Rosetta Stone Inc. Reports First Quarter 2014 Results

  Rosetta Stone Inc. Reports First Quarter 2014 Results

70% Growth in Enterprise and Education Business Reflects Continued Momentum in
                         the Company’s Transformation

Business Wire

ARLINGTON, Va. -- May 7, 2014

Rosetta Stone Inc. (NYSE:RST), a leading provider of technology-based
language-learning, reading and brain fitness solutions, today announced
financial results for the first quarter of 2014.

  *Company demonstrates continued progress and growth in Enterprise &
    Education (“E&E”) business with 70% bookings growth
  *Results from acquisitions on track and meeting or exceeding plans
  *Consumer business trending similar to last year but beginning to leverage
    marketing capabilities, including acceleration of Fit Brains results
  *Excluding the shuttered North American Kiosk channel, total bookings of
    $61.2 million grew 6%, while total revenue was down 1% to $60.8 million
  *Adjusted EBITDA of ($6.7) million versus guidance of ($8-$10) million
  *Confirms full year 2014 guidance

“The first quarter further demonstrated that we are making solid progress in
transforming Rosetta Stone,” said Steve Swad, President and Chief Executive
Officer of Rosetta Stone. Swad continued, “The expanded product portfolio from
acquisitions and new development helped generate solid 70% bookings growth in
our E&E segment. I was particularly encouraged by the immediate contribution
from sales of the Tell Me More product and strong growth from Lexia Learning.
Our Consumer business continued to reflect the effects of varying channel
performance with the web channel continuing to drive positive results but
retail creating significant drag on overall results. The addition of Fit
Brains to the Rosetta Stone portfolio and our ability to accelerate their
performance was evidence that we can leverage our marketing platform and
cross-sell to our growing user base, now over 9 million.”

First Quarter 2014 Operational and Financial Highlights

Bookings: Total consolidated bookings, excluding the shuttered North American
Kiosk channel, increased 6% to $61.2 million from $57.8 million in the
year-ago period. North American Consumer segment (“NA Consumer”) bookings
excluding Kiosk decreased 7% to $36.1 million from $38.8 million, primarily
reflecting a $4.0 million or 47% decrease in retail channel bookings. Bookings
from the direct-to-consumer (“DTC”) channel were flat, while bookings from Fit
Brains added an incremental $1.4 million to NA Consumer. Rest of World (“ROW”)
Consumer segment bookings declined 18%, primarily reflecting decreases in Asia
as the company downsized these markets in the first quarter, partially offset
by $0.3 million of incremental bookings from third-party partner sales.
Bookings in the Global Enterprise & Education (“E&E”) segment increased 70%
compared with a year-ago. Bookings from E&E Language decreased 4% on a pro
forma basis while bookings from Lexia increased 35% on a pro forma basis
compared with the first quarter of 2013.

                                                   
US$ thousands                     Three Months Ended
                                  March 31,
                                  2014      2013       % change
Bookings from:
N.A. Consumer ex Kiosk            $ 36,141  $ 38,758   -7    %
Rest of World Consumer              6,817     8,310    -18   %
Global Enterprise and Education    18,282   10,758   70    %
Total ex N.A. Kiosk               $ 61,240  $ 57,826   6     %
Total                             $ 61,240  $ 60,371   1     %
                                                             

Revenue: Total revenue excluding the shuttered North American Kiosk channel
decreased 1% year-over-year to $60.8 million from $61.4 million. NA Consumer
revenue excluding Kiosk decreased 7%, primarily reflecting weakness in the
retail channel, which declined 37%, and a 1% decrease in DTC. Fit Brains
contributed $0.2 million during the quarter. ROW Consumer revenue decreased
22% due mainly to decreases in Japan and Korea. E&E revenue grew 28% in the
first quarter compared with a year ago.

