Rosetta Stone Inc. Reports First Quarter 2013 Results

  Rosetta Stone Inc. Reports First Quarter 2013 Results

 Strategic Shift to Cloud Continues as Company Reports Adjusted EBITDA Growth
          of 39% to $2.4 Million, Reaffirms Full-Year 2013 Guidance

Business Wire

ARLINGTON, Va. -- May 8, 2013

Rosetta Stone Inc. (NYSE:RST), a leading provider of technology-based
language-learning solutions, today announced financial results for the first
quarter of 2013, as summarized below:

                                                           
US$ thousands                         Three Months Ended
except per-share data                 March 31,               %
                                      2013       2012        change
Total revenue                         $63,924     $69,449     -8   %
Total bookings                        $60,371     $65,267     -8   %
                                                              
Net loss                              ($4,700 )   ($1,903 )   -147 %
Net loss per share:                   ($0.22  )   ($0.09  )   -144 %
                                                              
Adjusted net loss ^(1)                ($622   )   ($1,377 )   55   %
Adjusted net loss per share: ^(1)     ($0.03  )   ($0.07  )   57   %
                                                              
Adjusted EBITDA ^(2)                  $2,409      $1,735      39   %
                                                              
Cash flow from operations             ($5,635 )   $2,656      -312 %
Purchases of property and equipment   ($2,528 )   ($967   )   -161 %
Free cash flow                        ($8,163 )   $1,689      -583 %
                                                              

(1) 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 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.


“During the first quarter we started to play a little offense,” said Steve
Swad, President and Chief Executive Officer of Rosetta Stone. “We continued
our shift to the cloud by emphasizing online and mobile solutions. We acquired
Livemocha for its large online community and robust technology platform. And
we invested in our Product group by realigning our resources and opening new
offices in San Francisco and Austin.” Swad continued, “We also made the
important decision to close our remaining U.S. kiosk locations.Overall, I’m
pleased that the core channels in our North American Consumer business
performed well, growing at mid-single digit rates, and that we are seeing
underlying strength in our Institutional business with higher renewal rates
and an improved pipeline. Our Rest of World Consumer business still faces
challenges, but we are taking steps to stabilize that segment and return it to
growth.”

First Quarter 2013 Operational and Financial Highlights

  *Bookings: Total bookings declined 8% in the first quarter year-over-year
    to $60.4 million. The North American Consumer segment (“NA Consumer”)
    recorded a 1% decrease in bookings primarily reflecting lower sales from
    the kiosk channel. Excluding kiosk, NA Consumer bookings increased over 5%
    year-over-year. The Rest of World Consumer segment (“ROW Consumer”)
    declined 34%, reflecting decreases in all geographies, with Japan
    accounting for nearly half of the decrease and the absence of hard-product
    sales in Germany also impacting bookings. The Institutional segment
    decreased 2% compared with a year-ago, reflecting the absence of network
    product this quarter following the company’s decision to curtail selling
    that product. Institutional segment bookings increased more than 10%
    year-over-year, excluding the impact of de-emphasized network and
    CD-product sales.
  *Revenue: Total revenue decreased 8% in the first quarter year-over-year to
    $63.9 million from $69.4 million a year ago. NA Consumer revenue decreased
    4%, reflecting both the shift to Online Learner sales and lower average
    selling price for Product Units as well as lower kiosk sales. Excluding
    kiosk, NA Consumer revenue increased in the low-single digits
    year-over-year. ROW Consumer revenue decreased 30% due to weakness in
    Japan and the absence of product unit sales in Germany versus the
    comparable period last year, reflecting the shift to an online-only
    business. ROW Consumer segment revenue was also impacted by fewer kiosk
    locations in the first quarter compared with a year ago. Institutional
    revenue decreased 1% in the first quarter due to the absence of network
    product sales compared with a year ago. Institutional segment revenue
    increased over 5% year-over-year, excluding the impact of network product
    sales.

