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| 8-K - SCIENTIFIC LEARNING CORPORATION 8-K - SCIENTIFIC LEARNING CORP | a6633121.htm |
Exhibit 99.1
Scientific Learning Reports Fourth Quarter and Full Year 2010 Financial Results
OAKLAND, Calif.--(BUSINESS WIRE)--March 2, 2011--Scientific Learning Corporation (NASDAQ:SCIL), a leading provider of technologies for accelerated learning, today announced financial results for the fourth quarter and year ended December 31, 2010.
Total revenue in the fourth quarter of 2010 was $9.8 million, compared to $15.8 million in the fourth quarter of 2009, a decrease of 38%. Total booked sales for the fourth quarter were $10.4 million, compared to $14.6 million in the fourth quarter 2009.
Earnings before interest, taxes, depreciation, amortization, and stock compensation (EBITDAS) was a loss of $1.4 million in the fourth quarter of 2010, compared to EBITDAS of $2.6 million in the fourth quarter of 2009. Net loss in the fourth quarter of 2010, which includes a one–time impairment charge of $3.9 million or $0.21 per share, was $6.2 million or $0.34 per share, compared to net income of $1.5 million, or $0.08 per share in the fourth quarter of 2009.
“We were disappointed by the significant decline in booked sales, which is largely attributable to the continued soft spending in the K-12 market,” said Andy Myers, Chief Executive Officer. “This decline is primarily due to fewer deals over $500,000. For comparative purposes, we had 5 large deals in all of 2010 compared to 20 large deals in 2009, representing an $18.5 million decline in booked sales generated by large deals. This reliance on large deals is a primary reason why we have been focused on re-architecting our technology to create new growth opportunities in both the core K-12 and other markets. We've made great strides in our objectives for 2010, as our platform, products and business begin to evolve into a more growth-oriented strategy.”
“The most significant accomplishment of 2010 was the launch of our SciLEARN Enterprise platform, which provides web-based access to our entire Fast ForWord product series. This launch means that schools no longer need to install the Fast ForWord software at each student station. Instead, SciLEARN Enterprise applications can be deployed from a single server at the district level, eliminating thousands of dollars of overhead at every school and lowering the total cost of ownership at a time when school district budgets are under significant duress. We are very excited about the new opportunities SciLEARN Enterprise creates for our current K-12 business, as well as its potential as the foundation for future products and growth in new markets.”
Total revenue for the year ended December 31, 2010 was $43.4 million, compared to $55.3 million for the year ended December 31, 2009, reflecting a 22% decrease. Total booked sales for 2010 were $41.8 million, compared to $59.7 million in 2009.
EBITDAS was a loss of $1.7 million for the full year ended December 31, 2010, compared to EBITDAS of $8.5 million for the full year ended December 31, 2009. Net loss for the twelve months ended December 31, 2010, which includes a one-time impairment charge of $3.9 million or $0.21 per share, was $9.7 million or $0.52 per share, compared to net income of $4.8 million, or $0.27 per share, for 2009.
“Although our overall financial performance in 2010 did not meet our expectations, we are excited by the evolution of a new business model and are encouraged by some early signs of success,” said Robert Feller, Chief Financial Officer. “This year, we experienced an increase in renewal rates over 2009, as well as an increase in the recurring revenue portion of the business. As we shift the business onto our new SciLEARN Enterprise web-based platform, we believe this will drive more subscription revenue and accelerate growth in recurring offerings as a percentage of the total revenue.”
The company believes that booked sales and EBITDAS (both non-GAAP measures) are important measures of operating performance and has chosen to disclose these figures as part of the earnings results. EBITDAS and booked sales should not be considered in isolation from net income (net loss) and revenue and are not intended to represent substitute measures of performance calculated under GAAP. Reconciliations of booked sales, revenue and deferred revenue, and EBITDAS and net income (net loss) are included at the end of this earnings release and in the investor information section of our website, www.scientificlearning.com.
Conference Call Information
A conference call to discuss fourth quarter and full year 2010 financial results is scheduled for today, March 2, 2011 at 5:00 p.m. Eastern Time / 2:00 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 # 42065253, 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 (800) 642-1687 (domestic) and (706) 645-9291 international and enter conference id number 42065253.
