Market Overview

Rosetta Stone Inc. Reports Fourth Quarter and Full Year 2012 Results

ARLINGTON, Va.--(BUSINESS WIRE)--

Rosetta Stone Inc. (NYSE: RST), a leading provider of technology-based language-learning solutions, today announced financial results for the fourth quarter 2012, as summarized below:

         
US$ thousands Three Months Ended Year Ended
except per-share data December 31, % December 31, %
2012   2011 change 2012 2011 change
Total revenue $78,701 $80,527 -2 % $273,241 $268,449 2 %
Total bookings $84,327 $84,834 -1 % $284,762 $273,187 4 %
 
Net income/(loss) $4,006 ($4,979 ) 180 % ($35,831 ) ($19,988 ) -79 %
Net income/(loss) per share: $0.19 ($0.24 ) 179 % ($1.70 ) ($0.96 ) -77 %
 

Adjusted net income/(loss)(1)

$3,370 ($1,531 ) 320 % ($1,274 ) ($16,391 ) 92 %

Adjusted net income/(loss) per share: (1)

$0.15 ($0.07 ) 314 % ($0.06 ) ($0.79 ) 92 %
 

Adjusted EBITDA (2)

$9,126 $7,073 29 % $13,811 ($6,090 ) 327 %
 
Cash flow from operations $23,409 $7,391 217 % $34,901 $3,373 935 %
Purchases of property and equipment ($1,248 ) ($2,032 ) 39 % ($4,187 ) ($9,940 ) 58 %
Free cash flow $22,161 $5,359 314 % $30,714 ($6,567 ) 568 %
 

(1) Adjusted net income (loss) and adjusted income (loss) per share exclude the impact of items related to its litigation with Google, Inc., restructuring costs as well as all adjustments related to recording the non-cash tax valuation allowance for deferred tax assets. Adjusted net income (loss) for prior periods has been revised to conform to current definition.

(2) Adjusted EBITDA is GAAP net income (loss) plus interest income and expense, income tax benefit and expense, depreciation, amortization and stock-based compensation expenses. Adjusted EBITDA excludes any items related to the litigation with Google Inc., and restructuring costs. Adjusted EBITDA for prior periods has been revised to conform to current definition.

Definitions and reconciliations for all non-GAAP measures are provided in this press release.

Steve Swad, President and Chief Executive Officer of Rosetta Stone, said, “I am very pleased with how Rosetta Stone performed in 2012. Early in the year we set the strategy and since then we have been executing at a pace that meets or exceeds our expectations. The business transitioned during the year as we shifted the focus of the business to more online and digital, growing our consumer Online Learner base 157% to over 68,000 and launching a digital downloadable version of our product on our website. We also utilized new partners to expand distribution and increased our social and mobile engagement.” Swad continued, “As we move through 2013, we have more opportunities ahead of us and we plan to invest further in product development to capitalize on these opportunities and deliver new and innovative products to our customers.”

Fourth Quarter and Full Year 2012 Operational and Financial Highlights

  • Bookings: Total bookings decreased less than 1% in the fourth quarter year-over-year to $84.3 million as 5% growth in the North American Consumer segment (“NA Consumer”) and 6% growth in the Institutional segment were offset by a $4.1MM decrease from the Rest of World Consumer segment (“ROW Consumer”). Full year 2012 bookings increased 4%, reflecting 14% growth in NA Consumer and 4% growth in Institutional, offset by a 24% decrease in ROW Consumer. Growth in NA Consumer for the quarter and the year reflects increases in Product Unit sales and Paid Online Learners as the Company leveraged new partners and increased online and digital sales. Decreases in ROW Consumer bookings reflected weakness in Japan and the absence of Product Unit sales in Germany compared with a year-ago.
  • Revenue: Consolidated revenue decreased 2% in the fourth quarter year-over-year to $78.7 million from $80.5 million a year ago. NA Consumer revenue decreased less than 1% reflecting both the shift to Online Learner sales and lower average selling price for Product Units. ROW Consumer revenue decreased 21% due to ongoing softness in Japan and the absence of Product Unit sales in Germany reflecting the shift to an online-only business. Both NA and ROW Consumer segment revenue were impacted by a rationalization of our kiosk channel. Institutional revenue increased 8% in the fourth quarter where strength in the Corporate and International verticals offset softness in K-12. Full year 2012 revenue increased 2% representing 10% growth in NA Consumer, partially offset by a 20% decline in ROW Consumer and a slight decrease in Institutional. The Institutional business was impacted by the non-renewal of the Army and Marines contracts in 2011, which impacted revenue in each of the first three quarters of 2012 and was partially offset by increases in Corporate, International and Emerging Markets.
           
