Rosetta Stone Inc. (NYSE:RST), a leading provider of technology-based
language-learning solutions, today announced financial results for the
third quarter 2012, as summarized below:
1Definitions and reconciliations for all non-GAAP measures
are provided in this press release.2 Excludes impact of
legal expenses related to the lawsuit against Google, Inc. and all
adjustments related to recording a non-cash tax valuation allowance for
deferred tax assets.
Steve Swad, President and Chief Executive Officer of Rosetta Stone,
said, "We had a good third quarter with bookings up 9% year-over-year
with double-digit growth in our consumer business and single-digit
growth in our institutional business. We also did a better job managing
our expenses and we made progress shifting the business online with over
57,000 consumer Online Learners and over 80% of our institutional
business online." Swad added, "We grew consumer Online Learners by 115%
since the beginning of the year and by 167% versus this time last year.
We operated more efficiently and lowered expenses, including reducing
our kiosk expenses and lowering our international media spend which
allowed us to deliver Adjusted EBITDA of $1.8 million, more than double
the $1.8 million loss a year ago."
Third Quarter 2012 Operational and Financial Highlights
The company is providing the following update to its guidance for the
full year 2012:
*Adjusted EBITDA excludes legal expenses related to the lawsuit
against Google Inc. and any restructuring costs.
**Adjusted net loss and Adjusted net loss per share exclude the
impact of legal expenses related to the lawsuit against Google, Inc. and
all adjustments related to recording the non-cash tax valuation
allowance for deferred tax assets.
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 expenses
related to the lawsuit against Google Inc., and any restructuring costs.
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 legal expenses related to its lawsuit against Google, Inc.
and 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
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
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.
This news release and the accompanying tables should be read in
conjunction with the additional content that is available on the
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
1-877-407-4018 (toll-free) or
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 November 21, 2012 via telephone at the following
1-877-870-5176 (toll-free) or
Pass Code: 403092
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 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,
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," "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 software; 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; 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 expansion 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 stabilize our
business in the U.S. consumer market including realigning our cost
structure and revitalizing our go-to-market strategy; our plans to
transition our distribution to more online in the consumer space;
adverse trends in general economic conditions and the other factors
described more fully in the company's filings with the U.S. Securities
and Exchange Commission (SEC), including the company's annual report on
Form 10-K for the fiscal year ended December 31, 2011, which is on file
with the SEC. The company assumes no obligation to update the
information in this communication, except as otherwise required by law.
Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date hereof.
Accounts receivable (net of allowance for doubtful accounts of
$1,299 and $1,951, respectively)
Preferred stock, $0.001 par value; 10,000 and 10,000 authorized;
zero and zero shares issued and outstanding September 30, 2012 and
December 31, 2011, respectively
Non-designated common stock, $0.00005 par value, 190,000 and
190,000 shares authorized, 21,839 and 21,258 shares issued and
outstanding at September 30, 2012 and December 31, 2011,
Adjustments to reconcile net loss to cash provided by (used in)
*Adjusted EBITDA equals GAAP net income or loss plus interest income and
expense, income tax benefit and expense, depreciation, amortization,
stock-based compensation expenses, restructuring costs and any expenses
related to the previously disclosed lawsuit against Google, Inc.Prior
period Adjusted EBITDA has been conformed to current definition.
*Adjusted Net Loss equals GAAP net loss adjusted for expenses related to
the lawsuit against Google, Inc. and all impacts related to recording
the valuation allowance.
Net Bookings by Market
Revenue by Market
Consumer Revenue by Channel
# of Kiosks (end of period)
Revenues by Geography
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