                                           
US$ thousands            Three Months Ended
                         March 31,
                         2013      2012      % change
Revenue from:
North America Consumer   $41,385    $43,084   -4%
Rest of World Consumer   8,570      12,204    -30%
Total Consumer           49,955     55,288    -10%
Institutional            13,969     14,161    -1%
Total                    $63,924    $69,449   -8%
                                              

  *Adjusted EBITDA: Adjusted EBITDA for the first quarter increased 39% to
    $2.4 million from $1.7 million. The improvement in Adjusted EBITDA was due
    to lower operating expenses that offset the decline in first quarter
    revenue. Cost of Goods Sold decreased $3.2 million due to lower
    hard-product box costs, a shift to online offerings and lower studio
    coaching costs. Sales and marketing expenses and general and
    administrative (G&A) expenses also both decreased by $1.3 million and $1.1
    million, respectively. The reduction in sales and marketing expense was
    due to marketing efficiencies and lower expenses from the reduced kiosk
    channel, compared with a year ago, while the decrease in G&A expense
    reflected improvements in bad debt, lower personnel expenses and lower
    depreciation expense. Research and development costs increased $1.1
    million, reflecting the investment being made in product development.
    Adjusted EBITDA includes approximately $2.7 million of add-backs, mainly
    related to severance associated with headcount reductions and an
    adjustment to our international facilities requirements.
  *Adjusted Net Loss and Adjusted EPS: Rosetta Stone recorded Adjusted Net
    Loss of $0.6 million in the first quarter 2013, compared to Adjusted Net
    Loss of $1.4 million in the first quarter of 2012. Adjusted Net Loss per
    share was $0.03 compared to an Adjusted Net Loss of $0.07 per share in the
    prior year period.
  *Balance Sheet and Cash Flow: Cash, cash equivalents and short-term
    investments decreased $8.9 million to $139.4 million at March 31, 2013
    from $148.3 million at December 31, 2012. The company has no debt. Free
    cash flow in the first quarter was ($8.2) million compared with $1.7
    million a year ago. The decline in free cash flow reflects a decrease in
    working capital versus the year ago period and an increase in capital
    expenditures. Capital expenditures were $2.5 million in the first quarter
    compared with $1.0 million a year ago.

Financial Outlook

The company is re-affirming 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 loss and adjusted net 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 May 22, 2013 via telephone at the following numbers:

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

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

Pass Code: 413176

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 realign our cost structure
and revitalize our go-to-market strategy; our plans to transition our
distribution to more online in the Consumer segment; our mergers and
acquisitions plans; our plans related to Livemocha; 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, 2012, 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
                                             March 31,
                                             2013         2012
Revenue:
Product                                      $ 37,592     $ 47,530
Subscription and service                      26,332     21,919 
Total revenue                                  63,924       69,449
                                                          
Cost of revenue:
Cost of product revenue                        6,940        9,108
Cost of subscription and service revenue      3,324      4,366  
Total cost of revenue                          10,264       13,474
                                                         
Gross profit                                  53,660     55,975 
                                                          
Operating expenses
Sales and marketing                            37,060       38,404
Research and development                       7,357        6,273
General and administrative                     12,588       13,657
Lease Abandonment                             793        -      
Total operating expenses                      57,798     58,334 
                                                          
Loss from operations                           (4,138 )     (2,359 )
                                                          
Other income and (expense):
Interest income                                41           78
Interest expense                               (45    )     -
Other income (expense)                        419        (364   )
Total other income (expense)                   415          (286   )
                                                          
Net loss before income taxes                   (3,723 )     (2,645 )
Income tax provision (benefit)                977        (742   )
                                                          
Net loss                                     $ (4,700 )   $ (1,903 )
                                                          
Net loss per share:
Basic                                        $ (0.22  )   $ (0.09  )
Diluted                                      $ (0.22  )   $ (0.09  )
                                                          
Common shares and equivalents outstanding:
Basic weighted average shares                 21,360     20,942 
Diluted weighted average shares               21,360     20,942 
                                                                   


ROSETTA STONE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)


                                                   March 31,    December 31,
                                                    2013          2012
                                                                  
