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

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

US$ thousands		Three Months Ended									Year Ended
except per-share data		December 31,						%			December 31,						%
		2012			2011			change			2012			2011			change
Total revenue		$78,701			$80,527			-2	%		$273,241			$268,449			2	%
Total bookings		$84,327			$84,834			-1	%		$284,762			$273,187			4	%
Net income/(loss)		$4,006			($4,979	)		180	%		($35,831	)		($19,988	)		-79	%
Net income/(loss) per share:		$0.19			($0.24	)		179	%		($1.70	)		($0.96	)		-77	%
Adjusted net income/(loss)(1)		$3,370			($1,531	)		320	%		($1,274	)		($16,391	)		92	%
Adjusted net income/(loss) per share: (1)		$0.15			($0.07	)		314	%		($0.06	)		($0.79	)		92	%
Adjusted EBITDA (2)		$9,126			$7,073			29	%		$13,811			($6,090	)		327	%
Cash flow from operations		$23,409			$7,391			217	%		$34,901			$3,373			935	%
Purchases of property and equipment		($1,248	)		($2,032	)		39	%		($4,187	)		($9,940	)		58	%
Free cash flow		$22,161			$5,359			314	%		$30,714			($6,567	)		568	%

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

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

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

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

Fourth Quarter and Full Year 2012 Operational and Financial Highlights

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

US$ thousands			Three Months Ended						Twelve Months Ended
			December 31,		December 31,				December 31,		December 31,
			2012		2011		% change		2012		2011		% change
Revenue from:
North America Consumer			$52,946		$53,184		0%		$172,826		$157,561		10%
Rest of World Consumer			10,088		12,848		-21%		40,248		50,465		-20%
Total Consumer			63,034		66,032		-5%		213,074		208,026		2%
Institutional			15,667		14,494		8%		60,167		60,423		0%
Total			78,701		80,526		-2%		273,241		268,449		2%

• Adjusted EBITDA: Adjusted EBITDA for the fourth quarter was $9.1 million, a 29% increase versus $7.1 million in the fourth quarter of 2011. The improvement in Adjusted EBITDA was due to lower operating expenses that offset the decline in fourth quarter revenue. Cost of Goods Sold decreased $1.9 million due to lower hard-product box costs and a shift to online offerings. Sales and marketing expenses and general and administrative (G&A) expenses also both decreased by $1.6 million and $1.8 million, respectively, on a normalized basis after adjusting the fourth quarter of 2011 for stock-compensation expense related to the cancellation of the Company’s Long Term Incentive Plan (“LTIP”) in that period. For the full year 2012, Adjusted EBITDA increased $19.9 million to $13.8 million from negative $6.1 million in 2011. The improvement in Adjusted EBITDA primarily reflects 2% revenue growth combined with a $9.2 million reduction in sales & marketing expenses and a $3.5 million decrease in G&A expenses, on a normalized basis, as the company improved its selling and marketing efficiency and better leveraged its fixed operating structure. Improvements in sales and marketing were mainly due to reducing the company’s kiosk footprint and more effectively managing media spend, particularly in ROW Consumer.
• Adjusted Net Income and Adjusted EPS: Rosetta Stone recorded Adjusted Net Income of $3.4 million in the fourth quarter 2012, compared to Adjusted Net Loss of $1.5 million in the fourth quarter of 2011. Adjusted Net Income per share was $0.15 compared to an Adjusted Net Loss of $0.07 per share in the prior year period. For full year 2012, Rosetta Stone recorded Adjusted Net Loss of $1.3 million, compared to Adjusted Net Loss of $16.4 million for the full year 2011. Full year 2012 Adjusted Net Loss per share was $0.06 compared to an Adjusted Net Loss of $0.79 per share in the prior year period Adjusted Net Income and Adjusted EPS.
• Balance Sheet and Cash Flow: Cash, cash equivalents and short-term investments increased $22.2 million to $148.3 million at December 31, 2012 from $126.1 million at September 30, 2012, and increased $32.0 million compared with $116.3 million at December 31, 2011. The company has no debt. Free cash flow in the fourth quarter was $22.2 million compared with $5.4 million a year ago. For the full year 2012, free cash flow was $30.7 million compared with ($6.6) million for 2011. Capital expenditures were $4.2 million for 2012 compared with $9.9 million for 2011. The fourth quarter cash flow from operations included $8.0 million in cash tax refunds.

