Scientific Learning Announces Revenues of $3.2 Million in First Quarter

Students Enrolled in Fast ForWord(R) Programs Increase

Almost 300% Year-over-Year



Apr 23, 2001, 01:00 ET from Scientific Learning Corporation

    OAKLAND, Calif., April 23 /PRNewswire Interactive News Release/ --
 Scientific Learning Corporation (Nasdaq:   SCIL) today announced its revenue for
 the quarter ended March 31, 2001 was $3.2 million in accordance with the
 Company's expectations, compared to $3.4 million reported for the quarter
 ended March 31, 2000.  Revenues from K-12 schools increased 9% year-over-year
 and represented almost 80% of total revenues.
     Students enrolled in the Company's Fast ForWord language and reading
 programs during the first quarter increased almost 300% year-over-year.
 Nearly 15,000 students enrolled in the programs during the quarter, bringing
 the total number of students who have trained or are currently enrolled to
 over 65,000.
     "We devoted ourselves this quarter to meeting expectations and laying the
 groundwork for strong sales later this year," said Sheryle Bolton, Chairman
 and CEO of Scientific Learning.
     In the first quarter, the Company expanded its aggressive marketing
 campaign to schools in key states and districts where reading improvements are
 mandated and funded.  The campaign is targeted to high-level public school
 decision-makers and includes direct marketing, seminars and conferences
 featuring educators who have had first-hand experience with the results of
 these programs in their schools.
     "Our reorder rates among our large customers remain at almost 90%, a
 strong sign of customer satisfaction.  Strong new lead conversion into sales,
 combined with this high reorder rate, is expected to drive revenue growth in
 the coming months," said Ms. Bolton.
     "We continue to see strong interest from educators in our site license
 approach, which allows them to use multiple Scientific Learning programs with
 as many students who may benefit from them as possible," said Ms. Bolton.
 "During the quarter, about 95 site license packages were sold to schools
 versus less than 10 a year ago in the same period.
     More than 200 school districts purchased Fast ForWord programs in the
 first quarter, bringing the total number of school districts who have
 purchased the programs to almost 1,200.
     During the quarter, the new sales totaled $2.0 million, slightly higher
 than the level in the first quarter of 2000.  Most of these sales will be
 recognized as revenue in later quarters.  Public school sales were about equal
 to last year's level and represented about 70% of the total.  Sales to
 professionals in private practice rose 8% compared to the first quarter of
 last year.
     Commenting on the increase in new sales during the quarter to
 professionals in private practice, Ms. Bolton said, "We are pleased that the
 initiatives we put in place to support private practice professionals are
 showing favorable results with increasing sales this quarter compared to
 declines in the previous twelve months."
     Deferred revenue was $3.4 million at quarter-end, an increase of 24%
 compared to $2.7 million on March 31, 2000.  Deferred revenue represents sales
 of training programs, products and services that will be recognized as
 revenues in future quarters.
     Operating expenses in the first quarter of 2001 totaled $8.0 million
 compared to $7.9 million in the first quarter of 2000.  Operating expenses in
 the first quarter were below the range previously projected.  The net loss for
 the quarter was $5.6 million or $.49 per share compared to $4.8 million and
 $.45 per share in the first quarter of 2000.
 
     Business Outlook
 
     Scientific Learning looks forward to rapid growth in 2001.  The Company's
 goal is to achieve revenues for 2001 that are 100% higher than the $15.3
 million in revenues recorded in 2000 and to turn the corner on operating
 profitability in the fourth quarter.
     For the second quarter of 2001, Scientific Learning expects revenue in the
 range of $4.8 to $5.3 million compared to 2000 revenue of  $3.7 million.
 Gross margins are expected to be in the range of 74-76 %.  Operating expenses
 are expected to be in the range of $8.6- $8.8 million, an increase from the
 first quarter as the Company continues to expand its direct sales force to
 public schools and reaches a seasonally high level of marketing expenses.
 However, overall operating expenses in the second quarter are expected to be
 below those of the second quarter of 2000.  The Company expects to report an
 operating loss  in the range of $4.8 to $5.2 million and an operating loss per
 share in the range of $.42 to $.46 compared to an operating loss of $.59 in
 the second quarter of 2000.
     The above targets represent the Company's current revenue and earnings
 goals and expectations as of the date of this release and are based on current
 conditions.  Scientific Learning does not undertake to update these goals or
 expectations in any way or for any reason.
 
