Rosetta Stone Management Discusses Q3 2013 Results - Earnings Call Transcript

| About: Rosetta Stone (RST)

Rosetta Stone (NYSE:RST)

Q3 2013 Earnings Call

November 06, 2013 4:30 pm ET


Steve Somers - Vice President of Corporate Development, Investor Relations & Treasury

Stephen M. Swad - Chief Executive Officer, President and Director

Thomas M. Pierno - Chief Financial Officer and Principal Accounting Officer


Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

John D. Crowther - Piper Jaffray Companies, Research Division

John H. Lewis - Osmium Partners, LLC


Greetings, and welcome to the Rosetta Stone Inc. Third Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Somers, IR for Rosetta Stone Inc. Thank you, Mr. Somers, you may begin.

Steve Somers

Good afternoon, and let me welcome you to Rosetta Stone's Third Quarter 2013 Earnings Call. I'm Steve Somers, Vice President of Corporate Development and Investor Relations and I'm joined today by Steve Swad, Rosetta Stone's President and CEO; and Tom Pierno, our CFO, to discuss the operations and financial results for the third quarter and our outlook.

In addition to our commentary, we have made our 3Q '13 earnings results press release and a slide deck supporting this webcast available on our IR website at Please review them to find important additional information.

There are or will be forward-looking statements in our press release, slides and conversation today. We offer these statements under the Safe Harbor provided by U.S. law. Of course, risks and uncertainty is attached to any forward-looking statement. A detailed discussion of such risks and uncertainties is contained in our Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC in March 2013, which is available in the Investor Relations section of our website. We ask that you review those risk factors before making any investment decision. Please note these forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to provide or publicly release the results of any revision to the forward-looking statements in light of new information or future events.

We also use non-GAAP numbers in our presentation. The definitions of those numbers and their reconciliation to GAAP numbers are available in today's press release, on our website and as filed with the SEC today on Form 8-K.

Now, here's Steve

Stephen M. Swad

Thanks, Steve, and welcome, everyone. Since becoming the CEO of Rosetta Stone, my goal has been to transform the company become more relevant to consumers, businesses, teachers and government. Our management team has been executing on our plans to shift the focus of the business to the cloud and mobile, invest and innovate new products around kids and advanced English, develop and invest behind our Enterprise & Education segment, extend the company into natural adjacencies such as reading and improve our financial profile.

During the quarter, we made progress on a number of fronts. In particular, we continued to move our strategy forward by growing our SaaS business in our E&E segment. We continued to shift our consumer business to more digital and we introduced a fun and engaging literacy and language app into the kids' space and we expanded our retail distribution and presence in the iOS and Android ecosystems.

In addition, the Lexia acquisition moved us beyond language, broadening our product portfolio into a natural adjacency with reading and represents an investment behind our recurring E&E business.

This quarter, we grew our core E&E business by 7% and by core I mean excluding network sales and the contribution from Lexia. Including Lexia, reported growth was 27%.

Our consumer business in Asia showed a few small green arrows but declined again. And our North America Consumer business was flat, excluding the shuttered kiosk channel, driven mainly by lower product ARPU and a softer retail channel, which we are addressing with additional distribution and many new points of presence.

Despite this quarter coming in softer than we anticipated, we are still expecting to deliver full year pro forma adjusted EBITDA within our guidance of $14 million to $17 million, although we currently think it is more likely to come in at the lower end of that range.

Given the softer revenue growth in the third quarter and our inability to quickly replace revenue from the kiosk channel, we expect that pro forma revenues for the full year will be below our previous guidance and now be in the range of $270 million to $280 million.

One of the key drivers of our future growth is our SaaS-based business, we call it our E&E business. In Q3, our core bookings grew 7%. In particular, we grew in K-12 after several quarters of flat or negative growth and we experienced strong double-digit growth in our international E&E business. The growth in international was driven by robust growth from emerging markets albeit off a relatively small base and growth in Europe, which is the largest of our international E&E markets. While the overall growth rate was lower than the double digits that I expected, this business continues to show promise in a pipeline that is building.

Lexia also performed well during its first 2 months as part of the Rosetta Stone family. The new product rollout is going as planned, usage is strong and more of their sales mix is shifting to recurring business, which is currently over 65%, up from 30% a year ago.

We again advanced our shift to digital within our consumer business. Total revenues from the combination of online learners and digital downloads in the third quarter was 30% of total consumer revenue, up from 25% in Q2 and up from 8% a year ago.

In our DTC channel, digital represented approximately 40% of DTC sales in Q3, reflecting our customers' shifting preference for these delivery solutions.

The third quarter was a significant one for our efforts to tap into the kids market. First, we completed our acquisition of Lexia Learning, which teaches kids how to read. Lexia sells exclusively today to the K-12 market, but we are currently running tests to see how we can move their core reading product into 2 of our consumer channels, homeschool in the U.S. and proctor learning in Korea.

We also launched our first app under the Rosetta Stone kids brand in September. This app taps into the natural curiosity of kids to learn and promote language acquisition skills for both native and second languages. Today, this app is offered on a free basis to introduce kids and parents to Rosetta Stone, with future applications aimed at both upfront and in app purchased options. Shortly after launch, this app was chosen by Apple to be a featured app, reaching #2 of the top kids app and receiving very positive customer reviews.

Lastly, we entered into a marketing and branding arrangement with Disney during the quarter, which we will see the Rosetta Stone brand co-promoted alongside some of Disney's most popular characters. I believe this will further position our brand with kids and parents.

