Attached files
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8-K - 8-K - ROSETTA STONE INC | a13-23662_18k.htm |
EX-99.2 - EX-99.2 - ROSETTA STONE INC | a13-23662_1ex99d2.htm |
Exhibit 99.1
Rosetta Stone Inc. Reports Third Quarter 2013 Results
Results Reflect Continued Business Transformation;
Reaffirms Pro Forma Adjusted EBITDA Guidance Range for Full-Year 2013
ARLINGTON, VA November 6, 2013 Rosetta Stone Inc. (NYSE:RST), a leading provider of technology-based language-learning and reading solutions, today announced financial results for the third quarter of 2013, as summarized below:
|
|
Three Months Ended |
|
|
| ||||
US$ thousands |
|
September 30, |
|
% |
| ||||
except per-share data |
|
2013 |
|
2012 |
|
change |
| ||
|
|
(As Adjusted) * |
| ||||||
Total revenue |
|
$ |
60,872 |
|
$ |
64,279 |
|
-5 |
% |
Total bookings |
|
$ |
70,694 |
|
$ |
72,125 |
|
-2 |
% |
Pro forma revenue |
|
$ |
63,778 |
|
$ |
64,279 |
|
-1 |
% |
|
|
|
|
|
|
|
| ||
Net loss |
|
$ |
(4,169 |
) |
$ |
(32,063 |
) |
87 |
% |
Net loss per share |
|
$ |
(0.19 |
) |
$ |
(1.52 |
) |
87 |
% |
|
|
|
|
|
|
|
| ||
Pro forma adjusted net loss |
|
$ |
(2,721 |
) |
$ |
(1,265 |
) |
-115 |
% |
Pro forma adjusted net loss per share |
|
$ |
(0.12 |
) |
$ |
(0.06 |
) |
-100 |
% |
|
|
|
|
|
|
|
| ||
Pro forma adjusted EBITDA |
|
$ |
(618 |
) |
$ |
2,110 |
|
-129 |
% |
|
|
|
|
|
|
|
| ||
Cash flow from operations |
|
$ |
(587 |
) |
$ |
5,424 |
|
-111 |
% |
Purchases of property and equipment |
|
$ |
(2,203 |
) |
$ |
(941 |
) |
-134 |
% |
Free cash flow |
|
$ |
(2,790 |
) |
$ |
4,483 |
|
-162 |
% |
* Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions.
Definitions and reconciliations for all non-GAAP measures are provided in this press release.
Although the third quarters performance was mixed we continued to move our long term strategy forward by growing our SaaS business in our Enterprise & Education segment, continuing to shift our consumer business to more digital, introducing literacy and language products into the Kids space and expanding our retail distribution and presence in iOS and Android ecosystems. In addition, the Lexia acquisition moved us beyond language, broadening our product portfolio into a natural adjacency with reading, said Steve Swad, President and CEO of Rosetta Stone. Swad continued, However, lower pricing and softness in our retail channel resulted in a decline in Pro
Forma Adjusted EBITDA. Despite the results in the quarter, we believe that the underlying transformation of the business is intact and we still expect to deliver full-year Pro Forma Adjusted EBITDA within our previous guidance range.
Third Quarter 2013 Operational and Financial Highlights
· Bookings: Total consolidated bookings of $70.7 million decreased 2% compared to the year-ago period. North American Consumer segment (NA Consumer) bookings decreased 9% to $38.6 million from $42.3 million, mainly reflecting the absence of the sales from our NA kiosk channel, which was closed early in the second quarter of 2013. Excluding the kiosk channel, NA Consumer bookings were flat year-over-year. The Rest of World Consumer segment (ROW Consumer) declined 29%, primarily reflecting on-going declines in Asia, partially offset by growth in Germany. Bookings in the Global Enterprise & Education (E&E) segment increased 27% compared with a year-ago. E&E bookings include two months of results from the acquisition of Lexia Learning. Core E&E bookings, which are before Lexia and exclude de-emphasized network product increased 7% year-over-year.
· Revenue: Total revenue decreased 5% year-over-year to $60.9 million from $64.3 million. NA Consumer revenue decreased 3%, reflecting the absence of sales from the kiosk channel and softer retail channel performance, partially offset by growth in the direct-to-consumer channel. The direct-to-consumer sales channel continued to benefit from cross-selling to community members of Livemocha. Excluding kiosk, core NA Consumer revenue increased 6% year-over-year. ROW Consumer revenue decreased 28% due mainly to decreases in Japan and Korea, partially offset by growth in Germany. E&E revenue grew 4% in the third quarter compared with a year ago.
|
|
Three Months Ended |
|
|
| ||||
|
|
September 30, |
|
% |
| ||||
US$ thousands |
|
2013 |
|
2012 |
|
change |
| ||
Revenue from: |
|
|
|
|
|
|
| ||
North America Consumer |
|
$ |
38,699 |
|
$ |
39,878 |
|
-3 |
% |
Rest of World Consumer |
|
7,165 |
|
9,903 |
|
-28 |
% | ||
Total Consumer |
|
45,864 |
|
49,781 |
|
-8 |
% | ||
Global Enterprise and Education |
|
15,008 |
|
14,498 |
|
4 |
% | ||
Total |
|
$ |
60,872 |
|
$ |
64,279 |
|
-5 |
% |
· Pro Forma Adjusted EBITDA: Pro Forma Adjusted EBITDA for the third quarter decreased 129% to ($0.6) million from $2.1 million. The decline was due to the decrease in revenue, which was partially offset by lower cost of goods sold, sales & marketing and general and administrative expenses. Cost of goods sold decreased
$0.4 million due to lower revenues and mix shift to lower-cost digital offerings and lower hard-product and studio coaching costs. Sales and marketing (S&M) expenses decreased by $2.0 million. The reduction in sales and marketing expense was primarily due to the absence of NA Consumer kiosk expenses. General and administrative (G&A) expenses also decreased by $0.5 million due to continued cost control efforts even as the third quarter 2013 results included expenses from the addition of Livemocha and Lexia. Offsetting the decreases in S&M and G&A expenses was a $3.6 million increase in research and development costs, reflecting the continued investment being made in product development as well as the additional costs from the Livemocha and Lexia acquisitions. Pro Forma Adjusted EBITDA includes approximately $0.5 million of adjustments, mainly related to severance and restructuring costs.