     About Scientific Learning
 
     Headquartered in Oakland, California, Scientific Learning offers CD-ROM
 and Internet programs developed by leaders in brain research. The Company's
 Fast ForWord system of intensive computer-based training programs for language
 and reading "train the brain" to learn faster.  These training programs use
 patented technologies to adapt to each student's skill level, allowing
 students of all ages to make gains in language and reading in just weeks,
 rather than years. Educators can use the Company's patented Internet
 technology to track students' progress. Other Scientific Learning products
 include award-winning software and storybooks for building early learning
 skills and rapid assessment of reading skills, and ReWord(TM), a training
 program for use with adults working to improve their language and
 organizational skills.  BrainConnection.com is a Web resource from Scientific
 Learning that offers the latest news on how the brain learns.  To learn more
 about Scientific Learning's family of neuroscience-based products, visit the
 Company's Web sites at http://www.ScientificLearning.com and
 http://www.BrainConnection.com, or call toll-free 888-665-9707.
 
     Conference Call Information
 
     The Company will host a conference call at 5:00 p.m. EDT on Monday, April
 23, 2001, which will be broadcast live at http://www.StreetEvents.com.  A
 replay will also be available on the Investor Information portion of the
 Company's Web site.
 
     Safe Harbor Statement
 
     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, financial resources and other financial results; results that may be
 achieved through the use of Scientific Learning products; and trends in
 marketing channels.  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: the extent of acceptance and
 purchase of our 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 and sales strategies are successful; the
 Company's ability to continue to demonstrate the efficacy of its products,
 which depends on how the programs are administered, the demography of
 participants and other factors; the Company's ability to retain key personnel;
 the Company's ability to timely execute its new product development
 strategies; pricing pressures; expense levels at the Company; 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 30, 2001 (Part I, Item 1, Risk Factors and Part II, Item 7,
 Management's Discussion and Analysis) and the Report on Form 10-Q filed
 November 14, 2000 (Part I, Item 2, Factors that May Affect Quarterly Results
 of Operations).
 
     SCIENTIFIC LEARNING CORPORATION
     BALANCE SHEETS
     (In thousands)
 
                                               March 31,      December 31,
                                                   2001              2000
                                             (Unaudited)
 
     ASSETS
     Current assets:
      Cash, cash equivalents
       and investments
       in government securities                 $ 3,375           $ 8,485
      Accounts receivable, net                    3,854             4,725
      Prepaid expenses and
       other receivables                          2,071             1,409
 
         Total current assets                     9,300            14,619
 
     Property and equipment, net                  2,896             2,080
     Other assets                                 6,219             2,254
 
     TOTAL ASSETS                              $ 18,415          $ 18,953
 
     LIABILITIES AND
      STOCKHOLDERS' EQUITY
     Current liabilities:
      Accounts payable                          $ 1,296           $ 1,148
      Accrued liabilities                         1,527             1,477
      Deferred revenue                            3,396             4,563
 
       Total current liabilities                  6,219             7,188
 
     Borrowings under bank
      line of credit                              2,000                --
     Other liabilities                              146               164
 
       Total liabilities                          8,365             7,352
 
     Stockholders' equity:
      Common stock                               68,142            64,179
      Deferred compensation                         (29)              (72)
      Accumulated deficit                       (58,063)          (52,506)
 
        Total stockholders' equity               10,050            11,601
 
     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                     $ 18,415          $ 18,953
 
     Certain 2000 items have been reclassified to conform to the presentation
     adopted in 2001.
 
 
     SCIENTIFIC LEARNING CORPORATION
     STATEMENTS OF OPERATIONS
     (In thousands, except share and per share amounts)
     Unaudited
 
 
                                 Three months ended March 31,
 
                                2001                      2000
 
     Revenues:
 
     Program and
      product revenues       $ 2,817                   $ 3,156
     Service revenues            389                       275
      Total revenues           3,206                     3,431
 
     Cost of sales:
 
     Cost of programs
      and products               480                       493
     Cost of services            302                       252
     Total cost of sales         782                       745
 
     Gross profit              2,424                     2,686
 
     Operating expenses:
 
      Sales and marketing      5,358                     5,288
      Research
       and development           938                     1,220
      General and
       administrative          1,725                     1,344
 
     Total operating
       expenses                8,021                     7,852
 
     Operating loss           (5,597)                   (5,166)
 
     Interest income , net        40                       348
 
     Net loss               $ (5,557)                 $ (4,818)
 
     Basic and diluted
      net loss per share     $ (0.49)                  $ (0.45)
 
     Shares used in
      computing basic
      and diluted
      net loss per share  11,346,691                10,699,388
 
     Certain 2000 operating expenses have been reclassified to conform to the
     presentation adopted in 2001.
 