About Scientific Learning Corporation
We accelerate learning by applying proven research on how the brain learns. Scientific Learning’s results are demonstrated in over 200 research studies and protected by over 55 patents. Learners can realize achievement gains of 1 - 2 years in as little as 8 - 12 weeks and maintain an accelerated rate of learning even after the programs end.
Today, learners have used nearly 3 million Scientific Learning software products, which apply “Brain Fitness” principles to the areas of English language and reading. 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 the impact of the current and planned future releases of the new SciLEARN Enterprise platform, growth in markets outside US K-12, future levels of recurring revenue and future renewal rates. 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 the current adverse conditions in the general economy and in the financial and credit markets); availability of funding to purchase the Company's products and generally available to schools; unexpected challenges in product development; 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 the Report on Form 10-Q for the quarter ended September 30, 2010 (Part II, Item 1A, Risk Factors), filed November 1, 2010. 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 BALANCE SHEET | ||||||||
| (In thousands) | ||||||||
| Unaudited | ||||||||
| December 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,415 | $ | 20,679 | ||||
| Short-term investments | 9,631 | - | ||||||
| Accounts receivable, net | 5,053 | 6,390 | ||||||
| Prepaid expenses and other current assets | 2,206 | 2,142 | ||||||
| Total current assets | 22,305 | 29,211 | ||||||
| Property and equipment, net | 2,497 | 1,780 | ||||||
| Goodwill | 4,568 | 4,568 | ||||||
| Other intangible assets, net | 1,034 | 5,476 | ||||||
| Other assets | 1,399 | 2,093 | ||||||
| Total assets | $ | 31,803 | $ | 43,128 | ||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 543 | $ | 812 | ||||
| Accrued liabilities | 4,198 | 7,362 | ||||||
| Deferred revenue | 16,388 | 15,859 | ||||||
| Total current liabilities | 21,129 | 24,033 | ||||||
| Deferred revenue, long-term | 5,483 | 6,371 | ||||||
| Other liabilities | 857 | 795 | ||||||
| Total liabilities | 27,469 | 31,199 | ||||||
| Stockholders' equity: | ||||||||
| Common stock and additional paid-in capital | 89,277 | 87,182 | ||||||
| Accumulated deficit | (84,943 | ) | (75,253 | ) | ||||
| Total stockholders' equity: | 4,334 | 11,929 | ||||||
| Total liabilities and stockholders' equity | $ | 31,803 | $ | 43,128 | ||||
| SCIENTIFIC LEARNING CORPORATION | ||||||||||||||
| STATEMENT OF OPERATIONS | ||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||
| Three months ended December 31, | Twelve months ended December 31, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||
| Revenues: | ||||||||||||||
| Products | $ | 4,733 | $ | 10,234 | $ | 22,506 |
$ |
35,863 |
||||||
| Service and support | 5,045 | 5,521 | 20,878 | 19,425 | ||||||||||
| Total revenues | 9,778 | 15,755 | 43,384 | 55,288 | ||||||||||
| Cost of revenues: | ||||||||||||||
| Cost of products | 476 | 718 | 2,092 | 2,679 | ||||||||||
| Cost of service and support | 2,353 | 2,454 | 9,348 | 8,895 | ||||||||||
| Total cost of revenues | 2,829 | 3,172 | 11,440 | 11,574 | ||||||||||
| Gross profit | 6,949 | 12,583 | 31,944 | 43,714 | ||||||||||
| Operating expenses: | ||||||||||||||
| Sales and marketing | 4,935 | 7,075 | 21,498 | 24,042 | ||||||||||