US$ thousands Three Months Ended

Twelve Months Ended

December 31, December 31, December 31,   December 31,
2012 2011 % change 2012 2011 % change
Revenue from:
North America Consumer $52,946 $53,184 0% $172,826 $157,561 10%
Rest of World Consumer 10,088 12,848 -21% 40,248 50,465 -20%
Total Consumer 63,034 66,032 -5% 213,074 208,026 2%
Institutional 15,667 14,494 8% 60,167 60,423 0%
Total 78,701 80,526 -2% 273,241 268,449 2%
 
  • Adjusted EBITDA: Adjusted EBITDA for the fourth quarter was $9.1 million, a 29% increase versus $7.1 million in the fourth quarter of 2011. The improvement in Adjusted EBITDA was due to lower operating expenses that offset the decline in fourth quarter revenue. Cost of Goods Sold decreased $1.9 million due to lower hard-product box costs and a shift to online offerings. Sales and marketing expenses and general and administrative (G&A) expenses also both decreased by $1.6 million and $1.8 million, respectively, on a normalized basis after adjusting the fourth quarter of 2011 for stock-compensation expense related to the cancellation of the Company's Long Term Incentive Plan (“LTIP”) in that period. For the full year 2012, Adjusted EBITDA increased $19.9 million to $13.8 million from negative $6.1 million in 2011. The improvement in Adjusted EBITDA primarily reflects 2% revenue growth combined with a $9.2 million reduction in sales & marketing expenses and a $3.5 million decrease in G&A expenses, on a normalized basis, as the company improved its selling and marketing efficiency and better leveraged its fixed operating structure. Improvements in sales and marketing were mainly due to reducing the company's kiosk footprint and more effectively managing media spend, particularly in ROW Consumer.
  • Adjusted Net Income and Adjusted EPS: Rosetta Stone recorded Adjusted Net Income of $3.4 million in the fourth quarter 2012, compared to Adjusted Net Loss of $1.5 million in the fourth quarter of 2011. Adjusted Net Income per share was $0.15 compared to an Adjusted Net Loss of $0.07 per share in the prior year period. For full year 2012, Rosetta Stone recorded Adjusted Net Loss of $1.3 million, compared to Adjusted Net Loss of $16.4 million for the full year 2011. Full year 2012 Adjusted Net Loss per share was $0.06 compared to an Adjusted Net Loss of $0.79 per share in the prior year period Adjusted Net Income and Adjusted EPS.
  • Balance Sheet and Cash Flow: Cash, cash equivalents and short-term investments increased $22.2 million to $148.3 million at December 31, 2012 from $126.1 million at September 30, 2012, and increased $32.0 million compared with $116.3 million at December 31, 2011. The company has no debt. Free cash flow in the fourth quarter was $22.2 million compared with $5.4 million a year ago. For the full year 2012, free cash flow was $30.7 million compared with ($6.6) million for 2011. Capital expenditures were $4.2 million for 2012 compared with $9.9 million for 2011. The fourth quarter cash flow from operations included $8.0 million in cash tax refunds.

Financial Outlook

The company is providing the following guidance for the full year 2013:

             
2013 Guidance            
    Range
($ Millions)     Low     High
Revenue $280     $290
Growth rate from 2012 2% 6%
 
Adjusted EBITDA $16 $18
Growth rate from 2012 16% 30%
 
Adjusted Net Income ($1) $1
Growth rate from 2012 66% 134%
 
Adjusted EPS ($0.02) $0.04
Growth rate from 2012 87% 127%
 
Shares Outstanding (MM) 21.5 21.5
 
Capital Expenditures $5 $8
 

Non-GAAP Financial Measures

This press release contains several non-GAAP financial measures.

