |
Total | |||||||
| Included in: | ||||||||||||
| Cost of subscriptions and licenses | $ 140 | $ 1 | $ 141 | $ 559 | $ 2 | $ 561 | ||||||
| Cost of service and support | -- | 10 | 10 | -- | 40 | 40 | ||||||
| Operating expenses | 394 | 214 | 608 | 1,365 | 1,190 | 2,555 | ||||||
| Total | $ 534 | $ 225 | $ 759 | $ 1,924 | $ 1,232 | $ 3,156 | ||||||
| Booked sales of subscription contracts | ||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||
| 2012 | 2011 | 2012 | 2011 | |||||
| Subscription booked sales1 | $ 1,428 | $ 1,347 | $ 6,449 | $ 4,213 | ||||
| Non-subscription booked sales2 | 3,397 | 4,232 | 17,856 | 31,737 | ||||
| Total booked sales | $ 4,825 | $ 5,579 | $ 24,305 | $ 35,950 | ||||
| Recurring booked sales as a % of total booked sales | 30% | 24% | 27% | 12% | ||||
| Non-recurring booked sales as a % of total booked sales | 70% | 76% | 73% | 88% | ||||
| 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 subscriptions contracts represent a non-GAAP measure of sales that generate revenue from annual or monthly subscriptions to our web-based applications. | ||||||||
| 2 Non-subscription booked sales represent the sale of licenses, services and support for perpetual licenses and on premise products. | ||||||||