Financial Outlook

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

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

Non-GAAP Financial Measures

This press release contains several non-GAAP financial measures.

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

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

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

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

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

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

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

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

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

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

Investor Webcast

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

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

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

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

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

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

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

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

Pass Code: 409560

About Rosetta Stone

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

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

Cautionary Statement Regarding Forward-Looking Statements

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

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

ROSETTA STONE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
		December 31,				December 31,
			2012				2011
Assets
Current assets:
Cash and cash equivalents		$	148,190			$	106,516
Restricted cash			73				74
Short term investments			-				9,711
Accounts receivable (net of allowance for doubtful accounts of $1,297 and $1,951, respectively)			49,946				51,997
Inventory			6,581				6,723
Prepaid expenses and other current assets			5,204				7,081
Income tax receivable			1,104				7,678
Deferred income taxes			79				10,985
Total current assets			211,177				200,765
Property and equipment, net			17,213				20,869
Goodwill			34,896				34,841
Intangible assets, net			10,825				10,865
Deferred income taxes			260				8,038
Other assets			1,484				1,803
Total assets		$	275,855			$	277,181
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$	6,064			$	7,291
Accrued compensation			16,830				11,703
Other current liabilities			36,387				34,911
Deferred revenue			59,195				49,375
Total current liabilities			118,476				103,280
Deferred revenue			4,221				2,520
Deferred income taxes			8,400				-
Other long-term liabilities			155				176
Total liabilities			131,252				105,976
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000 and 10,000 authorized; zero and zero shares issued and outstanding December 31, 2012 and December 31, 2011, respectively			—				—
Non-designated common stock, $0.00005 par value, 190,000 and 190,000 shares authorized, 21,951 and 21,258 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively			2				2
Additional paid-in capital			160,693				151,823
Accumulated income (loss)			(16,749	)			19,082
Accumulated other comprehensive income			657				298
Total stockholders' equity			144,603				171,205
Total liabilities and stockholders' equity		$	275,855			$	277,181

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

ROSETTA STONE INC.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(in thousands)
(unaudited)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
			2012				2011				2012				2011
Net income (loss)		$	4,006			$	(4,979	)		$	(35,831	)		$	(19,988	)
Interest (income)/expense, net			(46	)			(78	)			(187	)			(297	)
Income tax expense (benefit)			1,158				1,814				29,991				(7,980	)
Depreciation and amortization			1,847				2,285				8,077				8,724
Stock-based compensation			1,801				7,376				8,009				12,353
Other EBITDA Adjustments			360				655				3,752				1,098
Adjusted EBITDA*		$	9,126			$	7,073			$	13,811			$	(6,090	)