                                                     
US$ thousands                     Three Months Ended
                                  March 31,
                                  2014      2013       % change
Revenue from:
N.A. Consumer ex Kiosk            $ 36,214   $ 38,859   -7    %
Rest of World Consumer              6,669      8,570    -22   %
Global Enterprise and Education    17,882    13,969   28    %
Total ex N.A. Kiosk               $ 60,765   $ 61,397   -1    %
Total                             $ 60,765   $ 63,924   -5    %
                                                              

  *Adjusted EBITDA: Adjusted EBITDA in the first quarter was negative $6.7
    million vs. negative $1.1 million a year ago. The decrease in the quarter
    is mainly due to the $4.0 million decrease in retail bookings and the
    inclusion of the results from acquisitions this quarter, which operated at
    a seasonal loss in the first quarter. These decreases were partially
    offset by contribution from higher bookings from acquisitions and benefits
    from restructurings in Japan and Korea in the ROW Consumer segment. In
    connection with the downsizing of its operations in Asia in the first
    quarter, the company recorded a $2.2 million non-cash goodwill impairment
    charge for the ROW Consumer segment, which is excluded from Adjusted
    EBITDA.
  *Balance Sheet and Cash Flow: Cash at the end of the quarter was $56.0
    million compared with $98.8 million at 12/31/13. The decrease in cash was
    mainly due to the acquisition of Tell Me More S.A. of $28.0MM, the
    negative Adjusted EBITDA in the quarter and other one-time cash expenses
    for restructurings, severance and acquisition transaction and integration
    expenses. Deferred revenue increased $2.7 million in the quarter to $81.5
    million compared with $78.9 at 12/31/13. Free cash flow in the first
    quarter was negative $15.0 million compared with negative $8.2 million a
    year ago. The decline in free cash flow reflects the lower Adjusted
    EBITDA, higher one-time items of $4.1 million vs. $0.8 million a year ago
    and a decrease in working capital, which was partially offset by a
    decrease in capital expenditures to $1.4 million in the first quarter
    compared with $2.5 million a year ago.

Guidance

The company is maintaining its guidance for the full year 2014 as follows:


FY 2014 Guidance
                                               
                               Amount/Range       Commentary
Consolidated Bookings          $315MM to $325MM   Mid-single digit % growth
                                                  
Adjusted EBITDA                $18MM to $22MM     ~5% margin
                                                  
Shares outstanding             ~22MM
                                                  
Capital Expenditures           $10MM to $14MM     Acquisition Integrations
                                                  
Long-term effective tax rate  39%               
                                                  

Non-GAAP Financial Measures

This press release contains several non-GAAP financial measures.

  *Bookings represent executed sales contracts received by the Company that
    are either recorded immediately as revenue or as deferred revenue.
  *Adjusted EBITDA is GAAP net income/(loss) plus interest income and
    expense, income tax benefit and expense, depreciation, amortization and
    stock-based compensation expense, goodwill impairment plus the change in
    deferred revenue (excluding acquired deferred revenue) less the change in
    deferred commissions. In addition, Adjusted EBITDA excludes any items
    related to the litigation with Google Inc., restructuring and related wind
    down costs, severance 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 EBITDA for prior periods has been revised to conform to current
    definition.
  *Free cash flow is cash flow from operations less cash used in purchases of
    property and equipment.

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 and education-technology companies, many of which
present similar non-GAAP financial measures to investors.

Management typically excludes the amounts described below 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.

Earnings Results 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 an Earnings
Results webcast today at 4:30pm eastern time (ET) during which time there will
be a discussion of 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.

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.

About Rosetta Stone

Rosetta Stone Inc. (NYSE: RST) is dedicated to changing the way the world
learns. The company’s innovative technology-driven language and reading
solutions are used by thousands of schools, businesses, government
organizations and millions of individuals around the world. Founded in 1992,
Rosetta Stone pioneered the use of interactive software to accelerate language
learning. Today the company offers courses in 30 languages, from the most
commonly spoken (such as English, Spanish and Mandarin) to the less prominent
(including Swahili, Swedish and Tagalog). In 2013, Rosetta Stone expanded
beyond language and deeper into education-technology with its acquisitions of
Livemocha, Lexia Learning, Vivity Labs, and Tell Me More. Rosetta Stone is
based in Arlington, VA, and has offices around the world.

Cautionary Statement Regarding Forward-Looking Statements

Certain information contained in this presentation and certain comments today
constitute forward-looking statements for purposes of the safe harbor
provisions of The Private Securities Litigation Reform Act of 1995. 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 our 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; our international operations and growth plans; our plans regarding our
kiosks and retail relationships; our plans regarding our Enterprise and
Education 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
revitalizing our go-to-market strategy; our plans to transition our
distribution to more online in the consumer business; our ability to expand
our product offerings beyond our core adult-focused language learning
solutions, including the launch of Kids reading and brain fitness; our ability
to introduce successfully Lexia’s Core5 reading product to the consumer
market; our ability to expand our offerings to more devices and apps, our
ability to identify and successfully close and integrate additional
acquisition targets; our plans with respect to and our ability to successfully
integrate Lexia, Livemocha, Tell Me More and Vivity into our business; adverse
trends in general economic conditions and the other factors including the
“Risk Factors” more fully described 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 year period ended December 31, 2013, which is on
file with the SEC. We encourage you to review those factors before making any
investment decision. You should not place undue reliance on forward-looking
statements because they involve factors that are, in some cases, beyond our
control and that could materially affect actual results, levels of activity,
performance, or achievements.