Adjusted EBITDA is GAAP net income or loss plus interest income and expense, income tax benefit and expense, depreciation, amortization and stock-based compensation expenses. Adjusted EBITDA excludes any items related to the litigation with Google Inc., restructuring costs and transaction and other costs associated with mergers and acquisitions. Adjusted EBITDA for prior periods has been revised to conform to current definition.

Adjusted net income (loss) and adjusted net income (loss) per share exclude the impact of items related to its litigation with Google, Inc., restructuring costs and transaction and other costs associated with mergers and acquisitions as well as all adjustments related to recording the non-cash tax valuation allowance for deferred tax assets.

Free cash flow is cash flow from operations less cash used in purchases of property and equipment.

Bookings represent executed sales contracts received by the Company that are either recorded immediately as revenue or as deferred revenue.

Management believes that these non-GAAP measures of financial results provide useful information to investors regarding certain financial and business trends relating to the Company's financial condition and results of operations. Management uses these non-GAAP measures to compare the Company's performance to that of prior periods for trend analyses, for purposes of determining executive incentive compensation, and for budgeting and planning purposes. These measures are used in monthly financial reports prepared for management and in quarterly financial reports presented to the Company's board of directors. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.

Management typically excludes the amounts described above when evaluating the Company's operating performance and believes that the resulting non-GAAP measures are useful to investors and financial analysts in assessing the Company's operating performance due to the following factors:

  • Amortization of Acquired Intangibles. Amortization costs and the related tax effects are fixed at the time of an acquisition, and then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition.
  • Stock-based Compensation. Although stock-based compensation is an important aspect of compensation of the Company's employees and executives, stock-based compensation expense is generally fixed at the time of grant, then amortized over a period of several years after the grant of the stock-based instrument, and generally cannot be changed or influenced by management after the grant. In addition, the impact of shares granted under these plans is considered in the Company's EPS calculation to the extent the shares are dilutive.
  • Bookings. Although revenue is an important aspect of measuring Company performance, the Company believes total sales bookings can be a valuable indicator of the Company's performance. The Company is transitioning to a greater amount of subscription sales, which results in an increasing portion of sales being recorded as deferred revenue.

Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations, because they reflect the exercise of judgments by management about which expenses and items of income are excluded from these non-GAAP financial measures and may not be calculated in the same manner as other companies' similarly titled non-GAAP measures.

In order to compensate for these limitations, management presents its non-GAAP financial measures in connection with its GAAP results. The company urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing earnings information, including this press release, and not to rely on any single financial measure to evaluate the company's business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP measures used in this press release are included at the end of this release.

Investor Webcast

This news release and the accompanying tables should be read in conjunction with the additional content that is available on the company's website.

In conjunction with this announcement, Rosetta Stone will host a webcast today at 4:30 p.m. eastern time (ET) to discuss the results and the company's business outlook. The webcast will be available live on the Investor Relations page of the company's website at http://investors.rosettastone.com.

Investors may also dial in to the conference line using one of the following numbers:

1-877-407-9039 (toll-free) or

1-201-689-8470 (toll/international)

A recorded replay of the webcast will be available on the “Investor Relations” page of the company's web site http://investors.rosettastone.com after the live discussion. The replay will also be available beginning at 7:30PM ET until March 14, 2013 via telephone at the following numbers:

1-877-870-5176 (toll-free) or

1-858-384-5517 (toll/international)

Pass Code: 409560

About Rosetta Stone

Rosetta Stone Inc. provides cutting-edge interactive technology that is changing the way the world learns languages. The company's proprietary learning techniques—acclaimed for their power to unlock the natural language-learning ability in everyone—are used by schools, businesses, government organizations and millions of individuals around the world. Rosetta Stone offers courses in over 30 languages, from the most commonly spoken (like English, Spanish and Mandarin) to the less prominent (including Swahili, Swedish and Tagalog). The company was founded in 1992 on the core beliefs that learning to speak a language should be a natural and instinctive process, and that interactive technology can activate the language immersion method powerfully for learners of any age. Rosetta Stone is based in Arlington, VA., and has offices in Harrisonburg, VA, Boulder, CO, Tokyo, Seoul, London, and Sao Paulo.