| Research and development | 2,125 | 1,830 | 7,933 | 6,418 | ||||||||||
| General and administrative | 2,089 | 2,116 | 8,129 | 8,135 | ||||||||||
| Impairment charge | 3,890 | - | 3,890 | - | ||||||||||
| Total operating expenses | 13,039 | 11,021 | 41,450 | 38,595 | ||||||||||
| Operating income (loss) | (6,090 | ) | 1,562 | (9,506 | ) | 5,119 | ||||||||
| Interest and other income (expense), net | (90 | ) | 20 | (41 | ) | 110 | ||||||||
| Income (loss) before income tax | (6,180 | ) | 1,582 | (9,547 | ) | 5,229 | ||||||||
| Provision for income taxes | 5 | 62 | 143 | 429 | ||||||||||
| Net income (loss) | $ | (6,185 | ) | $ | 1,520 | $ | (9,690 | ) |
$ |
4,800 |
||||
| Basic net income (loss) per share | $ | (0.34 | ) | $ | 0.08 | $ | (0.52 | ) |
$ |
0.27 |
||||
| Shares used in computing basic net income (loss) per share | 18,641 | 18,213 | 18,498 | 18,039 | ||||||||||
| Diluted net income (loss) per share | $ | (0.34 | ) | $ | 0.08 | $ | (0.52 | ) |
$ |
0.26 |
||||
| Shares used in computing diluted net income (loss) per share | 18,641 | 19,201 | 18,498 | 18,690 | ||||||||||
| SCIENTIFIC LEARNING CORPORATION | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (In thousands) | ||||||||||||||||
|
Unaudited |
||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Operating Activities: | ||||||||||||||||
| Net income (loss) | $ | (6,185 | ) | $ | 1,520 | $ | (9,690 | ) | $ | 4,800 | ||||||
| Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities | ||||||||||||||||
| Depreciation and amortization | 613 | 712 | 2,532 | 1,895 | ||||||||||||
| Impairment charge | 3,890 | - | 3,890 | - | ||||||||||||
| Stock-based compensation | 338 | 355 | 1,496 | 1,389 | ||||||||||||
| Increase in deferred tax asset valuation allowance | - | - | - | - | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Accounts receivable | (463 | ) | 3,894 | 1,337 | 1,327 | |||||||||||
| Prepaid expenses and other current assets | (76 | ) | (416 | ) | (64 | ) | (801 | ) | ||||||||
| Other assets | 152 | (79 | ) | 32 | (90 | ) | ||||||||||
| Accounts payable | (11 | ) | (141 | ) | (268 | ) | 138 | |||||||||
| Accrued liabilities | 83 | 997 | (3,164 | ) | 3,398 | |||||||||||
| Deferred revenue | 8 | (2,946 | ) | (359 | ) | 2,278 | ||||||||||
| Other liabilities | (14 | ) | 82 | 62 | 170 | |||||||||||
| Net cash provided by (used in) operating activities | $ | (1,665 | ) | $ | 3,978 | (4,196 | ) | 14,504 | ||||||||
| Investing Activities: | ||||||||||||||||
| Purchases of property and equipment, net | (663 | ) | (500 | ) | (2,034 | ) | (2,070 | ) | ||||||||
| Purchases of short-term investments | (4,437 | ) | - | (16,357 | ) | - | ||||||||||
|
Sales and maturities of short-term investments |
3,900 | - | 6,724 | - | ||||||||||||
| Net cash used in investing activities | (1,200 | ) | (500 | ) | (11,667 | ) | (2,070 | ) | ||||||||
| Financing Activities: | ||||||||||||||||
| Borrowings under bank line of credit | - | - | - | 2,500 | ||||||||||||
| Repayment of borrowings | - | - | - | (2,500 | ) | |||||||||||
| Proceeds from issuance of common stock, net | 213 | 293 | 599 | 695 | ||||||||||||
| Net cash provided by financing activities | 213 | 293 | 599 | 695 | ||||||||||||
| Increase (decrease) in cash and cash equivalents | (2,652 | ) | 3,771 | (15,264 | ) | 13,129 | ||||||||||
| Cash and cash equivalents at beginning of period | 8,067 | 16,908 | 20,679 | 7,550 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 5,415 | $ | 20,679 | $ | 5,415 | $ | 20,679 | ||||||||