                                                                  
Assets
Current assets:
Cash and cash equivalents                           $ 139,311     $  148,190
Restricted cash                                       41             73
Accounts receivable (net of allowance for
doubtful accounts of $618 and $1,297,                 38,783         49,946
respectively)
Inventory                                             7,267          6,581
Prepaid expenses and other current assets             7,722          5,204
Income tax receivable                                 670            1,104
Deferred income taxes                                75           79      
Total current assets                                  193,869        211,177
                                                                  
Property and equipment, net                           17,099         17,213
Goodwill                                              34,868         34,896
Intangible assets, net                                10,815         10,825
Deferred income taxes                                 250            260
Other assets                                         1,389        1,484   
Total assets                                        $ 258,290    $  275,855 
                                                                  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable                                    $ 5,770       $  6,064
Accrued compensation                                  10,325         16,830
Other current liabilities                             31,284         36,387
Deferred revenue                                     55,929       59,195  
Total current liabilities                             103,308        118,476
                                                                  
Deferred revenue                                      3,934          4,221
Deferred income taxes                                 8,697          8,400
Other long-term liabilities                          911          155     
Total liabilities                                     116,850        131,252
                                                                  
Commitments and contingencies
                                                                  
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000 and
10,000 authorized; zero and zero shares issued        —              —
and outstanding March 31, 2013 and December 31,
2012, respectively
Non-designated common stock, $0.00005 par value,
190,000 and 190,000 shares authorized, 22,134 and     2              2
21,951 shares issued and outstanding at March 31,
2013 and December 31, 2012, respectively
Additional paid-in capital                            162,711        160,693
Accumulated loss                                      (21,449 )      (16,749 )
Accumulated other comprehensive income               176          657     
Total stockholders' equity                           141,440      144,603 
Total liabilities and stockholders' equity          $ 258,290    $  275,855 
                                                                  

                                                                
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                   
                                                     Three Months Ended
                                                     March 31,
                                                      2013        2012    
                                                                   
Cash Flows From Operating Activities:
Net loss                                             $ (4,700  )   $ (1,903  )
Adjustments to reconcile net loss to cash provided
by (used in) operating activities, net of business
acquisitions
Stock-based compensation expense                       1,668         1,635
Bad debt expense                                       (238    )     165
Depreciation and amortization                          2,372         2,436
Deferred income tax benefit                            298           (1,314  )
Loss on sales of equipment                             141           32
Net change in:
Restricted cash                                        32            23
Accounts receivable                                    11,135        17,575
Inventory                                              (746    )     (709    )
Prepaid expenses and other current assets              (2,559  )     503
Income tax receivable                                  413           (1,236  )
Other assets                                           5             (1,209  )
Accounts payable                                       (209    )     (587    )
Accrued compensation                                   (6,412  )     (2,076  )
Other current liabilities                              (4,253  )     (8,020  )
Other long-term liabilities                            371           1,587
Deferred revenue                                      (2,953  )    (4,246  )
Net cash provided by (used in) operating              (5,635  )    2,656   
activities
                                                                   
Cash Flows From Investing Activities:
Purchases of property and equipment                    (2,528  )     (967    )
Proceeds from (purchases of) available-for-sale       -           3,307   
securities
Net cash provided by (used in) investing              (2,528  )    2,340   
activities
                                                                   
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options            349           -
Payments under capital lease obligations              (193    )    (2      )
Net cash provided by (used in) financing              156         (2      )
activities
                                                                   
Increase (decrease) in cash and cash equivalents       (8,007  )     4,994
                                                                   
Effect of exchange rate changes in cash and cash      (872    )    563     
equivalents
                                                                   
Net increase (decrease) in cash and cash               (8,879  )     5,557
equivalents
                                                                   
Cash and cash equivalents—beginning of period         148,190     106,516 
                                                                   
Cash and cash equivalents—end of period              $ 139,311    $ 112,073 

                                                  
ROSETTA STONE INC.
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(unaudited)
                                                     
                                                     
                                        Three Months Ended
                                        March 31,
                                         2013       2012   
                                                     