“Rosetta Stone” is a registered trademark or trademark of Rosetta Stone Ltd. in the United States and other countries.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our guidance for future financial performance and operating targets, and our long-term growth prospects. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “project,” “believe,” “plan,” “expect,” “anticipate,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “seek,” “may,” “likely,” “will,” “financial outlook,” “guidance,” “strategy,” or “continue.” These forward-looking statements reflect the company's current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including demand for language learning solutions; the advantages of our products, services, technology, brand and business model as compared to others; our strategic focus; our ability to maintain effective internal controls or to remediate material weaknesses; our cash needs and expectations regarding cash flow from operations; our product development plans; the appeal and efficacy of our products and services; our expectations regarding capturing lifetime value and a broader range of market segments through such offerings; our plans regarding expansion of our marketing initiatives and sales force; our international operations and growth plans; our plans regarding our kiosks and retail relationships; our plans regarding our Institutional business; the impact of any revisions to our pricing strategy; our ability to manage and grow our business and execute our business strategy; our financial performance; our actions to realigning our cost structure and revitalizing our go-to-market strategy; our plans to transition our distribution to more online in the Consumer segment; adverse trends in general economic conditions and the other factors described more fully in the company's filings with the U.S. Securities and Exchange Commission (SEC), including the company's annual report on Form 10-K for the fiscal year ended December 31, 2011, which is on file with the SEC. The company assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

       
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Revenue:
Product $ 53,384 $ 60,841 $ 180,919 $ 195,382
Subscription and service   25,317   19,686     92,322     73,067  
Total revenue 78,701 80,527 273,241 268,449
 
Cost of revenue:
Cost of product revenue 9,596 11,067 33,684 36,497
Cost of subscription and service revenue   3,335   3,758     15,226     12,619  
Total cost of revenue 12,931 14,825 48,910 49,116
       
Gross profit   65,770   65,702     224,331     219,333  
 
Operating expenses
Sales and marketing 41,005 43,316 151,646 161,491
Research and development 5,510 6,389 23,453 24,218
General and administrative   14,211   19,300     55,262     62,031  
Total operating expenses   60,726   69,005     230,361     247,740  
 
Income (loss) from operations 5,044 (3,303 ) (6,030 ) (28,407 )
 
Other income and (expense):
Interest income 46 78 187 302
Interest expense - 0 - (5 )
Other income (expense)   74   60     3     142  
Total other income (expense) 120 138 190 439
 
Net income (loss) before income taxes 5,164 (3,165 ) (5,840 ) (27,968 )
Income tax expense (benefit)   1,158   1,814     29,991     (7,980 )
 
Net income (loss) $ 4,006 $ (4,979 ) $ (35,831 ) $ (19,988 )
 
Net income (loss) per share:
Basic $ 0.19 $ (0.24 ) $ (1.70 ) $ (0.96 )
Diluted $ 0.18 $ (0.24 ) $ (1.70 ) $ (0.96 )
 
Common shares and equivalents outstanding:
Basic weighted average shares   21,166   20,920     21,045     20,773  
Diluted weighted average shares   21,828   20,920     21,045     20,773  
   
ROSETTA STONE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)

December 31,

December 31,
  2012     2011
 
 
Assets
Current assets:
Cash and cash equivalents $ 148,190 $ 106,516
Restricted cash 73 74
Short term investments - 9,711

Accounts receivable (net of allowance for doubtful accounts of $1,297 and $1,951, respectively)

49,946 51,997
Inventory 6,581 6,723
Prepaid expenses and other current assets 5,204 7,081
Income tax receivable 1,104 7,678
Deferred income taxes   79     10,985
Total current assets 211,177 200,765
 