| Scientific Learning Corporation | ||||||||||||||||
| Supplemental Information | ||||||||||||||||
| Reconciliation of Booked Sales, Revenue and Change in Deferred Revenue | ||||||||||||||||
| $s in thousands | ||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Booked sales | $ | 10,378 | $ | 14,586 | $ | 41,838 | $ | 59,701 | ||||||||
| Less: revenue | 9,778 | 15,754 | 43,384 | 55,288 | ||||||||||||
| Other adjustments | (592 | ) | (1,778 | ) | 1,187 | (2,135 | ) | |||||||||
| Net increase (decrease) in current and long-term deferred revenue | $ | 8 | $ | (2,946 | ) | $ | (359 | ) | $ | 2,278 | ||||||
| Beginning balance in current and long-term deferred revenue | $ | 21,863 | $ | 25,176 | $ | 22,230 | $ | 19,952 | ||||||||
| Ending balance in current and long-term deferred revenue | $ | 21,871 | $ | 22,230 | $ | 21,871 | $ | 22,230 | ||||||||
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 Income (Loss) to EBITDAS | |||||||||||||||
| $s in thousands | |||||||||||||||
| Three months ended December 31, | Year ended December 31, | ||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||
| Net income (loss) | $ | (6,185 | ) | $ | 1,520 | $ | (9,690 | ) | $ | 4,800 | |||||
| Adjustments to reconcile to EBITDAS: | |||||||||||||||
| Income tax provision | 5 | 62 | 143 | 429 | |||||||||||
| Interest (income) expense, net | (14 | ) | (19 | ) | (53 | ) | 5 | ||||||||
| Depreciation and amortization | 613 | 712 | 2,532 | 1,895 | |||||||||||
| Stock compensation expense | 338 | 355 | 1,496 | 1,389 | |||||||||||
| Impairment charge | 3,890 | - | 3,890 | - | |||||||||||
| Adjusted EBITDAS | $ | (1,353 | ) | $ | 2,630 | $ | (1,682 | ) | $ | 8,518 | |||||
Earnings before interest, taxes, depreciation, amortization and stock compensation expense (EBITDAS) 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 EBITDAS will be useful in allowing investors to compare our performance with that of other companies. The table above shows a reconciliation of EBITDAS to net income (loss), the closest GAAP measure.
| Non-Cash Charges | ||||||||||||||||||
| $s in thousands | Three months ended December 31, 2010 | Year ended December 31, 2010 | ||||||||||||||||
|
Depreciation & |
Stock-based |
Total |
Depreciation & |
Stock-based |
Total | |||||||||||||
| Included in: | ||||||||||||||||||
| Cost of Products | $ | 220 | $ | - | $ | 220 | $ | 1,010 | $ | - | $ | 1,010 | ||||||
| Cost of Service and Support | 41 | 30 | 71 | 167 | 117 | 284 | ||||||||||||
| Operating Expenses | 353 | 308 | 661 | 1,357 | 1,380 | 2,736 | ||||||||||||
| Total | $ | 613 | $ | 338 | $ | 952 | $ | 2,532 | $ | 1,496 | $ | 4,030 | ||||||
| $s in thousands | Three months ended December 31, 2009 | Year ended December 31, 2009 | ||||||||||||||||
|
Depreciation & |
Stock-based |
Total |
Depreciation & |
Stock-based |
Total | |||||||||||||
| Included in: | ||||||||||||||||||
| Cost of Products | $ | 241 | $ | - | $ | 241 | $ | 720 | $ | - | $ | 720 | ||||||
| Cost of Service and Support | 50 | 44 | 94 | 133 | 149 | 282 | ||||||||||||
| Operating Expenses | 421 | 311 | 732 | 1,042 | 1,240 | 2,282 | ||||||||||||
| Total | $ | 712 | $ | 355 | $ | 1,067 | $ | 1,895 | $ | 1,389 | $ | 3,284 | ||||||
CONTACT:
Media Contact:
Scientific Learning Corporation
Jessica
Lindl, 510-625-6784
Sr. Vice President of Marketing and
Product
Management
jlindl@scilearn.com
or
Investor Contact:
The
Blueshirt Group
Stacie Bosinoff, 415-217-7722
investorrelations@scilearn.com
stacie@blueshirtgroup.com