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

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

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

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

Rosetta Stone Inc.
Business Metrics
(in thousands)
		Quarter-Ended												Quarter-Ended												Quarter-Ended
		3/31/10		6/30/10		9/30/10		12/31/10		2010				3/31/11		6/30/11		9/30/11		12/31/11		2011				3/31/12		6/30/12		9/30/12		12/31/12		2012
Net Bookings by Market
North America Consumer		41,631		38,746		41,138		52,243		173,758				29,814		36,828		35,562		55,209		157,413				41,733		37,295		42,283		57,870		179,181
Rest of World Consumer		10,029		8,177		9,860		15,176		43,242				14,996		12,910		11,945		14,166		54,017				12,550		8,113		10,488		10,034		41,185
Worldwide Consumer		51,660		46,923		50,998		67,419		217,000				44,810		49,738		47,507		69,375		211,430				54,283		45,408		52,771		67,904		220,366
Worldwide Institutional		9,108		17,110		22,307		14,395		62,920				10,770		16,973		18,555		15,459		61,757				10,984		17,635		19,354		16,423		64,396
Total		60,768		64,033		73,305		81,814		279,920				55,580		66,711		66,062		84,834		273,187				65,267		63,043		72,125		84,327		284,762
YoY Growth (%)
North America Consumer		6%		-9%		-19%		-11%		-9%				-28%		-5%		-14%		6%		-9%				40%		1%		19%		5%		14%
Rest of World Consumer		304%		168%		135%		93%		146%				50%		58%		21%		-7%		25%				-16%		-37%		-12%		-29%		-24%
Worldwide Consumer		23%		3%		-7%		1%		4%				-13%		6%		-7%		3%		-3%				21%		-9%		11%		-2%		4%
Worldwide Institutional		8%		28%		5%		37%		18%				18%		-1%		-17%		7%		-2%				2%		4%		4%		6%		4%
Total		21%		9%		-4%		6%		7%				-9%		4%		-10%		4%		-2%				17%		-5%		9%		-1%		4%
% of Total Net Bookings
North America Consumer		69%		60%		56%		64%		62%				54%		55%		54%		65%		57%				64%		59%		59%		69%		63%
Rest of World Consumer		16%		13%		14%		18%		16%				27%		20%		18%		17%		20%				19%		13%		14%		12%		14%
Worldwide Consumer		85%		73%		70%		82%		78%				81%		75%		72%		82%		77%				83%		72%		73%		81%		77%
Worldwide Institutional		15%		27%		30%		18%		22%				19%		25%		28%		18%		23%				17%		28%		27%		19%		23%
Total		100%		100%		100%		100%		100%				100%		100%		100%		100%		100%				100%		100%		100%		100%		100%
Revenue by Market
North America Consumer		41,407		38,748		36,902		44,516		161,573				28,061		38,606		37,710		53,184		157,561				43,084		36,918		39,878		52,946		172,826
Rest of World Consumer		9,815		7,651		9,708		15,516		42,690				14,601		12,014		11,002		12,848		50,465				12,204		8,053		9,903		10,088		40,248
Worldwide Consumer		51,222		46,399		46,610		60,032		204,263				42,662		50,620		48,712		66,032		208,026				55,288		44,971		49,781		63,034		213,074
Worldwide Institutional		11,792		14,249		14,316		14,248		54,605				14,316		16,123		15,490		14,494		60,423				14,161		15,841		14,498		15,667		60,167
Total		63,014		60,648		60,926		74,280		258,868				56,978		66,743		64,202		80,526		268,449				69,449		60,812		64,279		78,701		273,241
YoY Growth (%)
North America Consumer		5%		-8%		-28%		-25%		-16%				-32%		0%		2%		19%		-2%				54%		-4%		6%		0%		10%
Rest of World Consumer		297%		154%		137%		101%		147%				49%		57%		13%		-17%		18%				-16%		-33%		-10%		-21%		-20%
Worldwide Consumer		22%		3%		-16%		-10%		-2%				-17%		9%		5%		10%		2%				30%		-11%		2%		-5%		2%
Worldwide Institutional		39%		23%		21%		26%		26%				21%		13%		8%		2%		11%				-1%		-2%		-6%		8%		0%
Total		25%		7%		-9%		-5%		3%				-10%		10%		5%		8%		4%				22%		-9%		0%		-2%		2%
% of Total Revenue
North America Consumer		66%		64%		61%		60%		62%				49%		58%		59%		66%		58%				62%		61%		62%		67%		63%
Rest of World Consumer		15%		13%		16%		21%		17%				26%		18%		17%		16%		19%				18%		13%		15%		13%		15%
Worldwide Consumer		81%		77%		77%		81%		79%				75%		76%		76%		82%		77%				80%		74%		77%		80%		78%
Worldwide Institutional		19%		23%		23%		19%		21%				25%		24%		24%		18%		23%				20%		26%		23%		20%		22%