· Pro Forma Adjusted Net Loss and Pro Forma Adjusted EPS: Pro Forma Adjusted Net Loss was $2.7 million in the third quarter of 2013, compared to Pro Forma Adjusted Net Loss of $1.3 million in the third quarter of 2012. Pro Forma Adjusted Net Loss per share was $0.12 compared to a Pro Forma Adjusted Net Loss of $0.06 per share in the prior year period.
· Balance Sheet and Cash Flow: Cash at the end of the quarter was $113.2 million, a $18.9 million decrease from $132.1 million at June 30, 2013. The decrease was mainly due to the companys acquisition of Lexia for $22.5 million, net of cash acquired, closing adjustments and holdback. The balance sheet remains strong, with no debt. Deferred revenue increased $11.0 million in the quarter to $72.6 million, including the addition of $1.2 million of deferred revenue from the acquisition of Lexia. Free cash flow in the third quarter was ($2.8) million compared with $4.5 million a year ago. The decline in free cash flow reflects the negative Pro Forma Adjusted EBITDA and a decrease in working capital, offset in part by the increase in deferred revenue versus the year ago period and an increase in capital expenditures to $2.2 million in the third quarter compared with $0.9 million a year ago.
Guidance
Based on the companys year-to-date performance and outlook for the fourth quarter, the company is revising its guidance for Pro Forma Revenue, but maintaining its other financial guidance metrics.
2013 Guidance
Pro Forma Revenue |
|
$270MM to $280MM |
|
|
|
|
|
Pro Forma Adjusted EBITDA |
|
$14MM to $17MM |
|
|
|
|
|
Pro Forma Adjusted Net Income/(Loss) |
|
$(3MM) to $0MM |
|
Pro Forma Adjusted EPS |
|
$(0.12) to $(0.01) |
|
|
|
|
|
Shares outstanding |
|
~22.0MM |
|
|
|
|
|
Capital Expenditures |
|
$5MM to $8MM |
|
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 the 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.
· Pro Forma Revenue is GAAP revenue plus the purchase accounting impact on acquired deferred revenue.
· Pro forma adjusted EBITDA is GAAP net income/(loss) plus interest income and expense, income tax benefit and expense, depreciation, amortization and stock-based compensation expenses. Pro forma adjusted EBITDA excludes any items related to the 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, plus the purchase accounting impact on acquired deferred revenue less the purchase accounting impact on acquired deferred commissions. Pro forma adjusted EBITDA for prior periods has been revised to conform to current definition.
· Pro forma adjusted net income/(loss) and pro forma 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, plus the purchase accounting impact on acquired deferred revenue less the purchase accounting impact on acquired deferred commissions. Pro forma adjusted net income/(loss) and pro forma adjusted EPS for prior periods has been revised to conform to current definition.
Management believes that these non-GAAP measures of financial results provide useful information to investors regarding certain financial and business trends relating to the Companys financial condition and results of operations. Management uses these non-GAAP measures to compare the Companys 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 Companys 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 Companys financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.
Management typically excludes the amounts described below when evaluating the Companys operating performance and believes that the resulting non-GAAP measures are useful to investors and financial analysts in assessing the Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 companys 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 companys 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 companys business outlook. The webcast will be available live on the Investor Relations page of the companys 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 companys web site http://investors.rosettastone.com after the live discussion. The replay will also be available beginning at 7:30PM ET until November 20, 2013 at 11:59 pm ET via telephone at the following numbers:
1-877-870-5176 (toll-free) or
1-858-384-5517 (toll/international)
Pass Code: 13572591
About Rosetta Stone
Rosetta Stone Inc. (NYSE: RST) is dedicated to changing the way the world learns. The companys 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 and Lexia Learning. Rosetta Stone is based in Arlington, VA, and has offices in Harrisonburg, VA, Boulder, CO, Austin, TX, San Francisco, CA, Seattle, WA, Concord, MA, Tokyo, Seoul, London, Dubai 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 companys 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 retail relationships; our plans regarding our E&E 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 business; our mergers and acquisitions plans; our plans related to Lexia and Livemocha; our ability to successfully integrate Lexia and Livemocha into our business; adverse trends in general economic conditions and the other factors described more fully in the companys filings with the U.S. Securities and Exchange Commission (SEC), including the companys 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.
Investor Contact: |
Media Contact: |
Steve Somers, CFA |
Jonathan Mudd |
ssomers@rosettastone.com |
jmudd@rosettastone.com |
703-387-5876 |
571-357-7148 |
Source: Rosetta Stone Inc.
