Attached files
| file | filename |
|---|---|
| 8-K - SCIENTIFIC LEARNING CORPORATION 8-K 8-12-2013 - SCIENTIFIC LEARNING CORP | form8k.htm |
Exhibit 99.1
Scientific Learning Reports Second Quarter Financial Results
OAKLAND, Calif., August 12, 2013 (GLOBE NEWSWIRE) -- Scientific Learning Corporation (OTCQB: SCIL), a leading provider of technologies for accelerated learning, today announced financial results for the second quarter ended June 30, 2013.
Total revenue in the second quarter of 2013 was $5.3 million, compared to $7.1 million in the second quarter of 2012 due to a decline in perpetual license revenue. Total booked sales for the second quarter were $4.3 million, compared to $7.1 million in the same period of 2012, reflecting continued difficulties in the K-12 funding environment and reductions in sales capacity made in 2012. Operating expenses totaled $4.4 million compared to $8.3 million in the second quarter of 2012. The net loss in the second quarter of 2013 was $(0.05) million, or $(0.00) per share, compared to a net loss of $(3.1) million, or $(0.14) per share, in the second quarter of 2012. Adjusted EBITDA was a gain of $0.2 million in the second quarter of 2013 compared to a loss of $(2.4) million in the same period of 2012.
“While we are not pleased with the second quarter results which were significantly impacted by sequestration, we are encouraged by the strong start to the third quarter with July being our best month and our first year over year increase in booked sales this year,” stated Robert Bowen, CEO. “With sales starting to move in the right direction, margins improving, and costs at a desired level, we are well poised to leverage upside.”
Other second quarter highlights:
| · | Subscription revenue increased 80% over second quarter 2012 |
| · | As of June 30, 2013, 85% of the Company's active K-12 school sites are using MySciLEARN |
| · | Annualized recurring revenue including subscription, support, and non-K-12 recurring revenue is about $15M |
| · | Average transaction volume per K-12 sales representative increased 15% compared to 2012 |
| · | The committed pipeline is up over 100% compared to the same time in Q2 2012 |
| · | High quality leads increased 44% with cost per lead down 25% compared to the prior year |
| · | As of June 30, 2013 the number of employees was 136 compared to 231 on June 30, 2012 |
“During the second quarter we made significant progress on our product development goals and have now retired our legacy reporting tool, Progress Tracker for K-12. Reports are now available directly in MySciLEARN improving ease of use for our customers. Our Shanghai development operation is now at work on a content tool which will enable us to more easily add content to Reading Assistant™,” stated Mr. Bowen. “We are pleased with the results of our Reading Assistant™ sales initiatives.”
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/.
Conference Call Information
A conference call to discuss second quarter 2013 financial results is scheduled for today, August 12, 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 # 29271561 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, more than 2.2 million learners have used 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/.
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 trends in the Company’s sales, the education funding environment and the Company’s plans related to product development. 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 Annual Report on Form 10-K for the year ended December 31, 2012 (Part I, Item 1A, Risk Factors) filed April 1, 2013 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Part II, Item 1A, Risk Factors) filed on May 14, 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.