Total		100%		100%		100%		100%		100%				100%		100%		100%		100%		100%				100%		100%		100%		100%		100%
Consumer Revenue by Channel
DTC		31,026		25,142		27,500		34,496		118,164				31,856		30,984		31,177		42,368		136,385				36,839		30,953		35,136		39,345		142,273
Kiosk		9,391		8,683		7,392		9,533		34,999				7,312		7,368		6,987		8,504		30,171				6,483		4,564		4,103		4,092		19,242
Global Retail		9,608		11,200		9,832		15,413		46,053				2,585		10,752		9,015		14,265		36,616				10,999		8,122		8,911		18,593		46,625
Home School		1,197		1,374		1,886		590		5,047				909		1,516		1,533		895		4,854				967		1,332		1,631		1,004		4,934
Total		51,222		46,399		46,610		60,032		204,263				42,662		50,620		48,712		66,032		208,026				55,288		44,971		49,781		63,034		213,074
YoY Growth (%)
DTC		24%		-5%		-6%		-2%		2%				3%		23%		13%		23%		15%				16%		0%		13%		-7%		4%
Kiosk		14%		-7%		-25%		-28%		-14%				-22%		-15%		-5%		-11%		-14%				-11%		-38%		-41%		-52%		-36%
Global Retail		34%		46%		-27%		-12%		0%				-73%		-4%		-8%		-7%		-20%				325%		-24%		-1%		30%		27%
Home School		-19%		-12%		-28%		-50%		-26%				-24%		10%		-19%		52%		-4%				6%		-12%		6%		12%		2%
Total		22%		3%		-16%		-10%		-2%				-17%		9%		5%		10%		2%				30%		-11%		2%		-5%		2%
% of Total Consumer Revenue
DTC		61%		54%		59%		57%		58%				75%		61%		64%		64%		66%				66%		69%		71%		62%		67%
Kiosk		18%		19%		16%		16%		17%				17%		15%		14%		13%		15%				12%		10%		8%		6%		9%
Global Retail		19%		24%		21%		26%		23%				6%		21%		19%		22%		17%				20%		18%		18%		30%		22%
Home School		2%		3%		4%		1%		2%				2%		3%		3%		1%		2%				2%		3%		3%		2%		2%
Total		100%		100%		100%		100%		100%				100%		100%		100%		100%		100%				100%		100%		100%		100%		100%
Unit Metrics
Product Unit Volume (thousands)		126.3		112.9		117.6		169.7		526.5				108.5		140.0		134.3		202.9		585.8				143.0		129.7		146.5		210.7		629.8
Paid Online Learners (thousands)		12.6		14.2		17.7		16.8		16.8				16.4		17.1		21.5		26.6		26.6				41.2		48.7		57.4		68.4		68.4
YoY Growth (%)
Product Units														-14%		24%		14%		20%		11%				32%		-7%		9%		4%		8%
Paid Online Learners														30%		20%		21%		58%		58%				151%		185%		167%		157%		157%
Average Net Revenue Per Unit ($)
Average Net Revenue per Product Unit		$395		$398		$382		$343		$376				$379		$349		$346		$313		$341				$367		$319		$313		$277		$315
Average Net Revenue per Online Learner (monthly)		$33		$35		$35		$35		$35				$30		$34		$39		$36		$35				$28		$27		$24		$24		$26
YoY Growth (%)
Average Net Revenue per Product Unit														-4%		-12%		-9%		-9%		-9%				-3%		-9%		-9%		-11%		-8%
Average Net Revenue per Online Learner														-10%		-2%		10%		3%		0%				-6%		-22%		-37%		-32%		-25%
# of Kiosks (end of period)
North America		190		186		180		173		173				144		117		114		103		103				57		56		57		57		57
Europe		9		10		13		15		15				15		16		14		13		13				1		1		1		1		1
Asia Pacific		41		50		64		71		71				78		76		69		58		58				44		42		39		29		29
Total # of Kiosks (end of period)		240		246		257		259		259				237		209		197		174		174				102		99		97		87		87
Revenues by Geography
United States		52,476		52,139		50,390		57,624		212,629				41,271		53,418		51,708		65,725		212,122				54,914		50,810		52,167		65,856		223,747
International		10,538		8,509		10,536		16,656		46,239				15,707		13,325		12,494		14,801		56,327				14,535		10,002		12,112		12,845		49,494
Total		63,014		60,648		60,926		74,280		258,868				56,978		66,743		64,202		80,526		268,449				69,449		60,812		64,279		78,701		273,241
Revenues by Geography (as a %)
United States		83%		86%		83%		78%		82%				72%		80%		81%		82%		79%				79%		84%		81%		84%		82%
International		17%		14%		17%		22%		18%				28%		20%		19%		18%		21%				21%		16%		19%		16%		18%
Total		100%		100%		100%		100%		100%				100%		100%		100%		100%		100%				100%		100%		100%		100%		100%
Prior period data has been modified where applicable to conform to current presentation for comparative purposes.
Immaterial rounding differences may be present in this data in order to conform to Financial Statement totals.