Property and equipment, net 17,213 20,869
Goodwill 34,896 34,841
Intangible assets, net 10,825 10,865
Deferred income taxes 260 8,038
Other assets   1,484     1,803
Total assets $ 275,855   $ 277,181
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 6,064 $ 7,291
Accrued compensation 16,830 11,703
Other current liabilities 36,387 34,911
Deferred revenue   59,195     49,375
Total current liabilities 118,476 103,280
 
Deferred revenue 4,221 2,520
Deferred income taxes 8,400 -
Other long-term liabilities   155     176
Total liabilities 131,252 105,976
 
Commitments and contingencies
 
Stockholders' equity:

Preferred stock, $0.001 par value; 10,000 and 10,000 authorized; zero and zero shares issued and outstanding December 31, 2012 and December 31, 2011, respectively

Non-designated common stock, $0.00005 par value, 190,000 and 190,000 shares authorized, 21,951 and 21,258 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively

2 2
Additional paid-in capital 160,693 151,823
Accumulated income (loss) (16,749 ) 19,082
Accumulated other comprehensive income   657     298
Total stockholders' equity   144,603     171,205
Total liabilities and stockholders' equity $ 275,855   $ 277,181
       
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
  2012     2011     2012     2011  
 
Cash Flows From Operating Activities:
Net income (loss) 4,006 (4,979 ) (35,831 ) (19,988 )

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities, net of business acquisitions

Stock-based compensation expense 1,801 7,376 8,009 12,353
Bad debt expense 485 519 1,820 1,228
Depreciation and amortization 1,847 2,285 8,077 8,724
Deferred income tax benefit 95 (1,768 ) 27,035 (1,297 )
Loss on sales of equipment 31 300 783 318
Net change in:
Restricted cash (14 ) (8 ) 1 11
Accounts receivable (10,840 ) (17,403 ) 309 (5,058 )
Inventory 184 1,807 185 3,168
Prepaid expenses and other current assets 1,085 (712 ) 1,870 659
Income tax receivable 8,595 6,420 6,515 (5,812 )
Other assets 303 183 225 (25 )
Accounts payable (863 ) (1,185 ) (1,240 ) (447 )
Accrued compensation 3,617 2,662 5,093 1,200
Other current liabilities 7,325 7,691 635 3,979
Excess tax benefit from stock options exercised - - - (365 )
Other long-term liabilities (55 ) (204 ) (99 ) (52 )
Deferred revenue   5,807     4,407     11,514     4,777  
Net cash provided by (used in) operating activities   23,409     7,391     34,901     3,373  
 
Cash Flows From Investing Activities:
Purchases of property and equipment (1,248 ) (2,032 ) (4,187 ) (9,940 )
Proceeds from (purchases of) available-for-sale securities - (1,500 ) 9,711 (3,301 )
Acquisition, net of cash acquired   -     -     -     (75 )
Net cash provided by (used in) investing activities   (1,248 )   (3,532 )   5,524     (13,316 )
 
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options 32 161 862 800
Tax benefit of stock options exercised - - - 365
Payments under capital lease obligations   (210 )   (279 )   (215 )   (285 )
Net cash provided by financing activities   (178 )   (118 )   647     880  
 
Increase (decrease) in cash and cash equivalents 21,983 3,741 41,072 (9,063 )
 
Effect of exchange rate changes in cash and cash equivalents   161     (292 )   602     (177 )
 
Net increase (decrease) in cash and cash equivalents 22,144 3,449 41,674 (9,240 )
 
Cash and cash equivalents—beginning of period   126,046     103,067     106,516     115,756  
 
Cash and cash equivalents—end of period $ 148,190   $ 106,516   $ 148,190   $ 106,516  
       
ROSETTA STONE INC.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(in thousands)
(unaudited)
 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
  2012     2011     2012     2011  
 
Net income (loss) $ 4,006 $ (4,979 ) $ (35,831 ) $ (19,988 )
Interest (income)/expense, net (46 ) (78 ) (187 ) (297 )
Income tax expense (benefit) 1,158 1,814 29,991 (7,980 )
Depreciation and amortization 1,847 2,285 8,077 8,724
Stock-based compensation 1,801 7,376 8,009 12,353
Other EBITDA Adjustments   360     655     3,752     1,098  
 
Adjusted EBITDA* $ 9,126   $ 7,073   $ 13,811   $ (6,090 )
 

* Adjusted EBITDA is GAAP net income or loss plus interest income and expense, income tax benefit and expense, depreciation, amortization and stock-based compensation expenses. Adjusted EBITDA excludes any items related to the litigation with Google Inc., restructuring costs and transaction and other costs associated with mergers and acquisitions. Adjusted EBITDA for prior periods has been revised to conform to current definition.

