Exhibit 99.1 October 23, 2003 Scientific Learning Reports First Net Profit and |
“Our agreement with Neuroscience Solutions extends the findings of three decades of brain research to improve human potential into other markets, demonstrating both the strength of our patented technology and the breadth of its application,” said Mr. Bowen. “We look forward to the benefits it will bring to others while we continue to build our presence in K-12 education.” One of the founders of Neuroscience Solutions is Dr. Michael Merzenich, member of the National Academy of Sciences and a founder and director of Scientific Learning. “Our K-12 sales growth continues to exceed industry rates,” said Mr. Bowen. “K-12 sales grew 15% in the third quarter, as expected. We made 21 sales in excess of $100,000 during the quarter compared to 14 in the third quarter of 2002.” Deferred revenue increased 23% year over year and totaled $17.5 million at quarter-end compared to $14.2 million on September 30, 2002. Approximately 93% of deferred revenue is expected to be recognized as revenue in the next four quarters. During the third quarter, the Company generated $5.0 million in cash from operations. At September 30, 2003, the company had $1.0 million outstanding on its line of credit. Revenue for the nine months ended September 30, 2003 was $21.8 million, a 55% increase compared to $14.0 million reported in the same period last year. The net profit was $624,000 for the first nine months of 2003 and $.04 per share compared to a net loss of $7.2 million and $.46 per share in the same period of 2002. Because of its net operating loss carryforwards the Company does not expect to pay any significant amount of income taxes for several years. Business OutlookScientific Learning expects continued growth in the balance of 2003. For the year ending December 31, 2003, revenue is expected to be in the range of $28.9 to $29.2 million. The company expects to report an operating profit between $1.3 and $1.6 million. “We expect education spending to remain under pressure for the balance of 2003 and into 2004,” said Mr. Bowen. “Despite this challenging environment, we believe educators will continue to spend on products and solutions that drive reading improvement for students. We expect our K-12 sales will continue to grow in our target range of 20% to 30% for the year.” For the fourth quarter of 2003, Scientific Learning expects revenue to be in the range of $7.1 to $7.4 million compared to $6.3 million in the same period of 2002. The Company expects to report an operating profit of $200,000 to $500,000 in the fourth quarter of 2003, compared to an operating loss of $74,000 in the same period of 2002. The targets above represent the Company’s current revenue and earnings goals as of the date of this release and are based on information current as of October 23, 2003. Scientific Learning does not expect to update the business outlook until the release of its next quarterly earnings announcement. However, the Company may update the business outlook or any portion thereof at any time for any reason. |
Conference Call InformationThe Company will host a conference call at 5:00 p.m. EDT on Thursday, October 23, 2003, which will be broadcast live atwww.on24.com. The broadcast will also be available simultaneously and for replay after the end of the call on the Investor Information portion of the Company’s Web site. The conference call can also be accessed at 800-290-2715 (listen only). PostView® of the call is available for 48 hours following the call by dialing 800-633-8284 or 402-977-9140 (enter reservation #21163155). About Scientific LearningHeadquartered in Oakland, CA, Scientific Learning (OTCBB: SCIL) sells the patented Fast ForWord® family of products that develop and enhance cognitive skills required to read and learn effectively. The Fast ForWord software is based on more than 30 years of neuroscience research on how to improve learning in children, adolescents and adults. Significant gains are frequently achieved in as few as 20 to 40 instructional sessions. To learn more about Scientific Learning’s neuroscience-based products, visit the Company’s Web sites atwww.scientificlearning.com andwww.brainconnection.com, or call toll-free 888-665-9707. This press release contains projections and other forward-looking statements that are subject to the safe harbor created by Section 27A of the federal securities law. Such statements include, among others, statements relating to projected levels of revenue, sales, margins, expenses, profit or loss, cash flow, income tax, financial resources and other financial results. 