CONTACT: Media Contact:
Steve Gardner
Vice President, Marketing, Inside Sales and Support
Scientific Learning Corporation
(530) 282-6226
sgardner@scilearn.com
CONTACT: Investor Relations:
Jane Freeman
Chief Financial Officer
Scientific Learning Corporation
(510) 625-6710
jfreeman@scilearn.com
investorrealtions@scilearn.com
SCIENTIFIC LEARNING CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
|
June 30,
|
December 31,
|
||||||
|
|
2013
|
2012
|
||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
2,459
|
$
|
2,272
|
||||
|
Accounts receivable, net
|
1,835
|
2,446
|
||||||
|
Prepaid expenses and other current assets
|
1,027
|
1,484
|
||||||
|
|
||||||||
|
Total current assets
|
5,321
|
6,202
|
||||||
|
|
||||||||
|
Property and equipment, net
|
1,526
|
2,028
|
||||||
|
Goodwill
|
4,568
|
4,568
|
||||||
|
Other assets
|
488
|
260
|
||||||
|
|
||||||||
|
Total assets
|
$
|
11,903
|
$
|
13,058
|
||||
|
|
||||||||
|
Liabilities and stockholders' equity (net capital deficiency)
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$
|
469
|
$
|
715
|
||||
|
Accrued liabilities
|
1,682
|
1,981
|
||||||
|
Loan payable
|
-
|
800
|
||||||
|
Deferred revenue, short-term
|
8,689
|
10,964
|
||||||
|
|
||||||||
|
Total current liabilities
|
10,840
|
14,460
|
||||||
|
Deferred revenue, long-term
|
1,179
|
2,521
|
||||||
|
Long-term debt
|
4,129
|
-
|
||||||
|
Warrant liability
|
894
|
534
|
||||||
|
Other liabilities
|
698
|
771
|
||||||
|
|
||||||||
|
Total liabilities
|
17,740
|
18,286
|
||||||
|
|
||||||||
|
Stockholders' equity (net capital deficiency):
|
||||||||
|
Common stock and additional paid in capital
|
96,296
|
95,839
|
||||||
|
Accumulated deficit
|
(102,127
|
)
|
(101,069
|
)
|
||||
|
Accumulated other comprehensive income (loss)
|
(6
|
)
|
2
|
|||||
|
|
||||||||
|
Total stockholders' equity (net capital deficiency)
|
(5,837
|
)
|
(5,228
|
)
|
||||
|
|
||||||||
|
Total liabilities and stockholders' equity (net capital deficiency)
|
$
|
11,903
|
$
|
13,058
|
||||
SCIENTIFIC LEARNING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
Revenues:
|
||||||||||||||||
|
Subscriptions
|
$
|
1,659
|
$
|
921
|
$
|
3,223
|
$
|
1,684
|
||||||||
|
License
|
659
|
2,569
|
1,415
|
4,900
|
||||||||||||
|
Service and support
|
3,012
|
3,658
|
6,170
|
7,650
|
||||||||||||
|
|
||||||||||||||||
|
Total revenues
|
5,330
|
7,148
|
10,808
|
14,234
|
||||||||||||
|
|
||||||||||||||||
|
Cost of revenues:
|
||||||||||||||||
|
Cost of subscription
|
298
|
242
|
616
|
505
|
||||||||||||
|
Cost of license
|
71
|
255
|
136
|
499
|
||||||||||||
|
Cost of service and support
|
864
|
1,594
|
1,825
|
3,430
|
||||||||||||
|
|
||||||||||||||||
|
Total cost of revenues
|
1,233
|
2,091
|
2,577
|
4,434
|
||||||||||||
|
|
||||||||||||||||
|
Gross profit
|
4,097
|
5,057
|
8,231
|
9,800
|
||||||||||||
|
|
||||||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Sales and marketing
|
2,211
|
4,378
|
4,641
|
9,267
|
||||||||||||
|
Research and development
|
934
|
1,933
|
2,007
|
4,503
|
||||||||||||
|
General and administrative
|
1,286
|
1,971
|
2,663
|
4,189
|
||||||||||||
|
|
||||||||||||||||
|
Total operating expenses
|
4,431
|
8,282
|
9,311
|
17,959
|
||||||||||||
|
|
||||||||||||||||
|
Operating loss
|
(334
|
)
|
(3,225
|
)
|
(1,080
|
)
|
(8,159
|
)
|
||||||||
|
|
||||||||||||||||
|
Interest and other income, net
|
313
|
124
|
69
|
65
|
||||||||||||
|
|
||||||||||||||||
|
Loss before provision for income tax
|
(21
|
)
|
(3,101
|
)
|
(1,011
|
)
|
(8,094
|
)
|
||||||||
|
Provision for income taxes
|
33
|
40
|
47
|
83
|
||||||||||||
|
|
||||||||||||||||
|
Net loss
|
$
|
(54
|
)
|
$
|
(3,141
|
)
|
$
|
(1,058
|
)
|
$
|
(8,177
|
)
|
||||
|
|
||||||||||||||||
|
Net loss per share:
|
||||||||||||||||
|
Basic and diluted loss per share