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
(As Adjusted)* |
|
|
|
(As Adjusted)* |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
| ||||
Product |
|
$ |
34,038 |
|
$ |
42,462 |
|
$ |
107,087 |
|
$ |
127,534 |
|
Subscription and service |
|
26,834 |
|
21,817 |
|
79,847 |
|
67,006 |
| ||||
Total revenue |
|
60,872 |
|
64,279 |
|
186,934 |
|
194,540 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue: |
|
|
|
|
|
|
|
|
| ||||
Cost of product revenue |
|
7,325 |
|
7,858 |
|
21,263 |
|
24,087 |
| ||||
Cost of subscription and service revenue |
|
3,419 |
|
3,327 |
|
9,969 |
|
11,892 |
| ||||
Total cost of revenue |
|
10,744 |
|
11,185 |
|
31,232 |
|
35,979 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
50,128 |
|
53,094 |
|
155,702 |
|
158,561 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses |
|
|
|
|
|
|
|
|
| ||||
Sales and marketing |
|
34,844 |
|
36,830 |
|
104,904 |
|
110,518 |
| ||||
Research and development |
|
8,797 |
|
5,177 |
|
25,248 |
|
17,944 |
| ||||
General and administrative |
|
13,987 |
|
14,474 |
|
40,209 |
|
41,050 |
| ||||
Lease abandonment |
|
7 |
|
|
|
835 |
|
|
| ||||
Total operating expenses |
|
57,635 |
|
56,481 |
|
171,196 |
|
169,512 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loss from operations |
|
(7,507 |
) |
(3,387 |
) |
(15,494 |
) |
(10,951 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income and (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest income |
|
21 |
|
42 |
|
105 |
|
141 |
| ||||
Interest expense |
|
(9 |
) |
|
|
(54 |
) |
|
| ||||
Other income (expense) |
|
(305 |
) |
(27 |
) |
105 |
|
(71 |
) | ||||
Total other income (expense) |
|
(293 |
) |
15 |
|
156 |
|
70 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loss before income taxes |
|
(7,800 |
) |
(3,372 |
) |
(15,338 |
) |
(10,881 |
) | ||||
Income tax (benefit) provision |
|
(3,631 |
) |
28,691 |
|
(3,052 |
) |
27,739 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(4,169 |
) |
$ |
(32,063 |
) |
$ |
(12,286 |
) |
$ |
(38,620 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Net loss per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
(0.19 |
) |
$ |
(1.52 |
) |
$ |
(0.57 |
) |
$ |
(1.84 |
) |
Diluted |
|
$ |
(0.19 |
) |
$ |
(1.52 |
) |
$ |
(0.57 |
) |
$ |
(1.84 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Common shares and equivalents outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares |
|
21,827 |
|
21,073 |
|
21,587 |
|
21,004 |
| ||||
Diluted weighted average shares |
|
21,827 |
|
21,073 |
|
21,587 |
|
21,004 |
|
* Certain amounts have been adjusted for the restrospective change in accounting principle for sales commissions.
ROSETTA STONE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
|
|
September 30, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
(As Adjusted)* |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
113,104 |
|
$ |
148,190 |
|
Restricted cash |
|
82 |
|
73 |
| ||
Accounts receivable (net of allowance for doubtful accounts of $1,182 and $1,297, respectively) |
|
46,339 |
|
49,946 |
| ||
Inventory |
|
7,038 |
|
6,581 |
| ||
Prepaid expenses and other current assets |
|
10,391 |
|
8,651 |
| ||
Income tax receivable |
|
648 |
|
1,104 |
| ||
Deferred income taxes |
|
79 |
|
30 |
| ||
Total current assets |
|
177,681 |
|
214,575 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
|
18,029 |
|
17,213 |
| ||
Goodwill |
|
49,972 |
|
34,896 |
| ||
Intangible assets, net |
|
29,801 |
|
10,825 |
| ||
Deferred income taxes |
|
218 |
|
257 |
| ||
Other assets |
|
3,225 |
|
1,680 |
| ||
Total assets |
|
$ |
278,926 |
|
$ |
279,446 |
|
|
|
|
|
|
| ||
Liabilities and stockholders equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
7,588 |
|
$ |
6,064 |
|
Accrued compensation |
|
13,094 |
|
16,830 |
| ||
Other current liabilities |
|
30,482 |
|
36,387 |
| ||
Deferred revenue |
|
62,168 |
|
59,195 |
| ||
Total current liabilities |
|
113,332 |
|
118,476 |
| ||
|
|
|
|
|
| ||
Deferred revenue |
|
10,463 |
|
4,221 |
| ||
Deferred income taxes |
|
9,251 |
|
8,400 |
| ||
Other long-term liabilities |
|
2,627 |
|
155 |
| ||
Total liabilities |
|
135,673 |
|
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 September 30, 2013 and December 31, 2012, respectively |
|
|
|
|
| ||
Non-designated common stock, $0.00005 par value, 190,000 and 190,000 shares authorized, 22,650 and 21,951 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively |
|
2 |
|
2 |
| ||
Additional paid-in capital |
|
168,026 |
|
160,693 |
| ||
Accumulated loss |
|
(25,444 |
) |
(13,158 |
) | ||
Accumulated other comprehensive income |
|
669 |
|
657 |
| ||
Total stockholders equity |
|
143,253 |
|
148,194 |
| ||
Total liabilities and stockholders equity |
|
$ |
278,926 |
|
$ |
279,446 |
|
* Certain amounts have been adjusted for the restrospective change in accounting principle for sales commissions.
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
(As Adjusted)* |
|
|
|
(As Adjusted)* |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(4,169 |
) |
$ |
(32,063 |
) |
$ |
(12,286 |
) |
$ |
(38,620 |
) |
Adjustments to reconcile net loss to cash (used in) provided by operating activities, net of business acquisitions |
|
|
|
|
|
|
|
|
| ||||
Stock-based compensation expense |
|
2,525 |
|
2,477 |
|
6,229 |
|
6,208 |
| ||||
Bad debt expense |
|
455 |
|
739 |
|
682 |
|
1,335 |
| ||||
Depreciation and amortization |
|
2,409 |
|
1,748 |
|
7,005 |
|
6,230 |
| ||||
Deferred income tax provision (benefit) |
|
(3,904 |
) |
27,052 |
|
(4,527 |
) |
25,846 |
| ||||
Loss on disposal of equipment |
|
41 |
|
372 |
|
246 |
|
752 |
| ||||
Net change in: |
|
|
|
|
|
|
|
|
| ||||
Restricted cash |
|
(18 |
) |
(13 |
) |
(9 |
) |
15 |
| ||||
Accounts receivable |
|
(2,338 |
) |
(5,165 |
) |
5,672 |
|
11,149 |
| ||||
Inventory |
|
(1,058 |
) |
(479 |
) |
(506 |
) |
1 |
| ||||
Prepaid expenses and other current assets |
|
1,150 |
|
(128 |
) |
(1,593 |
) |
662 |
| ||||
Income tax receivable |
|
(420 |
) |
660 |
|
391 |
|
(2,080 |
) | ||||
Other assets |
|
(1,703 |
) |
968 |
|
(1,662 |
) |
(78 |
) | ||||
Accounts payable |
|
(1,986 |
) |