       
ROSETTA STONE INC.
Reconciliation of GAAP net income (loss) before taxes to adjusted net income (loss)
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
  2012     2011     2012     2011  
GAAP Net income (loss) $ 4,006 $ (4,979 ) $ (35,831 ) $ (19,988 )
Items related to litigation with Google, Inc. restructuring and other related costs 360 655 3,752 1,098
Income tax adjustments *   (996 )   2,793     30,805     2,499  
Adjusted Net income (loss) ** $ 3,370   $ (1,531 ) $ (1,274 ) $ (16,391 )
 
GAAP net income (loss) per share $ 0.19 $ (0.24 ) $ (1.70 ) $ (0.96 )
Items related to litigation with Google, Inc. restructuring and other related costs 0.01 0.03 0.18 0.05
Income tax adjustments *   (0.05 )   0.14     1.46     0.12  
Adjusted net income (loss) per share ** $ 0.15   $ (0.07 ) $ (0.06 ) $ (0.79 )
 
Diluted weighted average shares 21,828 20,920 21,045 20,773
 

* For adjusted net income (loss) purposes, we use a 39% effective tax rate which represents the projected, long term effective tax rate on adjusted pretax income. Our adjusted tax rate assumes full use of loss and credit carryforwards without reduction for valuation allowances.

** Adjusted net income (loss) and adjusted net income (loss) per share exclude the impact of items related to its litigation with Google, Inc., restructuring costs and transaction and other costs associated with mergers and acquisitions as well as all adjustments related to recording the non-cash tax valuation allowance for deferred tax assets. Adjusted net income (loss) for prior periods has been revised to conform to current definition.

 
Rosetta Stone Inc.
Business Metrics
(in thousands)
 
                                                             
Quarter-Ended Quarter-Ended Quarter-Ended
                 
3/31/10   6/30/10   9/30/10   12/31/10   2010 3/31/11   6/30/11   9/30/11   12/31/11   2011 3/31/12   6/30/12   9/30/12   12/31/12   2012

Net Bookings by Market

 
North America Consumer 41,631 38,746 41,138 52,243 173,758 29,814 36,828 35,562 55,209 157,413 41,733 37,295 42,283 57,870 179,181
Rest of World Consumer 10,029   8,177   9,860   15,176   43,242 14,996   12,910   11,945   14,166   54,017 12,550   8,113   10,488   10,034   41,185
Worldwide Consumer 51,660 46,923 50,998 67,419 217,000 44,810 49,738 47,507 69,375 211,430 54,283 45,408 52,771 67,904 220,366
 
Worldwide Institutional 9,108   17,110   22,307   14,395   62,920 10,770   16,973   18,555   15,459   61,757 10,984   17,635   19,354   16,423   64,396
Total 60,768   64,033   73,305   81,814   279,920 55,580   66,711   66,062   84,834   273,187 65,267   63,043   72,125   84,327   284,762
 
YoY Growth (%)
North America Consumer 6% -9% -19% -11% -9% -28% -5% -14% 6% -9% 40% 1% 19% 5% 14%
Rest of World Consumer 304%   168%   135%   93%   146% 50%   58%   21%   -7%   25% -16%   -37%   -12%   -29%   -24%
Worldwide Consumer 23% 3% -7% 1% 4% -13% 6% -7% 3% -3% 21% -9% 11% -2% 4%
 
Worldwide Institutional 8%   28%   5%   37%   18% 18%   -1%   -17%   7%   -2% 2%   4%   4%   6%   4%
Total 21%   9%   -4%   6%   7% -9%   4%   -10%   4%   -2% 17%   -5%   9%   -1%   4%
 