Net loss                                $ (4,700 )   $ (1,903 )
Interest (income)/expense, net            4            (78    )
Income tax expense (benefit)              977          (742   )
Depreciation and amortization             1,757        2,436
Depreciation related to restructuring     615          -
Stock-based compensation                  1,668        1,635
Other EBITDA Adjustments                 2,088      387    
                                                     
Adjusted EBITDA*                        $ 2,409     $ 1,735  


* 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 Loss to Adjusted Net Loss
(in thousands, except per share amounts)
(unaudited)
                                                                    
                                                                    
                                                       Three Months Ended
                                                       March 31,
                                                        2013       2012   
GAAP net loss                                          $ (4,700 )   $ (1,903 )
Items related to litigation with Google, Inc.,
restructuring and other related costs, acquisition       2,703        387
costs
Income tax adjustments *                                1,375      139    
Adjusted net loss                                      $ (622   )   $ (1,377 )
                                                                    
GAAP net loss per share                                $ (0.22  )   $ (0.09  )
Items related to litigation with Google, Inc.            0.13       $ 0.02
restructuring and other related costs
Income tax adjustments *                                0.06      $ 0.01   
Adjusted net loss per share **                         $ (0.03  )   $ (0.07  )
                                                                    
Diluted weighted average shares                          21,360       20,942


* 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 loss and adjusted net 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.

                                                                                                              
Rosetta Stone Inc.
Business Metrics
(in thousands)
                                                                                                                
                Quarter-Ended                                          Quarter-Ended                                          Quarter-Ended
                                                                                                                              
                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          3/31/13
Net Bookings
by Market
                                                                                                                              
North America   29,814    36,828    35,562    55,209     157,413       41,733    37,295    42,283    57,870     179,181       41,303
Consumer
Rest of World   14,996   12,910   11,945   14,166    54,017        12,550   8,113    10,488   10,034    41,185        8,310
Consumer
Worldwide       44,810    49,738    47,507    69,375     211,430       54,283    45,408    52,771    67,904     220,366       49,613
Consumer
                                                                                                                              
Worldwide       10,770   16,973   18,555   15,459    61,757        10,984   17,635   19,354   16,423    64,396        10,758
Institutional
Total           55,580   66,711   66,062   84,834    273,187       65,267   63,043   72,125   84,327    284,762       60,371
                                                                                                                              
YoY Growth
(%)
North America   -28%      -5%       -14%      6%         -9%           40%       1%        19%       5%         14%           -1%
Consumer
Rest of World   50%      58%      21%      -7%       25%           -16%     -37%     -12%     -29%      -24%          -34%
Consumer
Worldwide       -13%      6%        -7%       3%         -3%           21%       -9%       11%       -2%        4%            -9%
Consumer
                                                                                                                              
Worldwide       18%      -1%      -17%     7%        -2%           2%       4%       4%       6%        4%            -2%
Institutional
Total           -9%      4%       -10%     4%        -2%           17%      -5%      9%       -1%       4%            -8%
                                                                                                                              
% of Total
Net Bookings
North America   54%       55%       54%       65%        57%           64%       59%       59%       69%        63%           68%
Consumer
Rest of World   27%      20%      18%      17%       20%           19%      13%      14%      12%       14%           14%
Consumer
Worldwide       81%       75%       72%       82%        77%           83%       72%       73%       81%        77%           82%
Consumer
                                                                                                                              
Worldwide       19%      25%      28%      18%       23%           17%      28%      27%      19%       23%           18%
Institutional
Total           100%     100%     100%     100%      100%          100%     100%     100%     100%      100%          100%
                                                                                                                              
                                                                                                                              
Revenue by
Market
                                                                                                                              
North America   28,061    38,606    37,710    53,184     157,561       43,084    36,918    39,878    52,946     172,826       41,385
Consumer
Rest of World   14,601   12,014   11,002   12,848    50,465        12,204   8,053    9,903    10,088    40,248        8,570
Consumer
Worldwide       42,662    50,620    48,712    66,032     208,026       55,288    44,971    49,781    63,034     213,074       49,955
Consumer
                                                                                                                              