Today’s presentation and discussion also contains references to non-GAAP
financial measures. The full definition and reconciliation of those measures
is available in our Form 8-K filed with the SEC on May 7, 2014. 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. 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. Our definitions of non-GAAP measures may not be comparable to the
definitions used by other companies, and we encourage you to review and
understand all our financial reporting before making any investment decision.

                                                               
ROSETTA STONE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
                                                                  
                                                    March 31,     December 31,
                                                     2014         2013    
Assets
Current assets:
Cash and cash equivalents                           $ 55,974      $  98,825
Restricted cash                                       50             12,424
Accounts receivable (net of allowance for
doubtful accounts of $1,542 and $1,000,               44,932         60,342
respectively)
Inventory                                             8,416          6,639
Prepaid expenses and other current assets             13,257         12,294
Income tax receivable                                947          197     
Total current assets                                  123,576        190,721
                                                                  
Property and equipment, net                           23,350         17,766
Goodwill                                              78,560         50,059
Intangible assets, net                                39,610         29,006
Other assets                                         3,317        3,224   
Total assets                                        $ 268,413    $  290,776 
                                                                  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable                                    $ 11,740      $  10,326
Accrued compensation                                  11,461         16,380
Obligations under capital lease                       667            256
Other current liabilities                             33,497         41,936
Deferred revenue                                     68,861       67,173  
Total current liabilities                             126,226        136,071
                                                                  
Deferred revenue                                      12,681         11,684
Deferred income taxes                                 10,548         9,022
Obligations under capital lease                       4,092          217
Other long-term liabilities                          2,369        2,539   
Total liabilities                                     155,916        159,533
                                                                  
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, 2014 and December 31,
2013, respectively
Non-designated common stock, $0.00005 par value,
190,000 and 190,000 shares authorized, 22,832 and
22,588 shares issued and 21,832 and 21,588 shares     2              2
outstanding at March 31, 2014 and December 31,
2013, respectively
Additional paid-in capital                            172,982        171,123
Accumulated loss                                      (49,533 )      (29,292 )
Accumulated other comprehensive income                481            845
Treasury stock, at cost, 1,000 shares at March       (11,435 )     (11,435 )
31, 2014 and 1,000 shares at December 31, 2013
Total stockholders' equity                           112,497      131,243 
Total liabilities and stockholders' equity          $ 268,413    $  290,776 

                                                        
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
                                                           
                                                           
                                                           
                                             Three Months Ended
                                             March 31,
                                              2014          2013    
                                                           (As Adjusted)*
Revenue:
Product                                      $ 32,371      $   37,592
Subscription and service                      28,394        26,332  
Total revenue                                  60,765          63,924
                                                           
Cost of revenue:
Cost of product revenue                        7,824           6,940
Cost of subscription and service revenue      4,347         3,324   
Total cost of revenue                          12,171          10,264
                                                          
Gross profit                                  48,594        53,660  
                                                           
Operating expenses
Sales and marketing                            39,096          37,273
Research and development                       8,773           7,357
General and administrative                     16,054          12,588
Goodwill impairment                            2,199           -
Lease abandonment                             3,571         793     
Total operating expenses                      69,693        58,011  
                                                           
Loss from operations                           (21,099 )       (4,351  )
                                                           
Other income and (expense):
Interest income                                5               41
Interest expense                               (56     )       (45     )
Other income (expense)                        226           419     
Total other income                             175             415
                                                           
Loss before income taxes                       (20,924 )       (3,936  )
Income tax (benefit) provision                (683    )      968     
                                                           
Net loss                                     $ (20,241 )   $   (4,904  )
                                                           
Net loss per share:
Basic                                        $ (0.96   )   $   (0.23   )
Diluted                                      $ (0.96   )   $   (0.23   )
                                                           
Common shares and equivalents outstanding:
Basic weighted average shares                 21,125        21,360  
Diluted weighted average shares               21,125        21,360  
                                                                       

* Certain amounts have been adjusted for the retrospective change in
accounting principle for sales commissions.