|
$
|
(0.00
|
)
|
$
|
(0.14
|
)
|
$
|
(0.04
|
)
|
$
|
(0.39
|
)
|
||||
|
|
||||||||||||||||
|
Weighted average shares used in computation of per share data:
|
||||||||||||||||
|
Basic weighted average shares outstanding
|
23,620
|
23,263
|
23,635
|
21,210
|
||||||||||||
|
Diluted weighted average shares outstanding
|
23,620
|
23,263
|
23,635
|
21,210
|
||||||||||||
SCIENTIFIC LEARNING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
Operating Activities:
|
||||||||||||||||
|
Net loss
|
$
|
(54
|
)
|
$
|
(3,141
|
)
|
$
|
(1,058
|
)
|
$
|
(8,177
|
)
|
||||
|
Adjustments to reconcile net income(loss) to cash used in operating activities
|
||||||||||||||||
|
Depreciation and amortization
|
329
|
611
|
717
|
1,225
|
||||||||||||
|
Investment impairment charge
|
-
|
200
|
-
|
200
|
||||||||||||
|
Stock-based compensation
|
189
|
222
|
422
|
485
|
||||||||||||
|
Paid-in-kind interest expense
|
133
|
-
|
133
|
-
|
||||||||||||
|
Amortization of debt discount and deferred debt issuance cost
|
109
|
-
|
109
|
-
|
||||||||||||
|
Change in fair value of warrant
|
(559
|
)
|
(326
|
)
|
(338
|
)
|
(288
|
)
|
||||||||
|
Changes in operating assets and liabilities:
|
-
|
-
|
-
|
-
|
||||||||||||
|
Accounts receivable
|
(510
|
)
|
(2,063
|
)
|
611
|
154
|
||||||||||
|
Prepaid expenses and other current assets
|
157
|
497
|
457
|
481
|
||||||||||||
|
Other assets
|
(123
|
)
|
27
|
(183
|
)
|
(5
|
)
|
|||||||||
|
Accounts payable
|
65
|
(340
|
)
|
(246
|
)
|
228
|
||||||||||
|
Accrued liabilities
|
31
|
(492
|
)
|
(299
|
)
|
(593
|
)
|
|||||||||
|
Deferred revenue
|
(1,035
|
)
|
(26
|
)
|
(3,617
|
)
|
(2,489
|
)
|
||||||||
|
Other liabilities
|
5
|
(8
|
)
|
(73
|
)
|
(59
|
)
|
|||||||||
|
|
||||||||||||||||
|
Net cash used in operating activities
|
(1,263
|
)
|
(4,839
|
)
|
(3,365
|
)
|
(8,838
|
)
|
||||||||
|
|
||||||||||||||||
|
Investing Activities:
|
||||||||||||||||
|
Purchases of property and equipment and additions to capitalized software, net
|
(34
|
)
|
(216
|
)
|
(157
|
)
|
(465
|
)
|
||||||||
|
|
||||||||||||||||
|
Net cash used in investing activities
|
(34
|
)
|
(216
|
)
|
(157
|
)
|
(465
|
)
|
||||||||
|
|
||||||||||||||||
|
Financing Activities:
|
||||||||||||||||
|
Borrowings under bank line of credit
|
-
|
-
|
2,300
|
3,000
|
||||||||||||
|
Repayment of borrowings under bank line of credit
|
(2,900
|
)
|
-
|
(3,100
|
)
|
(3,000
|
)
|
|||||||||
|
Proceeds from exercise of options
|
37
|
147
|
37
|
148
|
||||||||||||
|
Proceeds from issuance of common stock, net
|
-
|
-
|
-
|
6,511
|
||||||||||||
|
Proceeds from issuance of subordinated debt
|
4,600
|
-
|
4,600
|
-
|
||||||||||||
|
Debt issuance cost
|
(118
|
)
|
-
|
(118
|
)
|
-
|
||||||||||
|
Net cash paid for common stock issued
|
(2
|
)
|
(17
|
)
|
(2
|
)
|
(31
|
)
|
||||||||
|
|
||||||||||||||||
|
Net cash provided by financing activities
|
1,617
|
130
|
3,717
|
6,628
|
||||||||||||
|
|
||||||||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(7
|
)
|
1
|
(8
|
)
|
-
|
||||||||||
|
|
||||||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
313
|
(4,924
|
)
|
187
|
(2,675
|
)
|
||||||||||
|
|
||||||||||||||||
|
Cash and cash equivalents at beginning of period
|
2,146
|
8,120
|
2,272
|
5,871
|
||||||||||||
|
|
||||||||||||||||
|
Cash and cash equivalents at end of period
|
$
|
2,459
|
$
|
3,196
|
$
|
2,459
|
$
|
3,196
|
||||||||
Scientific Learning Corporation
Supplemental Information
Reconciliation of Booked Sales, Revenue and Change in Deferred Revenue
$s in thousands
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
||||||||||||||||
|
Booked sales
|
$
|
4,296
|
$
|
7,128
|
$
|
7,191
|
$
|
11,743
|
||||||||
|
Less: revenue
|
(5,330
|
)
|
(7,148
|
)
|
(10,808
|
)
|
(14,234
|
)
|
||||||||
|
Adjustments
|
-
|
(5
|
)
|
-
|
2
|