Worldwide       14,316   16,123   15,490   14,494    60,423        14,161   15,841   14,498   15,667    60,167        13,969
Institutional
Total           56,978   66,743   64,202   80,526    268,449       69,449   60,812   64,279   78,701    273,241       63,924
                                                                                                                              
YoY Growth
(%)
North America   -32%      0%        2%        19%        -2%           54%       -4%       6%        0%         10%           -4%
Consumer
Rest of World   49%      57%      13%      -17%      18%           -16%     -33%     -10%     -21%      -20%          -30%
Consumer
Worldwide       -17%      9%        5%        10%        2%            30%       -11%      2%        -5%        2%            -10%
Consumer
                                                                                                                              
Worldwide       21%      13%      8%       2%        11%           -1%      -2%      -6%      8%        0%            -1%
Institutional
Total           -10%     10%      5%       8%        4%            22%      -9%      0%       -2%       2%            -8%
                                                                                                                              
% of Total
Revenue
North America   49%       58%       59%       66%        58%           62%       61%       62%       67%        63%           65%
Consumer
Rest of World   26%      18%      17%      16%       19%           18%      13%      15%      13%       15%           13%
Consumer
Worldwide       75%       76%       76%       82%        77%           80%       74%       77%       80%        78%           78%
Consumer
                                                                                                                              
Worldwide       25%      24%      24%      18%       23%           20%      26%      23%      20%       22%           22%
Institutional
Total           100%     100%     100%     100%      100%          100%     100%     100%     100%      100%          100%
                                                                                                                              
                                                                                                                              
Unit Metrics
                                                                                                                              
Product Unit
Volume          108.5     140.0     134.3     202.9      585.8         143.0     129.7     146.5     210.7      629.8         141.8
(thousands)
Paid Online
Learners        16.4      17.1      21.5      26.6       26.6          41.2      48.7      57.4      68.4       68.4          80.6
(thousands)
                                                                                                                              
YoY Growth
(%)
Product Units   -14%      24%       14%       20%        11%           32%       -7%       9%        4%         8%            -1%
Paid Online     30%       20%       21%       58%        58%           151%      185%      167%      157%       157%          95%
Learners
                                                                                                                              
Average Net
Revenue Per
Unit ($)
Average Net
Revenue per     $379      $349      $346      $313       $341          $367      $319      $313      $277       $315          $312
Product Unit
Average Net
Revenue per
Online          $30       $34       $39       $36        $35           $28       $27       $24       $24        $26           $26
Learner
(monthly)
                                                                                                                              
YoY Growth
(%)
Average Net
Revenue per     -4%       -12%      -9%       -9%        -9%           -3%       -9%       -9%       -11%       -8%           -15%
Product Unit
Average Net
Revenue per     -10%      -2%       10%       3%         0%            -6%       -22%      -37%      -32%       -25%          -7%
Online
Learner
                                                                                                                              
                                                                                                                              
# of Kiosks
(end of
period)
                                                                                                                              
North America   144       117       114       103        103           57        56        57        57         57            56
Europe          15        16        14        13         13            1         1         1         1          1             -
Asia Pacific    78        76        69        58         58            44        42        39        29         29            22
Total # of
Kiosks (end     237       209       197       174        174           102       99        97        87         87            78
of period)
                                                                                                                              
Revenues by
Geography
                                                                                                                              
United States   41,271    53,418    51,708    65,725     212,122       54,914    50,810    52,167    65,856     223,747       52,791
International   15,707   13,325   12,494   14,801    56,327        14,535   10,002   12,112   12,845    49,494        11,133
Total           56,978   66,743   64,202   80,526    268,449       69,449   60,812   64,279   78,701    273,241       63,924
                                                                                                                              
Revenues by
Geography (as
a %)
United States   72%       80%       81%       82%        79%           79%       84%       81%       84%        82%           83%
International   28%      20%      19%      18%       21%           21%      16%      19%      16%       18%           17%
Total           100%     100%     100%     100%      100%          100%     100%     100%     100%      100%          100%
                                                                                                                              

Contact:

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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