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 conditions; the extent of acceptance and purchase of the Company’s products by target customers; seasonality and sales cycles in Scientific Learning’s markets; competition; availability of funding to purchase the Company’s products and generally available to schools; the extent to which the Company’s marketing, sales and implementation strategies are successful; the Company’s ability to continue to demonstrate the efficacy of its products, which depends on how the products are administered, the demography of participants and other factors; the Company’s ability to recruit and retain key personnel; the Company’s ability to timely execute its new product development strategies; pricing pressures; expense levels at the Company; changes in tax law; risks associated with litigation and intellectual property; and other risks detailed in the Company’s SEC reports, including but not limited to the Report on Form 10-K filed March 31, 2003 (Part I, Item 1, Factors That May Affect Our Results or Stock Price and Part II, Item 7, Management’s Discussion and Analysis) and the Report on Form 10-Q filed August 14, 2003 (Part I, Item 2, Factors That May Affect Quarterly Results of Operations and Stock Price). # # # |
SCIENTIFIC LEARNING CORPORATION |
| September 30, 2003 | December 31, 2002 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 5,323 | $ | 4,613 | ||
| Accounts receivable, net | 4,915 | 4,867 | ||||
| Prepaid expenses and other current assets | 748 | 1,340 | ||||
| Total current assets | 10,986 | 10,820 | ||||
| Property and equipment, net | 757 | 1,198 | ||||
| Other assets | 5,206 | 6,625 | ||||
| Total assets | $ | 16,949 | $ | 18,643 | ||
| Liabilities and stockholders’ deficit | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 491 | $ | 287 | ||
| Accrued liabilities | 4,409 | 5,411 | ||||
| Borrowings under bank line of credit | 1,000 | — | ||||
| Deferred revenue | 16,231 | 13,433 | ||||
| Total current liabilities | 22,131 | 19,131 | ||||
| Borrowings under bank line of credit | — | 5,000 | ||||
| Deferred revenue, long-term | 1,273 | 2,151 | ||||
| Other liabilities | 631 | 484 | ||||
| Total liabilities | 24,035 | 26,766 | ||||
| Stockholders’ deficit: | ||||||
| Common stock | 74,184 | 73,771 | ||||
| Accumulated deficit | (81,270 | ) | (81,894 | ) | ||
| Total stockholders’ deficit | (7,086 | ) | (8,123 | ) | ||
| Total liabilities and stockholders’ deficit | $ | 16,949 | $ | 18,643 | ||
SCIENTIFIC LEARNING CORPORATION |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||
| Revenues: | ||||||||||||
| Products | $ | 6,262 | $ | 5,335 | $ | 17,810 | $ | 11,555 | ||||
| Service and support | 1,755 | 1,061 | 3,942 | 2,475 | ||||||||
| Total revenues | 8,017 | 6,396 | 21,752 | 14,030 | ||||||||
| Cost of revenues: | ||||||||||||
| Cost of products | 679 | 633 | 1,807 | 1,443 | ||||||||
| Cost of service and support | 966 | 389 | 2,732 | 1,118 | ||||||||
| Total cost of revenues | 1,645 | 1,022 | 4,539 | 2,561 | ||||||||
| Gross profit | 6,372 | 5,374 | 17,213 | 11,469 | ||||||||
| Operating expenses: | ||||||||||||
| Sales and marketing | 3,258 | 3,587 | 9,898 | 10,948 | ||||||||
| Research and development | 796 | 812 | 2,640 | 2,231 | ||||||||
| General and administrative | 1,140 | 1,088 | 3,537 | 3,722 | ||||||||
| Restructuring charges | — | — | — | 880 | ||||||||
| Total operating expenses | 5,194 | 5,487 | 16,075 | 17,781 | ||||||||
| Operating income (loss) | 1,178 | (113 | ) | 1,138 | (6,312 | ) | ||||||
| Other income from related party | 425 | — | 425 | — | ||||||||
| Interest expense, net | (301 | ) | (337 | ) | (926 | ) | (926 | ) | ||||
| Net income (loss) before income tax provision | 1,302 | (450 | ) | 637 | (7,238 | ) | ||||||
| Income tax provision | 13 | — | 13 | — | ||||||||
| Net income (loss) | $ | 1,289 | $ | (450 | ) | $ | 624 | $ | (7,238 | ) | ||
| Basic net income (loss) per share: | $ | 0.08 | $ | (0.03 | ) | $ | 0.04 | $ | (0.46 | ) | ||
| Shares used in computing basic net income (loss) | 16,052,661 | 15,704,474 | 15,979,534 | 15,591,975 | ||||||||
| Diluted net income (loss) per share: | $ | 0.08 | $ | (0.03 | ) | $ | 0.04 | $ | (0.46 | ) | ||
| Shares used in computing diluted net income (loss) | 17,123,821 | 15,704,474 | 16,827,135 | 15,591,975 | ||||||||
Certain 2002 items have been reclassified to conform to the presentation adopted in 2003. |