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X43618623
 
 

SOURCE Scientific Learning Corporation
    OAKLAND, Calif., April 23 /PRNewswire Interactive News Release/ --
 Scientific Learning Corporation (Nasdaq:   SCIL) today announced its revenue for
 the quarter ended March 31, 2001 was $3.2 million in accordance with the
 Company's expectations, compared to $3.4 million reported for the quarter
 ended March 31, 2000.  Revenues from K-12 schools increased 9% year-over-year
 and represented almost 80% of total revenues.
     Students enrolled in the Company's Fast ForWord language and reading
 programs during the first quarter increased almost 300% year-over-year.
 Nearly 15,000 students enrolled in the programs during the quarter, bringing
 the total number of students who have trained or are currently enrolled to
 over 65,000.
     "We devoted ourselves this quarter to meeting expectations and laying the
 groundwork for strong sales later this year," said Sheryle Bolton, Chairman
 and CEO of Scientific Learning.
     In the first quarter, the Company expanded its aggressive marketing
 campaign to schools in key states and districts where reading improvements are
 mandated and funded.  The campaign is targeted to high-level public school
 decision-makers and includes direct marketing, seminars and conferences
 featuring educators who have had first-hand experience with the results of
 these programs in their schools.
     "Our reorder rates among our large customers remain at almost 90%, a
 strong sign of customer satisfaction.  Strong new lead conversion into sales,
 combined with this high reorder rate, is expected to drive revenue growth in
 the coming months," said Ms. Bolton.
     "We continue to see strong interest from educators in our site license
 approach, which allows them to use multiple Scientific Learning programs with
 as many students who may benefit from them as possible," said Ms. Bolton.
 "During the quarter, about 95 site license packages were sold to schools
 versus less than 10 a year ago in the same period.
     More than 200 school districts purchased Fast ForWord programs in the
 first quarter, bringing the total number of school districts who have
 purchased the programs to almost 1,200.
     During the quarter, the new sales totaled $2.0 million, slightly higher
 than the level in the first quarter of 2000.  Most of these sales will be
 recognized as revenue in later quarters.  Public school sales were about equal
 to last year's level and represented about 70% of the total.  Sales to
 professionals in private practice rose 8% compared to the first quarter of
 last year.
     Commenting on the increase in new sales during the quarter to
 professionals in private practice, Ms. Bolton said, "We are pleased that the
 initiatives we put in place to support private practice professionals are
 showing favorable results with increasing sales this quarter compared to
 declines in the previous twelve months."
     Deferred revenue was $3.4 million at quarter-end, an increase of 24%
 compared to $2.7 million on March 31, 2000.  Deferred revenue represents sales
 of training programs, products and services that will be recognized as
 revenues in future quarters.
     Operating expenses in the first quarter of 2001 totaled $8.0 million
 compared to $7.9 million in the first quarter of 2000.  Operating expenses in
 the first quarter were below the range previously projected.  The net loss for
 the quarter was $5.6 million or $.49 per share compared to $4.8 million and
 $.45 per share in the first quarter of 2000.
 
     Business Outlook
 
     Scientific Learning looks forward to rapid growth in 2001.  The Company's
 goal is to achieve revenues for 2001 that are 100% higher than the $15.3
 million in revenues recorded in 2000 and to turn the corner on operating
 profitability in the fourth quarter.
     For the second quarter of 2001, Scientific Learning expects revenue in the
 range of $4.8 to $5.3 million compared to 2000 revenue of  $3.7 million.
 Gross margins are expected to be in the range of 74-76 %.  Operating expenses
 are expected to be in the range of $8.6- $8.8 million, an increase from the
 first quarter as the Company continues to expand its direct sales force to
 public schools and reaches a seasonally high level of marketing expenses.
 However, overall operating expenses in the second quarter are expected to be
 below those of the second quarter of 2000.  The Company expects to report an
 operating loss  in the range of $4.8 to $5.2 million and an operating loss per
 share in the range of $.42 to $.46 compared to an operating loss of $.59 in
 the second quarter of 2000.
     The above targets represent the Company's current revenue and earnings
 goals and expectations as of the date of this release and are based on current
 conditions.  Scientific Learning does not undertake to update these goals or
 expectations in any way or for any reason.
 