2,491 |
|
961 |
|
(377 |
) | ||||
Accrued compensation |
|
(2,621 |
) |
(298 |
) |
(4,180 |
) |
1,476 |
| ||||
Other current liabilities |
|
1,704 |
|
1,123 |
|
(8,092 |
) |
(6,690 |
) | ||||
Excess tax benefit from stock options exercised |
|
|
|
18 |
|
|
|
|
| ||||
Other long-term liabilities |
|
(7 |
) |
(1,640 |
) |
329 |
|
(44 |
) | ||||
Deferred revenue |
|
9,353 |
|
7,562 |
|
7,606 |
|
5,707 |
| ||||
Net cash (used in) provided by operating activities |
|
(587 |
) |
5,424 |
|
(3,734 |
) |
11,492 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
| ||||
Purchases of property and equipment |
|
(2,203 |
) |
(941 |
) |
(6,415 |
) |
(2,939 |
) | ||||
Proceeds from (purchases of) available-for-sale securities |
|
|
|
1,599 |
|
|
|
9,711 |
| ||||
Acquisitions, net of cash acquired |
|
(17,495 |
) |
|
|
(25,675 |
) |
|
| ||||
Net cash (used in) provided by investing activities |
|
(19,698 |
) |
658 |
|
(32,090 |
) |
6,772 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
| ||||
Proceeds from the exercise of stock options |
|
581 |
|
830 |
|
2,379 |
|
830 |
| ||||
Repurchase of shares from exercised stock options |
|
|
|
|
|
(1,040 |
) |
|
| ||||
Tax benefit of stock options exercised |
|
|
|
(18 |
) |
|
|
|
| ||||
Proceeds from equity offering, net of issuance costs |
|
(57 |
) |
|
|
(228 |
) |
|
| ||||
Payments under capital lease obligations |
|
(17 |
) |
(2 |
) |
(213 |
) |
(5 |
) | ||||
Net cash provided by financing activities |
|
507 |
|
810 |
|
898 |
|
825 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
(Decrease) increase in cash and cash equivalents |
|
(19,778 |
) |
6,892 |
|
(34,926 |
) |
19,089 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Effect of exchange rate changes in cash and cash equivalents |
|
812 |
|
380 |
|
(160 |
) |
441 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net (decrease) increase in cash and cash equivalents |
|
(18,966 |
) |
7,272 |
|
(35,086 |
) |
19,530 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalentsbeginning of period |
|
132,070 |
|
118,774 |
|
148,190 |
|
106,516 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalentsend of period |
|
$ |
113,104 |
|
$ |
126,046 |
|
$ |
113,104 |
|
$ |
126,046 |
|
* Certain amounts have been adjusted for the restrospective change in accounting principle for sales commissions.
ROSETTA STONE INC.
Reconciliation of GAAP Net Loss to Adjusted EBITDA and Pro Forma Adjusted EBITDA
(in thousands)
(unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
(As Adjusted)* |
|
|
|
(As Adjusted)* |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
GAAP net loss |
|
$ |
(4,169 |
) |
$ |
(32,063 |
) |
$ |
(12,286 |
) |
$ |
(38,620 |
) |
Interest (income)/expense, net |
|
(12 |
) |
(42 |
) |
(51 |
) |
(141 |
) | ||||
Income tax (benefit) expense |
|
(3,631 |
) |
28,691 |
|
(3,052 |
) |
27,739 |
| ||||
Depreciation and amortization |
|
2,414 |
|
1,748 |
|
6,338 |
|
6,230 |
| ||||
Depreciation related to restructuring |
|
(5 |
) |
|
|
667 |
|
|
| ||||
Stock-based compensation |
|
2,525 |
|
2,477 |
|
6,229 |
|
6,208 |
| ||||
Other EBITDA adjustments |
|
565 |
|
1,299 |
|
5,178 |
|
3,392 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Adjusted EBITDA** |
|
$ |
(2,313 |
) |
$ |
2,110 |
|
$ |
3,023 |
|
$ |
4,808 |
|
Purchase accounting impact on acquired deferred revenue |
|
2,906 |
|
|
|
3,217 |
|
|
| ||||
Purchase accounting impact on acquired deferred commissions |
|
(1,211 |
) |
|
|
(1,211 |
) |
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Pro Forma Adjusted EBITDA*** |
|
$ |
(618 |
) |
$ |
2,110 |
|
$ |
5,029 |
|
$ |
4,808 |
|
* Certain amounts have been adjusted for the restrospective 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 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.
*** Pro Forma Adjusted EBITDA is Adjusted EBITDA plus the purchase accounting impact on acquired deferred revenue less the purchase accounting impact on acquired deferred commissions.
ROSETTA STONE INC.
Reconciliation of GAAP Net Loss to Adjusted Net Loss and Pro Forma Adjusted Net Loss
(in thousands, except per share amounts)
(unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
(As Adjusted) * |
|
|
|
(As Adjusted) * |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
GAAP net loss |
|
$ |
(4,169 |
) |
$ |
(32,063 |
) |
$ |
(12,286 |
) |
$ |
(38,620 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items related to litigation with Google Inc., restructuring and other related costs, and acquisition costs |
|
560 |
|
1,299 |
|
5,845 |
|
3,392 |
| ||||
Income tax adjustments ** |
|
(807 |
) |
29,499 |
|
650 |
|
30,660 |
| ||||
Adjusted net loss *** |
|
$ |
(4,416 |
) |
$ |
(1,265 |
) |
$ |
(5,791 |
) |
$ |
(4,568 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Purchase accounting impact on acquired deferred revenue |
|
2,906 |
|
|
|
3,217 |
|
|
| ||||
Purchase accounting impact on acquired deferred commissions |
|
(1,211 |
) |
|
|
(1,211 |
) |
|
| ||||
Pro forma adjusted net loss **** |
|
$ |
(2,721 |
) |
$ |
(1,265 |
) |
$ |
(3,785 |
) |
$ |
(4,568 |
) |
|
|
|
|
|
|
|
|
|
| ||||
GAAP net loss per share |
|
$ |
(0.19 |
) |
$ |
(1.52 |
) |
$ |
(0.57 |
) |
$ |
(1.84 |
) |
Items related to litigation with Google Inc. restructuring and other related costs |
|
0.03 |
|
0.06 |
|
0.27 |
|
0.16 |
| ||||
Income tax adjustments ** |
|
(0.04 |
) |
1.40 |
|
0.03 |
|
1.46 |
| ||||
Adjusted net loss per share *** |
|
$ |
(0.20 |
) |
$ |
(0.06 |
) |
$ |
(0.27 |
) |
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Purchase accounting impact on acquired deferred revenue |
|
0.13 |
|
|
|
0.15 |
|
|
| ||||
Purchase accounting impact on acquired deferred commissions |
|
(0.06 |
) |
|
|
(0.06 |
) |
|
| ||||
Pro forma adjusted net loss per share **** |
|
$ |
(0.12 |
) |
$ |
(0.06 |
) |
$ |
(0.18 |
) |
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares |
|
21,827 |
|
21,073 |
|
21,587 |
|
21,004 |
| ||||
Diluted weighted average shares |
|
21,827 |
|
21,073 |
|
21,587 |
|
21,004 |
|
* Certain amounts have beeen adjusted for the restrospective change in accounting principle for sales commissions.