|||||||||||
|
Net decrease in current and long-term deferred revenue
|
$
|
(1,034
|
)
|
$
|
(25
|
)
|
$
|
(3,617
|
)
|
$
|
(2,489
|
)
|
||||
|
|
||||||||||||||||
|
Beginning balance in current and long-term deferred revenue
|
$
|
10,902
|
$
|
14,858
|
$
|
13,485
|
$
|
17,322
|
||||||||
|
Ending balance in current and long-term deferred revenue
|
$
|
9,868
|
$
|
14,833
|
$
|
9,868
|
$
|
14,833
|
||||||||
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 June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
||||||||||||||||
|
Net loss
|
$
|
(54
|
)
|
$
|
(3,141
|
)
|
$
|
(1,058
|
)
|
$
|
(8,177
|
)
|
||||
|
Adjustments to reconcile to Adjusted EBITDA:
|
||||||||||||||||
|
Provision for income taxes1
|
33
|
40
|
47
|
83
|
||||||||||||
|
Interest and other (income) expense, net2
|
246
|
2
|
269
|
23
|
||||||||||||
|
Depreciation and amortization3
|
329
|
611
|
717
|
1,225
|
||||||||||||
|
Stock-based compensation4
|
189
|
222
|
422
|
485
|
||||||||||||
|
Change in fair value of warrant5
|
(559
|
)
|
(326
|
)
|
(338
|
)
|
(288
|
)
|
||||||||
|
Impairment charge6
|
-
|
200
|
-
|
200
|
||||||||||||
|
Adjusted EBITDA
|
$
|
184
|
$
|
(2,392
|
)
|
$
|
59
|
$
|
(6,449
|
)
|
||||||
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 reported 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. Interest expense includes accrued PIK interest and amortization of debt discount and debt issuance costs related to our subordinated debt financing in April 2013. Other income and expense includes foreign exchange loss 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 and April 5, 2013. The fair value were 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 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.
Non-Cash Charges
|
$s in thousands
|
Three Months Ended June 30, 2013
|
Six Months Ended June 30, 2013
|
||||||||||||||||||||||
|
|
Depreciation & Amortization
|
Stock-based
Compensation
|
Total
|
Depreciation & Amortization
|
Stock-based
Compensation
|
Total
|
||||||||||||||||||
|
Included in:
|
||||||||||||||||||||||||
|
Cost of subscriptions and licenses
|
$
|
80
|
$
|
2
|
$
|
82
|
$
|
158
|
$
|
3
|
$
|
161
|
||||||||||||
|
Cost of service and support
|
- |
$
|
2
|
2
|
$
|
-
|
$
|
4
|
4
|
|||||||||||||||
|
Operating expenses
|
$
|
249
|
$
|
185
|
434
|
$
|
559
|
$
|
415
|
974
|
||||||||||||||
|
Total
|
$
|
329
|
$
|
189
|
$
|
518
|
$
|
717
|
$
|
422
|
$
|
1,139
|
||||||||||||
|
$s in thousands
|
Three Months Ended June 30, 2012
|
Six Months Ended June 30, 2012
|
||||||||||||||||||||||
|
|
Depreciation & Amortization
|
Stock-based
Compensation
|
Total
|
Depreciation & Amortization
|
Stock-based
Compensation
|
Total
|
||||||||||||||||||
|
Included in:
|
||||||||||||||||||||||||
|
Cost of subscriptions and licenses
|
$
|
158
|
$
|
2
|
$
|
160
|
$
|
312
|
$
|
1
|
$
|
313
|
||||||||||||
|
Cost of service and support
|
-
|
8
|
8
|
-
|
15
|
15
|
||||||||||||||||||
|
Operating expenses
|
453
|
212
|
665
|
913
|
469
|
1,382
|
||||||||||||||||||
|
Total
|
$
|
611
|
$
|
222
|
$
|
833
|
$
|
1,225
|
$
|
485
|
$
|
1,710
|
||||||||||||
|
Booked sales of subscription contracts
|
||||||||||||||||
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
||||||||||||||||
|
Subscription booked sales1
|
$
|
2,181
|
$
|
2,058
|
$
|
3,444
|
$
|
3,330
|
||||||||
|
Non-subscription booked sales2
|
2,115
|
5,070
|
3,747
|
8,413
|
||||||||||||
|
|
||||||||||||||||
|
Total booked sales
|
$
|
4,296
|
$
|
7,128
|
$
|
7,191
|
$
|
11,743
|
||||||||
|
|
||||||||||||||||
|
Subscription booked sales as a % of total booked sales
|
51
|
%
|
29
|
%
|
48
|
%
|
28
|
%
|
||||||||
|
Non-subscription booked sales as a % of total booked sales
|
49
|
%
|
71
|
%
|
52
|
%
|
72
|
%
|
||||||||
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.