% of Total Net Bookings
North America Consumer 69% 60% 56% 64% 62% 54% 55% 54% 65% 57% 64% 59% 59% 69% 63%
Rest of World Consumer 16%   13%   14%   18%   16% 27%   20%   18%   17%   20% 19%   13%   14%   12%   14%
Worldwide Consumer 85% 73% 70% 82% 78% 81% 75% 72% 82% 77% 83% 72% 73% 81% 77%
 
Worldwide Institutional 15%   27%   30%   18%   22% 19%   25%   28%   18%   23% 17%   28%   27%   19%   23%
Total 100%   100%   100%   100%   100% 100%   100%   100%   100%   100% 100%   100%   100%   100%   100%
 
 

Revenue by Market

 
North America Consumer 41,407 38,748 36,902 44,516 161,573 28,061 38,606 37,710 53,184 157,561 43,084 36,918 39,878 52,946 172,826
Rest of World Consumer 9,815   7,651   9,708   15,516   42,690 14,601   12,014   11,002   12,848   50,465 12,204   8,053   9,903   10,088   40,248
Worldwide Consumer 51,222 46,399 46,610 60,032 204,263 42,662 50,620 48,712 66,032 208,026 55,288 44,971 49,781 63,034 213,074
 
Worldwide Institutional 11,792   14,249   14,316   14,248   54,605 14,316   16,123   15,490   14,494   60,423 14,161   15,841   14,498   15,667   60,167
Total 63,014   60,648   60,926   74,280   258,868 56,978   66,743   64,202   80,526   268,449 69,449   60,812   64,279   78,701   273,241
 
YoY Growth (%)
North America Consumer 5% -8% -28% -25% -16% -32% 0% 2% 19% -2% 54% -4% 6% 0% 10%
Rest of World Consumer 297%   154%   137%   101%   147% 49%   57%   13%   -17%   18% -16%   -33%   -10%   -21%   -20%
Worldwide Consumer 22% 3% -16% -10% -2% -17% 9% 5% 10% 2% 30% -11% 2% -5% 2%
 
Worldwide Institutional 39%   23%   21%   26%   26% 21%   13%   8%   2%   11% -1%   -2%   -6%   8%   0%
Total 25%   7%   -9%   -5%   3% -10%   10%   5%   8%   4% 22%   -9%   0%   -2%   2%
 
% of Total Revenue
North America Consumer 66% 64% 61% 60% 62% 49% 58% 59% 66% 58% 62% 61% 62% 67% 63%
Rest of World Consumer 15%   13%   16%   21%   17% 26%   18%   17%   16%   19% 18%   13%   15%   13%   15%
Worldwide Consumer 81% 77% 77% 81% 79% 75% 76% 76% 82% 77% 80% 74% 77% 80% 78%
 
Worldwide Institutional 19%   23%   23%   19%   21% 25%   24%   24%   18%   23% 20%   26%   23%   20%   22%
Total 100%   100%   100%   100%   100% 100%   100%   100%   100%   100% 100%   100%   100%   100%   100%
 
 

Consumer Revenue by Channel

 
DTC 31,026 25,142 27,500 34,496 118,164 31,856 30,984 31,177 42,368 136,385 36,839 30,953 35,136 39,345 142,273
Kiosk 9,391 8,683 7,392 9,533 34,999 7,312 7,368 6,987 8,504 30,171 6,483 4,564 4,103 4,092 19,242
Global Retail 9,608 11,200 9,832 15,413 46,053 2,585 10,752 9,015 14,265 36,616 10,999 8,122 8,911 18,593 46,625
Home School 1,197   1,374   1,886   590   5,047 909   1,516   1,533   895   4,854 967   1,332   1,631   1,004   4,934
Total 51,222   46,399   46,610   60,032   204,263 42,662   50,620   48,712   66,032   208,026 55,288   44,971   49,781   63,034   213,074
 