     About Scientific Learning
 
     Headquartered in Oakland, California, Scientific Learning offers CD-ROM
 and Internet programs developed by leaders in brain research. The Company's
 Fast ForWord system of intensive computer-based training programs for language
 and reading "train the brain" to learn faster.  These training programs use
 patented technologies to adapt to each student's skill level, allowing
 students of all ages to make gains in language and reading in just weeks,
 rather than years. Educators can use the Company's patented Internet
 technology to track students' progress. Other Scientific Learning products
 include award-winning software and storybooks for building early learning
 skills and rapid assessment of reading skills, and ReWord(TM), a training
 program for use with adults working to improve their language and
 organizational skills.  BrainConnection.com is a Web resource from Scientific
 Learning that offers the latest news on how the brain learns.  To learn more
 about Scientific Learning's family of neuroscience-based products, visit the
 Company's Web sites at http://www.ScientificLearning.com and
 http://www.BrainConnection.com, or call toll-free 888-665-9707.
 
     Conference Call Information
 
     The Company will host a conference call at 5:00 p.m. EDT on Monday, April
 23, 2001, which will be broadcast live at http://www.StreetEvents.com.  A
 replay will also be available on the Investor Information portion of the
 Company's Web site.
 
     Safe Harbor Statement
 
     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, financial resources and other financial results; results that may be
 achieved through the use of Scientific Learning products; and trends in
 marketing channels.  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: the extent of acceptance and
 purchase of our 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 and sales strategies are successful; the
 Company's ability to continue to demonstrate the efficacy of its products,
 which depends on how the programs are administered, the demography of
 participants and other factors; the Company's ability to retain key personnel;
 the Company's ability to timely execute its new product development
 strategies; pricing pressures; expense levels at the Company; 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 30, 2001 (Part I, Item 1, Risk Factors and Part II, Item 7,
 Management's Discussion and Analysis) and the Report on Form 10-Q filed
 November 14, 2000 (Part I, Item 2, Factors that May Affect Quarterly Results
 of Operations).
 
     SCIENTIFIC LEARNING CORPORATION
     BALANCE SHEETS
     (In thousands)
 
                                               March 31,      December 31,
                                                   2001              2000
                                             (Unaudited)
 
     ASSETS
     Current assets:
      Cash, cash equivalents
       and investments
       in government securities                 $ 3,375           $ 8,485
      Accounts receivable, net                    3,854             4,725
      Prepaid expenses and
       other receivables                          2,071             1,409
 
         Total current assets                     9,300            14,619
 
     Property and equipment, net                  2,896             2,080
     Other assets                                 6,219             2,254
 
     TOTAL ASSETS                              $ 18,415          $ 18,953
 
     LIABILITIES AND
      STOCKHOLDERS' EQUITY
     Current liabilities:
      Accounts payable                          $ 1,296           $ 1,148
      Accrued liabilities                         1,527             1,477
      Deferred revenue                            3,396             4,563
 
       Total current liabilities                  6,219             7,188
 
     Borrowings under bank
      line of credit                              2,000                --
     Other liabilities                              146               164
 
       Total liabilities                          8,365             7,352
 
     Stockholders' equity:
      Common stock                               68,142            64,179
      Deferred compensation                         (29)              (72)
      Accumulated deficit                       (58,063)          (52,506)
 
        Total stockholders' equity               10,050            11,601
 
     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                     $ 18,415          $ 18,953
 
     Certain 2000 items have been reclassified to conform to the presentation
     adopted in 2001.
 
 
     SCIENTIFIC LEARNING CORPORATION
     STATEMENTS OF OPERATIONS
     (In thousands, except share and per share amounts)
     Unaudited
 
 
                                 Three months ended March 31,
 
                                2001                      2000
 
     Revenues:
 
     Program and
      product revenues       $ 2,817                   $ 3,156
     Service revenues            389                       275
      Total revenues           3,206                     3,431
 
     Cost of sales:
 
     Cost of programs
      and products               480                       493
     Cost of services            302                       252
     Total cost of sales         782                       745
 
     Gross profit              2,424                     2,686
 
     Operating expenses:
 
      Sales and marketing      5,358                     5,288
      Research
       and development           938                     1,220
      General and
       administrative          1,725                     1,344
 
     Total operating
       expenses                8,021                     7,852
 
     Operating loss           (5,597)                   (5,166)
 
     Interest income , net        40                       348
 
     Net loss               $ (5,557)                 $ (4,818)
 
     Basic and diluted
      net loss per share     $ (0.49)                  $ (0.45)
 
     Shares used in
      computing basic
      and diluted
      net loss per share  11,346,691                10,699,388
 
     Certain 2000 operating expenses have been reclassified to conform to the
     presentation adopted in 2001.
 
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X43618623
 
 SOURCE  Scientific Learning Corporation