                                                             
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                
                                                  Three Months Ended
                                                  March 31,
                                                   2014         2013     
                                                                (As Adjusted)*
                                                                
Cash Flows From Operating Activities:
Net loss                                          $ (20,241 )   $  (4,904   )
Adjustments to reconcile net loss to cash used
in operating activities, net of business
acquisitions:
Stock-based compensation expense                    1,406          1,668
Bad debt expense                                    957            (238     )
Depreciation and amortization                       3,434          2,372
Deferred income tax provision (benefit)             (756    )      289
Loss on disposal of equipment                       106            141
Goodwill impairment                                 2,199          -
Net change in:
Restricted cash                                     60             32
Accounts receivable                                 17,916         11,135
Inventory                                           (1,034  )      (746     )
Prepaid expenses and other current assets           (213    )      (2,446   )
Income tax receivable                               (639    )      413
Other assets                                        62             105
Accounts payable                                    512            (209     )
Accrued compensation                                (8,123  )      (6,412   )
Other current liabilities                           (9,461  )      (4,253   )
Other long-term liabilities                         (172    )      371
Deferred revenue                                   358          (2,953   )
Net cash used in operating activities              (13,629 )     (5,635   )
                                                                
Cash Flows From Investing Activities:
Purchases of property and equipment                 (1,366  )      (2,528   )
Decrease in restricted cash related to Vivity       12,314         -
Labs acquisition
Acquisitions, net of cash acquired                 (40,161 )     -        
Net cash (used in) provided by investing           (29,213 )     (2,528   )
activities
                                                                
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options         454            349
Payments under capital lease obligations           (61     )     (193     )
Net cash provided by financing activities          393          156      
                                                                
(Decrease) increase in cash and cash                (42,449 )      (8,007   )
equivalents
                                                                
Effect of exchange rate changes in cash and        (402    )     (872     )
cash equivalents
                                                                
Net (decrease) increase in cash and cash            (42,851 )      (8,879   )
equivalents
                                                                
Cash and cash equivalents—beginning of period      98,825       148,190  
                                                                
Cash and cash equivalents—end of period           $ 55,974     $  139,311  
                                                                

* Certain amounts have been adjusted for the retrospective change in
accounting principle for sales commissions.

                                                   
ROSETTA STONE INC.
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(in thousands)
(unaudited)
                                                      
                                        Three Months Ended
                                        March 31,
                                         2014          2013    
                                                      (As Adjusted)*
                                                      
GAAP net loss                           $ (20,241 )   $   (4,904  )
Interest (income)/expense, net            51              4
Income tax (benefit) expense              (683    )       968
Depreciation and amortization             3,372           1,757
Depreciation related to restructuring     62              615
Goodwill impairment                       2,199           -
Stock-based compensation                  1,406           1,668
Other EBITDA adjustments                  8,006           2,088
Change in deferred revenue                475             (3,553  )
Change in deferred commission            (1,377  )      213     
Adjusted EBITDA**                       $ (6,730  )   $   (1,144  )
                                                      

* Certain amounts have been adjusted for the retrospective change in
accounting principle for sales commissions.

** Adjusted EBITDA is GAAP net income or loss plus interest income and
expense, income tax benefit and expense, depreciation, amortization, goodwill
impairment, and stock-based compensation expenses, plus the change in deferred
revenue excluding increases in deferred revenue from acquisitions less the
change in deferred commissions. Adjusted EBITDA excludes any items related to
the litigation with Google Inc., restructuring and related wind down costs,
severance costs, and transaction and other costs associated with mergers and
acquisitions. Adjusted EBITDA for prior periods has been revised to conform to
the current definition.

