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Scientific Learning Corp. (SCIL) filed Quarterly Report for the period ended 2011-09-30.
Scientific Learning Corp. has a market cap of $62.2 million; its shares were traded at around $3.3 with and P/S ratio of 1.4.
This is the annual revenues and earnings per share of SCIL over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of SCIL.
Highlight of Business Operations:
Software development costs incurred subsequent to the establishment of technological feasibility are capitalized and amortized over the estimated lives of the related products. Technological feasibility is established upon completion of a working model. In the three and nine months ended September 30, 2011, the Company capitalized $23,000 and $41,000 respectively of software development costs. In the three and nine months ended September 30, 2010, the Company did not capitalize any software development costs. The Company amortizes these costs to cost of product revenues over the estimated useful life of the software, which is three years. The Company recorded amortization expense of $25,000 and $74,000 in the three and nine months ended September 30, 2011, respectively. The Company recorded amortization expense of $82,000 and $247,000 in the three and nine months ended September 30, 2010, respectively.Our total revenue increased by 3% and decreased by 1% during the three and nine months ended September 30, 2011, respectively, as compared to the same periods in 2010. We experienced a 7% increase and a 3% decrease in booked sales in the three and nine months ended September 30, 2011, respectively, as compared to the same periods in 2010. (Booked sales is a non generally accepted accounting principles (“GAAP”) financial measure. For more explanation on booked sales, see Revenues below.) The change in booked sales is due primarily to K-12 sales which increased by 7% during the three months ended September 30, 2011 and decreased by 6% during the nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010. We believe that the decline in booked sales year to date reflects continued budget pressures on school districts and that the increase in the three months ended September 30, 2011 is a result of large transactions reflecting schools spending their remaining stimulus funding prior to the spending deadline. Offsetting the decrease in year to date K-12 sales is significant growth in our International VAR, Direct-to-Consumer and Virtual School businesses and non-recurring revenue associated with an OEM contract related to the Reading Assistant product.
In the nine months ended September 30, 2011, we closed three transactions in excess of $0.5 million totaling $3.1 million. There was one transaction in excess of $0.5 million totaling $1.1 million in the three months ended September 30, 2011. In the three and nine months ended September 30, 2010, we closed one and four such transactions in excess of $0.5 million totaling $0.5 million and $2.5 million, respectively. During the second quarter of 2011, we revised our pricing and licensing options to reflect the ongoing funding and budgeting environment, and we released our new SciLearn On-Demand deployment offering. K-12 transaction volume increased by 8% to 609 transactions and 5% to 1,330 transactions during the three and nine month periods ended September 30, 2011 as compared to the same periods in 2010, which we believe reflects our new pricing changes. Non-school booked sales, including private practice, international, direct to consumer, virtual schools and OEM customers, increased by 3% or $26,000 and 24% or $691,000 during the three and nine month periods ended September 30, 2011 as compared to the same periods in 2010. In the three months ended September 30, 2011 the recurring portion of our revenue as a percentage of total revenue increased to 31% from 28% as compared to the three months ended September 30, 2010. In the nine months ended September 30, 2011, the recurring portion of our revenue as a percentage of total revenue was unchanged at 28% compared to the nine months ended September 30, 2010.
Booked sales in the K-12 sector increased by 7% to $11.2 million in the three months ended September 30, 2011 compared to $10.4 million in the three months ended September 30, 2010. Booked sales in the K-12 sector decreased by 6% to $26.7 million in the nine months ended September 30, 2011 compared to $28.5 million in the nine months ended September 30, 2010. As described above, during the year to date state and local budget pressures continued to cause many school districts to struggle to maintain their core functions. We attribute the increase in booked sales for the third quarter primarily to large transactions reflecting schools spending their remaining stimulus funding prior to the spending deadline. Booked sales to the K-12 sector for the three months ended September 30, 2011 and for the three months ended September 30, 2010 were 92% of total booked sales. Booked sales to the K-12 sector for the nine months ended September 30, 2011 and for the nine months ended September 30, 2010 were 88% and 91%, respectively, of total booked sales. “Other adjustments” in the three and nine months ended September 30, 2011 and 2010 consists primarily of the deferral of revenue and the related receivable for booked sales with Free-On-Board (“FOB”) destination delivery terms that were not delivered at the end of the third quarter 2011 and 2010.
Net cash provided by investing activities for the nine months ended September 30, 2011 was $2.1 million compared to $10.5 million net cash used by investing activities for the nine months ended September 30, 2010. In the nine months ended September 30, 2011, net sales of investments were $3.9 million in order to fund operating expenses. This was offset in part by $1.7 million of capital expenditures primarily related to critical investments in product development. In the nine months ended September 30, 2010, net purchases of investments were $9.1 million offset in part by $1.4 million of equipment purchases.
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