** For adjusted net income (loss) and pro forma 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.
**** Pro forma adjusted net loss and pro forma adjusted net loss per share are adjusted net loss and adjusted net loss per share plus the purchase accounting impact on acquired deferred revenue less the purchase accounting impact on acquired deferred commissions.
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 |
|
6/30/13 |
|
9/30/13 |
|
Net Bookings by Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Consumer |
|
29,814 |
|
36,828 |
|
35,562 |
|
55,209 |
|
157,413 |
|
41,733 |
|
37,295 |
|
42,283 |
|
57,870 |
|
179,181 |
|
41,303 |
|
39,321 |
|
38,629 |
|
Rest of World Consumer |
|
14,996 |
|
12,910 |
|
11,945 |
|
14,166 |
|
54,017 |
|
12,550 |
|
8,113 |
|
10,488 |
|
10,034 |
|
41,185 |
|
8,310 |
|
6,879 |
|
7,471 |
|
Worldwide Consumer |
|
44,810 |
|
49,738 |
|
47,507 |
|
69,375 |
|
211,430 |
|
54,283 |
|
45,408 |
|
52,771 |
|
67,904 |
|
220,366 |
|
49,613 |
|
46,200 |
|
46,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Enterprise and Education |
|
10,770 |
|
16,973 |
|
18,555 |
|
15,459 |
|
61,757 |
|
10,984 |
|
17,635 |
|
19,354 |
|
16,423 |
|
64,396 |
|
10,758 |
|
16,883 |
|
24,594 |
|
Total |
|
55,580 |
|
66,711 |
|
66,062 |
|
84,834 |
|
273,187 |
|
65,267 |
|
63,043 |
|
72,125 |
|
84,327 |
|
284,762 |
|
60,371 |
|
63,083 |
|
70,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YoY Growth (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Consumer |
|
-28 |
% |
-5 |
% |
-14 |
% |
6 |
% |
-9 |
% |
40 |
% |
1 |
% |
19 |
% |
5 |
% |
14 |
% |
-1 |
% |
5 |
% |
-9 |
% |
Rest of World Consumer |
|
50 |
% |
58 |
% |
21 |
% |
-7 |
% |
25 |
% |
-16 |
% |
-37 |
% |
-12 |
% |
-29 |
% |
-24 |
% |
-34 |
% |
-15 |
% |
-29 |
% |
Worldwide Consumer |
|
-13 |
% |
6 |
% |
-7 |
% |
3 |
% |
-3 |
% |
21 |
% |
-9 |
% |
11 |
% |
-2 |
% |
4 |
% |
-9 |
% |
2 |
% |
-13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Enterprise and Education |
|
18 |
% |
-1 |
% |
-17 |
% |
7 |
% |
-2 |
% |
2 |
% |
4 |
% |
4 |
% |
6 |
% |
4 |
% |
-2 |
% |
-4 |
% |
27 |
% |
Total |
|
-9 |
% |
4 |
% |
-10 |
% |
4 |
% |
-2 |
% |
17 |
% |
-5 |
% |
9 |
% |
-1 |
% |
4 |
% |
-8 |
% |
0 |
% |
-2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total Net Bookings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Consumer |
|
54 |
% |
55 |
% |
54 |
% |
65 |
% |
57 |
% |
64 |
% |
59 |
% |
59 |
% |
69 |
% |
63 |
% |
68 |
% |
62 |
% |
55 |
% |
Rest of World Consumer |
|
27 |
% |
20 |
% |
18 |
% |
17 |
% |
20 |
% |
19 |
% |
13 |
% |
14 |
% |
12 |
% |
14 |
% |
14 |
% |
11 |
% |
14 |
% |
Worldwide Consumer |
|
81 |
% |
75 |
% |
72 |
% |
82 |
% |
77 |
% |
83 |
% |
72 |
% |
73 |
% |
81 |
% |
77 |
% |
82 |
% |
73 |
% |
65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Enterprise and Education |
|
19 |
% |
25 |
% |
28 |
% |
18 |
% |
23 |
% |
17 |
% |
28 |
% |
27 |
% |
19 |
% |
23 |
% |
18 |
% |
27 |
% |
35 |
% |
Total |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Consumer |
|
28,061 |
|
38,606 |
|
37,710 |
|
53,184 |
|
157,561 |
|
43,084 |
|
36,918 |
|
39,878 |
|
52,946 |
|
172,826 |
|
41,385 |
|
39,934 |
|
38,699 |
|
Rest of World Consumer |
|
14,601 |
|
12,014 |
|
11,002 |
|
12,848 |
|
50,465 |
|
12,204 |
|
8,053 |
|
9,903 |
|
10,088 |
|
40,248 |
|
8,570 |
|
7,478 |
|
7,165 |
|
Worldwide Consumer |
|
42,662 |
|
50,620 |
|
48,712 |
|
66,032 |
|
208,026 |
|
55,288 |
|
44,971 |
|
49,781 |
|
63,034 |
|
213,074 |
|
49,955 |
|
47,412 |
|
45,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Enterprise and Education |
|
14,316 |
|
16,123 |
|
15,490 |
|
14,494 |
|
60,423 |
|
14,161 |
|
