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Scientific Learning Reports Third Quarter 2019 Financial Results

OAKLAND, Calif.--(BUSINESS WIRE)--

Scientific Learning Corp. (OTC PINK:SCIL), a leading SaaS service provider that delivers neuroscience-based educational technologies, today announced it has released its unaudited financial results for the period ending Sept. 30, 2019. Details of the quarterly results can be found at https://www.otcmarkets.com/stock/SCIL/disclosure.

The company continued to make progress on its product development roadmap and operational improvements, and booked its largest deal in two years, over $600,000. Despite this, the financial results for the third quarter were below expectations and do not reflect these operational gains. Total sales for the third quarter were six percent below the third quarter of 2018, driven in part by several larger K-12 transactions in the sales pipeline that were not closed by Sept. 30, 2019. The company is working to convert this solid pipeline to achieve modest growth in the fourth quarter.

This past quarter Scientific Learning continued its focus on addressing customer feedback, and it made progress in converting its products to HTML5. The two additional Flash-free products released in early July have transitioned smoothly into the back to school season. Also, the team released 37 additional selections for Reading Assistant Plus during the third quarter.

The company’s strategic operational improvements made in the early part of the year are paying off. For example, the rebuilt marketing team achieved a 70 percent increase in leads during the third quarter. These new leads will assist in building pipeline for the fourth quarter and into 2020.

“We are pleased with the breadth and depth of operational gains that our company has made,” said Jeff Thomas, CEO of Scientific Learning. “These gains include improving our learning solutions, driving cost efficiencies, and enhancing the overall customer experience. We believe that these actions will benefit our customers and improve shareholder value over time.”

In addition, today, the company took actions to significantly increase the focus on its core K-12 business segment, which represents over 82 percent of total sales. After conducting a strategic review of its non-K-12 segments, including International, Private Provider and FFW Home (“Home”), it confirmed that both International and Private Provider are strong cash-generating segments, while the Home segment is not. Moreover, the Home segment diverts management attention away from the core K-12 segment. After considering a number of alternatives, the company determined that the best course of action is to transition the Home business to the Private Provider network. This will help to bolster the Private Provider network and increase the focus on K-12.

Based on this decision, the company expects to reduce overall headcount by 13 over the next several months, as it continues to service existing customer commitments. Eight positions will be eliminated in November, and five will be eliminated as the Home business winds down. We expect to incur severance costs of approximately $75,000 in the fourth quarter and expect total sales to be reduced by $1 million and expenses to be reduced by $1.3 million in 2020, as a result of this action.

About Scientific Learning Corp.

Based in Oakland, Calif., Scientific Learning is a leading SaaS education company that delivers neuroscience-based educational technologies. Scientific Learning’s programs have been used by more than 3 million learners in more than 2,200 K-12 schools in the United States and Canada, almost 300 private practice clinicians, thousands of students via a direct-to-consumer channel, and in over 55 countries via value-added resellers. The company’s Fast ForWord® programs cross-train foundational language and cognitive skills necessary for rapid English language development. Reading Assistant™ uses speech verification technology to provide real-time corrective feedback to students as they read and speak, in a manner similar to that of an individualized language and reading coach.

Safe Harbor Statement: The information posted in this release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words "may," "will," "should," "plans," "explores," "expects," "anticipates," "continue," "estimate," "project," "intend," and similar expressions. The forward-looking statements in this release include, among others, statements regarding potential future sales results, and plans for investing in the Company’s products. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Factors which could cause results or events to differ from current expectations include, among other things: general economic and business conditions; availability of government funding for the purchase of the Company’s educational products; effects of potential geopolitical unrest and regional conflicts; competition; and various other factors beyond the Company's control. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to have been correct. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements.

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