YoY Growth (%)
DTC 24% -5% -6% -2% 2% 3% 23% 13% 23% 15% 16% 0% 13% -7% 4%
Kiosk 14% -7% -25% -28% -14% -22% -15% -5% -11% -14% -11% -38% -41% -52% -36%
Global Retail 34% 46% -27% -12% 0% -73% -4% -8% -7% -20% 325% -24% -1% 30% 27%
Home School -19%   -12%   -28%   -50%   -26% -24%   10%   -19%   52%   -4% 6%   -12%   6%   12%   2%
Total 22%   3%   -16%   -10%   -2% -17%   9%   5%   10%   2% 30%   -11%   2%   -5%   2%
 
% of Total Consumer Revenue
DTC 61% 54% 59% 57% 58% 75% 61% 64% 64% 66% 66% 69% 71% 62% 67%
Kiosk 18% 19% 16% 16% 17% 17% 15% 14% 13% 15% 12% 10% 8% 6% 9%
Global Retail 19% 24% 21% 26% 23% 6% 21% 19% 22% 17% 20% 18% 18% 30% 22%
Home School 2%   3%   4%   1%   2% 2%   3%   3%   1%   2% 2%   3%   3%   2%   2%
Total 100%   100%   100%   100%   100% 100%   100%   100%   100%   100% 100%   100%   100%   100%   100%
 
 

Unit Metrics

 
Product Unit Volume (thousands) 126.3 112.9 117.6 169.7 526.5 108.5 140.0 134.3 202.9 585.8 143.0 129.7 146.5 210.7 629.8
Paid Online Learners (thousands) 12.6 14.2 17.7 16.8 16.8 16.4 17.1 21.5 26.6 26.6 41.2 48.7 57.4 68.4 68.4
 
YoY Growth (%)
Product Units -14% 24% 14% 20% 11% 32% -7% 9% 4% 8%
Paid Online Learners 30% 20% 21% 58% 58% 151% 185% 167% 157% 157%
 
Average Net Revenue Per Unit ($)
Average Net Revenue per Product Unit $395 $398 $382 $343 $376 $379 $349 $346 $313 $341 $367 $319 $313 $277 $315
Average Net Revenue per Online Learner (monthly) $33 $35 $35 $35 $35 $30 $34 $39 $36 $35 $28 $27 $24 $24 $26
 
YoY Growth (%)
Average Net Revenue per Product Unit -4% -12% -9% -9% -9% -3% -9% -9% -11% -8%
Average Net Revenue per Online Learner -10% -2% 10% 3% 0% -6% -22% -37% -32% -25%
 
 

# of Kiosks (end of period)

 
North America 190 186 180 173 173 144 117 114 103 103 57 56 57 57 57
Europe 9 10 13 15 15 15 16 14 13 13 1 1 1 1 1
Asia Pacific 41 50 64 71 71 78 76 69 58 58 44 42 39 29 29
Total # of Kiosks (end of period) 240 246 257 259 259 237 209 197 174 174 102 99 97 87 87
 

Revenues by Geography

 
United States 52,476 52,139 50,390 57,624 212,629 41,271 53,418 51,708 65,725 212,122 54,914 50,810 52,167 65,856 223,747
International 10,538   8,509   10,536   16,656   46,239 15,707   13,325   12,494   14,801   56,327 14,535   10,002   12,112   12,845   49,494
Total 63,014   60,648   60,926   74,280   258,868 56,978   66,743   64,202   80,526   268,449 69,449   60,812   64,279   78,701   273,241
 
Revenues by Geography (as a %)
United States 83% 86% 83% 78% 82% 72% 80% 81% 82% 79% 79% 84% 81% 84% 82%
International 17%   14%   17%   22%   18% 28%   20%   19%   18%   21% 21%   16%   19%   16%   18%
Total 100%   100%   100%   100%   100% 100%   100%   100%   100%   100% 100%   100%   100%   100%   100%
 
 
Prior period data has been modified where applicable to conform to current presentation for comparative purposes.
Immaterial rounding differences may be present in this data in order to conform to Financial Statement totals.
 

Rosetta Stone Inc.
Investor Contact:
Steve Somers, CFA, 703-387-5876
ssomers@rosettastone.com
or
Media Contact:
Jonathan Mudd, 571-357-7148
jmudd@rosettastone.com

 

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