15,841 |
|
14,498 |
|
15,667 |
|
60,167 |
|
13,969 |
|
14,727 |
|
15,008 |
|
Total |
|
56,978 |
|
66,743 |
|
64,202 |
|
80,526 |
|
268,449 |
|
69,449 |
|
60,812 |
|
64,279 |
|
78,701 |
|
273,241 |
|
63,924 |
|
62,139 |
|
60,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YoY Growth (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Consumer |
|
-32 |
% |
0 |
% |
2 |
% |
19 |
% |
-2 |
% |
54 |
% |
-4 |
% |
6 |
% |
0 |
% |
10 |
% |
-4 |
% |
8 |
% |
-3 |
% |
Rest of World Consumer |
|
49 |
% |
57 |
% |
13 |
% |
-17 |
% |
18 |
% |
-16 |
% |
-33 |
% |
-10 |
% |
-21 |
% |
-20 |
% |
-30 |
% |
-7 |
% |
-28 |
% |
Worldwide Consumer |
|
-17 |
% |
9 |
% |
5 |
% |
10 |
% |
2 |
% |
30 |
% |
-11 |
% |
2 |
% |
-5 |
% |
2 |
% |
-10 |
% |
5 |
% |
-8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Enterprise and Education |
|
21 |
% |
13 |
% |
8 |
% |
2 |
% |
11 |
% |
-1 |
% |
-2 |
% |
-6 |
% |
8 |
% |
0 |
% |
-1 |
% |
-7 |
% |
4 |
% |
Total |
|
-10 |
% |
10 |
% |
5 |
% |
8 |
% |
4 |
% |
22 |
% |
-9 |
% |
0 |
% |
-2 |
% |
2 |
% |
-8 |
% |
2 |
% |
-5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Consumer |
|
49 |
% |
58 |
% |
59 |
% |
66 |
% |
58 |
% |
62 |
% |
61 |
% |
62 |
% |
67 |
% |
63 |
% |
65 |
% |
64 |
% |
64 |
% |
Rest of World Consumer |
|
26 |
% |
18 |
% |
17 |
% |
16 |
% |
19 |
% |
18 |
% |
13 |
% |
15 |
% |
13 |
% |
15 |
% |
13 |
% |
12 |
% |
12 |
% |
Worldwide Consumer |
|
75 |
% |
76 |
% |
76 |
% |
82 |
% |
77 |
% |
80 |
% |
74 |
% |
77 |
% |
80 |
% |
78 |
% |
78 |
% |
76 |
% |
75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Enterprise and Education |
|
25 |
% |
24 |
% |
24 |
% |
18 |
% |
23 |
% |
20 |
% |
26 |
% |
23 |
% |
20 |
% |
22 |
% |
22 |
% |
24 |
% |
25 |
% |
Total |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
6/30/13 |
|
9/30/13 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Unit Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Product Unit Volume (thousands) |
|
108.5 |
|
140.0 |
|
134.3 |
|
202.9 |
|
585.8 |
|
143.0 |
|
129.7 |
|
146.5 |
|
210.7 |
|
629.8 |
|
141.8 |
|
148.6 |
|
157.7 |
| |||||||||||||
Paid Online Learners (thousands) |
|
16.4 |
|
17.1 |
|
21.5 |
|
26.6 |
|
26.6 |
|
41.2 |
|
48.7 |
|
57.4 |
|
68.4 |
|
68.4 |
|
80.6 |
|
85.1 |
|
88.6 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
YoY Growth (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Product Units |
|
-14 |
% |
24 |
% |
14 |
% |
20 |
% |
11 |
% |
32 |
% |
-7 |
% |
9 |
% |
4 |
% |
8 |
% |
-1 |
% |
15 |
% |
8 |
% | |||||||||||||
Paid Online Learners |
|
30 |
% |
20 |
% |
21 |
% |
58 |
% |
58 |
% |
151 |
% |
185 |
% |
167 |
% |
157 |
% |
157 |
% |
95 |
% |
75 |
% |
54 |
% | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Average Net Revenue Per Unit ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Average Net Revenue per Product Unit |
|
$ |
379 |
|
$ |
349 |
|
$ |
346 |
|
$ |
313 |
|
$ |
341 |
|
$ |
367 |
|
$ |
319 |
|
$ |
313 |
|
$ |
277 |
|
$ |
315 |
|
$ |
312 |
|
$ |
275 |
|
$ |
250 |
|
Average Net Revenue per Online Learner (monthly) |
|
$ |
30 |
|
$ |
34 |
|
$ |
39 |
|
$ |
36 |
|
$ |
35 |
|
$ |
28 |
|
$ |
27 |
|
$ |
24 |
|
$ |
24 |
|
$ |
26 |
|
$ |
26 |
|
$ |
25 |
|
$ |
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
YoY Growth (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Average Net Revenue per Product Unit |
|
-4 |
% |
-12 |
% |
-9 |
% |
-9 |
% |
-9 |
% |
-3 |
% |
-9 |
% |
-9 |
% |
-11 |
% |
-8 |
% |
-15 |
% |
-14 |
% |
-20 |
% | |||||||||||||
Average Net Revenue per Online Learner |
|
-10 |
% |
-2 |
% |
10 |
% |
3 |
% |
0 |
% |
-6 |
% |
-22 |
% |
-37 |
% |
-32 |
% |
-25 |
% |
-7 |
% |
-6 |
% |
-1 |
% | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
# 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 |
|
20 |
|
9 |
| |||||||||||||
Total # of Kiosks (end of period) |
|
237 |
|
209 |
|
197 |
|
174 |
|
174 |
|
102 |
|
99 |
|
97 |
|
87 |
|
87 |
|
78 |
|
20 |
|
9 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
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 |
|
52,163 |
|
51,013 |
| |||||||||||||
International |
|
15,707 |
|
13,325 |
|
12,494 |
|
14,801 |
|
56,327 |
|
14,535 |
|
10,002 |
|
12,112 |
|
12,845 |
|
49,494 |
|
11,133 |
|
9,976 |
|
9,859 |
| |||||||||||||
Total |
|
56,978 |
|
66,743 |
|
64,202 |
|
80,526 |
|
268,449 |
|
69,449 |
|
60,812 |
|
64,279 |
|
78,701 |
|
273,241 |
|
63,924 |
|
62,139 |
|
60,872 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Revenues by Geography (as a %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
United States |
|
72 |
% |
80 |
% |
81 |
% |
82 |
% |
79 |
% |
79 |
% |
84 |
% |
81 |
% |
84 |
% |
82 |
% |
83 |
% |
84 |
% |
84 |
% | |||||||||||||
International |
|
28 |
% |
20 |
% |
19 |
% |
18 |
% |
21 |
% |
21 |
% |
16 |
% |
19 |
% |
16 |
% |
18 |
% |
17 |
% |
16 |
% |
16 |
% | |||||||||||||
Total |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
ROSETTA STONE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - AS RESTATED
(in thousands)
(unaudited)
|
|
As of December 31, 2012 |
|
As of March 31, 2013 |
|
As of June 30, 2013 |
|
As of September 30, 2013 |
| ||||||||||||||||||||||||||||
|
|
As Previously |
|
Impact of |
|
As Adjusted * |
|
As Previously |
|
Impact of |
|
As Adjusted * |
|
As Previously |
|
Impact of |
|
As Adjusted * |
|
Computed under |
|
Impact of |
|
As Adjusted * |
| ||||||||||||
Prepaid expenses and other current assets |
|
$ |
5,204 |
|
$ |
3,447 |
|
$ |
8,651 |
|
$ |
7,722 |
|
$ |
3,333 |
|
$ |
11,055 |
|
$ |
7,788 |
|
$ |
3,622 |
|
$ |
11,410 |
|
$ |
6,457 |
|
$ |
3,934 |
|
$ |
10,391 |
|
Deferred income taxes (current) |
|
$ |
79 |
|
$ |
(49 |
) |
$ |
30 |
|
$ |
75 |
|
$ |
(44 |
) |
$ |
31 |
|
$ |
136 |
|
$ |
(57 |
) |
$ |
79 |
|
$ |
141 |
|
$ |
(62 |
) |
$ |
79 |
|
Total current assets |
|
$ |
211,177 |
|
$ |
3,398 |
|
$ |
214,575 |
|
$ |
193,869 |
|
$ |
3,289 |
|
$ |
197,158 |
|
$ |
187,986 |
|
$ |
3,565 |
|
$ |
191,551 |
|
$ |
173,809 |
|
$ |
3,872 |
|
$ |
177,681 |
|
Other assets |
|
$ |
1,484 |
|
$ |
196 |
|
$ |
1,680 |
|
$ |
1,389 |
|
$ |
97 |
|
$ |
1,486 |
|
$ |
1,335 |
|
$ |
165 |
|
$ |
1,500 |
|
$ |
3,060 |
|
$ |
165 |
|
$ |
3,225 |
|
Deferred income taxes (non-current) |
|
$ |
260 |
|
$ |
(3 |
) |
$ |
257 |
|
$ |
250 |
|
$ |
|
|
$ |
250 |
|
$ |
210 |
|
$ |
|
|
$ |
210 |
|
$ |
221 |
|
$ |
(3 |
) |
$ |
218 |
|
Total assets |
|
$ |
275,855 |
|
$ |
3,591 |
|
$ |
279,446 |
|
$ |
258,290 |
|
$ |
3,386 |
|
$ |
261,676 |
|
$ |
262,335 |
|
$ |
3,730 |
|
$ |
266,065 |
|
$ |
274,892 |
|
$ |
4,034 |
|
$ |
278,926 |
|
Accumulated loss |
|
$ |
(16,749 |
) |
$ |
3,591 |
|
$ |
(13,158 |
) |
$ |
(21,449 |
) |
$ |
3,386 |
|
$ |
(18,063 |
) |
$ |
(25,006 |
) |
$ |
3,730 |
|
$ |
(21,276 |
) |
$ |
(29,478 |
) |
$ |
4,034 |
|
$ |
(25,444 |
) |
Total stockholders equity |
|
$ |
144,603 |
|
$ |
3,591 |
|
$ |
148,194 |
|
$ |
141,440 |
|
$ |
3,386 |
|
$ |
144,826 |
|
$ |
140,274 |
|
$ |
3,730 |
|
$ |
144,004 |
|
$ |
139,219 |
|
$ |
4,034 |
|
$ |
143,253 |
|
Total liabilities and stockholders equity |
|
$ |
275,855 |
|
$ |
3,591 |
|
$ |
279,446 |
|
$ |
258,290 |
|
$ |
3,386 |
|
$ |
261,676 |
|
$ |
262,335 |
|
$ |
3,730 |
|
$ |
266,065 |
|
$ |
274,892 |
|
$ |
4,034 |
|
$ |
278,926 |
|
* Certain amounts have been adjusted for the restrospective change in accounting principle for sales commissions.