                                                             
Rosetta Stone
Inc.
Business
Metrics
(in
thousands)
                                                                    
                Quarter-Ended                                        Quarter-Ended
                                                                     
                3/31/13  6/30/13  9/30/13  12/31/13  2013        3/31/14
Net Bookings
by Market
                                                                     
North America   41,303    39,321    38,629    52,620     171,873     36,141
Consumer
Rest of World   8,310    6,879    7,471    7,300     29,960      6,817
Consumer
Worldwide       49,613    46,200    46,100    59,920     201,833     42,958
Consumer
                                                                     
Global
Enterprise      10,758   16,883   24,594   24,067    76,302      18,282
and Education
Total           60,371   63,083   70,694   83,987    278,135     61,240
                                                                     
YoY Growth
(%)
North America   -1%       5%        -9%       -9%        -4%         -12%
Consumer
Rest of World   -34%     -15%     -29%     -27%      -27%        -18%
Consumer
Worldwide       -9%       2%        -13%      -12%       -8%         -13%
Consumer
                                                                     
Global
Enterprise      -2%      -4%      27%      47%       18%         70%
and Education
Total           -8%      0%       -2%      0%        -2%         1%
                                                                     
% of Total
Net Bookings
North America   68%       62%       55%       63%        62%         59%
Consumer
Rest of World   14%      11%      10%      9%        11%         11%
Consumer
Worldwide       82%       73%       65%       71%        73%         70%
Consumer
                                                                     
Global
Enterprise      18%      27%      35%      29%       27%         30%
and Education
Total           100%     100%     100%     100%      100%        100%
                                                                     
                                                                     
Revenue by
Market
                                                                     
North America   41,385    39,934    38,699    53,998     174,016     36,214
Consumer
Rest of World   8,570    7,478    7,165    7,207     30,420      6,669
Consumer
Worldwide       49,955    47,412    45,864    61,205     204,436     42,883
Consumer
                                                                     
Global
Enterprise      13,969   14,727   15,008   16,505    60,209      17,882
and Education
Total           63,924   62,139   60,872   77,710    264,645     60,765
                                                                     
YoY Growth
(%)
North America   -4%       8%        -3%       2%         1%          -12%
Consumer
Rest of World   -30%     -7%      -28%     -29%      -24%        -22%
Consumer
Worldwide       -10%      5%        -8%       -3%        -4%         -14%
Consumer
                                                                     
Global
Enterprise      -1%      -7%      4%       5%        0%          28%
and Education
Total           -8%      2%       -5%      -1%       -3%         -5%
                                                                     
% of Total
Revenue
North America   65%       64%       64%       69%        66%         60%
Consumer
Rest of World   13%      12%      11%      9%        11%         11%
Consumer
Worldwide       78%       76%       75%       79%        77%         71%
Consumer
                                                                     
Global
Enterprise      22%      24%      25%      21%       23%         29%
and Education
Total           100%     100%     100%     100%      100%        100%
                                                                     
                                                                     
Unit Metrics
                                                                     
Product Unit
Volume          141.8     148.6     157.7     233.5      681.6       132.6
(thousands)
Paid Online
Learners        80.6      85.1      88.6      94.1       94.1        100.4
(thousands)
                                                                     
YoY Growth
(%)
Product Units   -1%       15%       8%        11%        8%          -6%
Paid Online     95%       75%       54%       38%        38%         25%
Learners
                                                                     
Average Net
Revenue Per
Unit ($)
Average Net
Revenue per     $312      $275      $250      $234       $263        $273
Product Unit
Average Net
Revenue per
Online          $26       $25       $24       $23        $25         $22
Learner
(monthly)
                                                                     
YoY Growth
(%)
Average Net
Revenue per     -15%      -14%      -20%      -15%       -16%        -13%
Product Unit
Average Net
Revenue per     -7%       -6%       -1%       -5%        -3%         -15%
Online
Learner
                                                                     
                                                                     
# of Kiosks
(end of
period)
                                                                     
North America   56        -         -         -          -           -
Europe          -         -         -         -          -           -
Asia Pacific    22        20        9         3          3           -
Total # of
Kiosks (end     78        20        9         3          3           -
of period)
                                                                     
Revenues by
Geography
                                                                     
United States   52,791    52,163    51,013    67,485     223,451     49,410
International   11,133   9,976    9,859    10,226    41,194      11,355
Total           63,924   62,139   60,872   77,710    264,645     60,765
                                                                     
Revenues by
Geography (as
a %)
United States   83%       84%       84%       87%        82%         81%
International   17%      16%      16%      13%       18%         19%
Total           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.


Contact:

Rosetta Stone Inc.
Investor Contact:
Steve Somers, CFA
Vice President, Corporate Development & Investor Relations
703-387-5876
ssomers@rosettastone.com
or
Media Contact:
Jonathan Mudd
Head of Global Communications
571-357-7148
jmudd@rosettastone.com
 
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