ROSETTA STONE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - AS RESTATED
(in thousands, except per share amounts)
(unaudited)
|
|
Three Months Ended March 31, 2012 |
|
Three Months Ended June 30, 2012 |
|
Three Months Ended September 30, 2012 |
| |||||||||||||||||||||
|
|
As Previously |
|
Impact of |
|
As Adjusted * |
|
As Previously |
|
Impact of |
|
As Adjusted * |
|
As Previously |
|
Impact of |
|
As Adjusted * |
| |||||||||
Sales and marketing |
|
$ |
38,404 |
|
$ |
166 |
|
$ |
38,570 |
|
$ |
35,125 |
|
$ |
(6 |
) |
$ |
35,119 |
|
$ |
37,113 |
|
$ |
(283 |
) |
$ |
36,830 |
|
Income (loss) from operations |
|
$ |
(2,359 |
) |
$ |
(166 |
) |
$ |
(2,525 |
) |
$ |
(5,045 |
) |
$ |
6 |
|
$ |
(5,039 |
) |
$ |
(3,670 |
) |
$ |
283 |
|
$ |
(3,387 |
) |
Income tax provisions (benefit) |
|
$ |
(742 |
) |
$ |
(66 |
) |
$ |
(808 |
) |
$ |
(160 |
) |
$ |
16 |
|
$ |
(144 |
) |
$ |
29,735 |
|
$ |
(1,044 |
) |
$ |
28,691 |
|
Net income (loss) |
|
$ |
(1,903 |
) |
$ |
(100 |
) |
$ |
(2,003 |
) |
$ |
(4,544 |
) |
$ |
(10 |
) |
$ |
(4,554 |
) |
$ |
(33,390 |
) |
$ |
1,327 |
|
$ |
(32,063 |
) |
Basic net income (loss) per share |
|
$ |
(0.09 |
) |
$ |
(0.01 |
) |
$ |
(0.10 |
) |
$ |
(0.22 |
) |
$ |
0.00 |
|
$ |
(0.22 |
) |
$ |
(1.58 |
) |
$ |
0.06 |
|
$ |
(1.52 |
) |
Diluted net income (loss) per share |
|
$ |
(0.09 |
) |
$ |
(0.01 |
) |
$ |
(0.10 |
) |
$ |
(0.22 |
) |
$ |
0.00 |
|
$ |
(0.22 |
) |
$ |
(1.58 |
) |
$ |
0.06 |
|
$ |
(1.52 |
) |
Shares used in computing basic net income (loss) per share |
|
20,942 |
|
|
|
20,942 |
|
20,995 |
|
|
|
20,995 |
|
21,073 |
|
|
|
21,073 |
| |||||||||
Shares used in computing diluted net income (loss) per share |
|
20,942 |
|
|
|
20,942 |
|
20,995 |
|
|
|
20,995 |
|
21,073 |
|
|
|
21,073 |
|
|
|
Three Months Ended December 31, 2012 |
|
Twelve Months Ended December 31, 2012 |
|
|
| ||||||||||||||||||
|
|
As Previously |
|
Impact of |
|
As Adjusted |
|
As Previously |
|
Impact of |
|
As Adjusted |
|
|
|
|
|
|
| ||||||
Sales and marketing |
|
$ |
41,005 |
|
$ |
(641 |
) |
$ |
40,364 |
|
$ |
151,647 |
|
$ |
(764 |
) |
$ |
150,883 |
|
|
|
|
|
|
|
Income (loss) from operations |
|
$ |
5,044 |
|
$ |
641 |
|
$ |
5,685 |
|
$ |
(6,030 |
) |
$ |
764 |
|
$ |
(5,266 |
) |
|
|
|
|
|
|
Income tax provisions (benefit) |
|
$ |
1,158 |
|
$ |
12 |
|
$ |
1,170 |
|
$ |
29,991 |
|
$ |
(1,082 |
) |
$ |
28,909 |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
4,006 |
|
$ |
629 |
|
$ |
4,635 |
|
$ |
(35,831 |
) |
$ |
1,846 |
|
$ |
(33,985 |
) |
|
|
|
|
|
|
Basic net income (loss) per share |
|
$ |
0.19 |
|
$ |
0.03 |
|
$ |
0.22 |
|
$ |
(1.70 |
) |
$ |
0.09 |
|
$ |
(1.61 |
) |
|
|
|
|
|
|
Diluted net income (loss) per share |
|
$ |
0.18 |
|
$ |
0.03 |
|
$ |
0.21 |
|
$ |
(1.70 |
) |
$ |
0.09 |
|
$ |
(1.61 |
) |
|
|
|
|
|
|
Shares used in computing basic net income (loss) per share |
|
21,166 |
|
|
|
21,166 |
|
21,045 |
|
|
|
21,045 |
|
|
|
|
|
|
| ||||||
Shares used in computing diluted net income (loss) per share |
|
21,828 |
|
|
|
21,828 |
|
21,045 |
|
|
|
21,045 |
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013 |
|
Three Months Ended June 30, 2013 |
|
Three Months Ended September 30, 2013 |
| |||||||||||||||||||||
|
|
As Previously |
|
Impact of |
|
As Adjusted |
|
As Previously |
|
Impact of |
|
As Adjusted |
|
Computed under |
|
Impact of |
|
As Reported |
| |||||||||
Sales and marketing |
|
$ |
37,060 |
|
$ |
213 |
|
$ |
37,273 |
|
$ |
33,144 |
|
$ |
(357 |
) |
$ |
32,787 |
|
$ |
35,156 |
|
$ |
(312 |
) |
$ |
34,844 |
|
Income (loss) from operations |
|
$ |
(4,138 |
) |
$ |
(213 |
) |
$ |
(4,351 |
) |
$ |
(3,991 |
) |
$ |
357 |
|
$ |
(3,634 |
) |
$ |
(7,819 |
) |
$ |
312 |
|
$ |
(7,507 |
) |
Income tax provisions (benefit) |
|
$ |
977 |
|
$ |
(9 |
) |
$ |
968 |
|
$ |
(400 |
) |
$ |
13 |
|
$ |
(387 |
) |
$ |
(3,640 |
) |
$ |
9 |
|
$ |
(3,631 |
) |
Net income (loss) |
|
$ |
(4,700 |
) |
$ |
(204 |
) |
$ |
(4,904 |
) |
$ |
(3,557 |
) |
$ |
344 |
|
$ |
(3,213 |
) |
$ |
(4,472 |
) |
$ |
303 |
|
$ |
(4,169 |
) |
Basic net income (loss) per share |
|
$ |
(0.22 |
) |
$ |
(0.01 |
) |
$ |
(0.23 |
) |
$ |
(0.16 |
) |
$ |
0.01 |
|
$ |
(0.15 |
) |
$ |
(0.20 |
) |
$ |
0.01 |
|
$ |
(0.19 |
) |
Diluted net income (loss) per share |
|
$ |
(0.22 |
) |
$ |
(0.01 |
) |
$ |
(0.23 |
) |
$ |
(0.16 |
) |
$ |
0.01 |
|
$ |
(0.15 |
) |
$ |
(0.20 |
) |
$ |
0.01 |
|
$ |
(0.19 |
) |
Shares used in computing basic net income (loss) per share |
|
21,360 |
|
|
|
21,360 |
|
21,569 |
|
|
|
21,569 |
|
21,827 |
|
|
|
21,827 |
| |||||||||
Shares used in computing diluted net income (loss) per share |
|
21,360 |
|
|
|
21,360 |
|
21,569 |
|
|
|
21,569 |
|
21,827 |
|
|
|
21,827 |
|
* Certain amounts have been adjusted for the restrospective change in accounting principle for sales commissions.