North America Consumer results for the quarter were mixed, mostly because of lower product ARPU and softness in our traditional retail channel, even though we had mid-single-digit growth in our DTC channel. ARPU on our CD and download products declined 20% in the quarter compared to prior year. Approximately 4 points of that decline is related to channel shift as we had a greater mix of retail which is recognized at wholesale prices, and nothing from kiosk, which was recognized at retail pricing. The remaining 16 points is mainly due to discounting.

Importantly, we continue to test ways to stabilize price. For example, we are testing a bundled offering of our product with a tablet and another one with a partner gift card. We also have plans to test other bundles like our product with dictionaries or our product with phrase books. Until we find bundles or other ideas to reduce discounting, we expect ARPU to continue to decline through the near term.

Despite the decrease in the retail channel, we've been making progress on expanding our distribution and increasing our points of presence. In the third quarter, we added the airport locations of Brookstone, which subsequent to our initial rollout has expanded their store count.

In addition, we also added Target stores as a retail partner. Target has already taken delivery of over $5 million of product, which will be sold in over 1,300 locations and online through the website. This deal is a consignment arrangement so we won't record those units of sales until sell-through occurs for the end consumer.

We also continue to benefit from our relationship with daily online deal retailers like Groupon, which we believe help us expand our reach in tapping the new customers.

Finally, our growing paid online learner monthly ARPU remained steady at $24, with an average life of approximately 13 months and lifetime revenue valued at over $300.

The other major factor driving lower bookings was continued decreases in Japan and Korea. While we have taken steps to change management and alter our go-to-market strategy in Japan, we have not yet seen significant positive impact from these actions. But we are seeing small signs of progress. For example, we are seeing early signs of gains on a new 1 month SKU directed at a key segment in Japan. Similarly, in Korea, revenue from the Proctor learning channel, which is a key recurring revenue channel, doubled during the quarter to $200,000. But they're not yet large enough to offset decreases in other channels like home shopping.

Turning to our earnings. Our string of 7 consecutive quarters of positive year-over-year pro forma adjusted EBITDA growth was interrupted. This was mainly due to lower than planned growth from our E&E business, softness in product ARPU and softness in North America retail, as well as significant investments in product development. Overall, adjusted EBITDA before Lexia was negative $900,000 versus our expectation of flat to slightly positive growth for the quarter. Importantly, during the quarter, we increased deferred revenue by $11 million, highlighting that the business continues to put value on the balance sheet.

In terms of where we are and where we're headed for the fourth quarter and full year, we have several plans in place that we think will make up for the shortfall in Q3 pro forma adjusted EBITDA. We have new creative coming out in North America, our retail presence has expanded and our E&E segment is positioned for continued growth to help the pipeline. I'm also looking at a number of ways to become more efficient globally. Overall, the transformation of Rosetta Stone remains on track and despite some bumps in Q3, we're making good progress toward our long-term goals. I remain confident in our ability to grow the kids market, invest in English for E&E and continue our shift to digital and the cloud.

Now let me turn the call over to Tom.

Thomas M. Pierno

Thanks, Steve. For the third quarter, consolidated core revenues were flat with last year's third quarter, while consolidated core bookings were down 3%. Please note that when I discuss core bookings and revenues, these figures exclude Lexia, as well as the U.S. kiosk channel and network sales within our E&E segment.

Given that we are still in the midst of transforming Rosetta Stone and part of that transformation includes acquisitions, we've included a slide in our earnings presentation that lays out the impact of Lexia on our pro forma bookings and revenue. Because Lexia is part of our reported E&E business, we only intend to provide this level of detail through 2013.

Now, let me discuss the financial results for the quarter. Core North American Consumer bookings were down slightly from last year at $38.3 million compared with $38.4 million a year ago. Despite the flat performance, we continue to make gains in our DTC channel, growing mid-single digits, while the retail channel offset that growth due to broader consumer retail weakness in the quarter and softness from one of our retail partners. We expect to see improvement in this channel going forward as we expand our retail points of presence this quarter, notably with our new partners Target and Brookstone.

In our Rest of World Consumer segment, we continue to experience weakness primarily from our 2 Asian markets. Overall, Rest of World bookings declined 29% but reflected larger declines in Japan and Korea, while our European business was off single-digit percentage.

The efforts that we undertook in the second quarter to reposition the business in Japan has not yet fully taken hold, while Korean results were impacted by underperformance in the home shopping channel. Despite soft results in Korea, you're seeing good uptake in the proctor assisted learning channel, although still off a small base.

Looking at our consumer product unit and paid online learner metrics, total product units increased 8% to 158,000 units compared with 147,000 units a year ago. While this was good growth, it was offset by a 20% decline in product average revenue per unit to $250 from the $313 in last year's third quarter. About one quarter of the 20% decrease in product ARPU was due to channel mix shift. This resulted from the closure of our US kiosk channel earlier this year as some of those sales shifted to retail, as well as the increased business with online daily deal retailers like Groupon. The remaining 3 quarters of the 20% decline in ARPU was due to price discounting, which continues to unlock new demand to drive additional units.

While the growth in product units help mitigate the decline in pricing, total consumer product revenue was down 14% versus the third quarter of last year. Paid online learners grew almost 55% to nearly 89,000 at the end of the quarter, while monthly ARPU was unchanged from last year at $24. ARPU has been effectively flat in the mid-20s for the past year and a half, reflecting the predominance of our 12 month access offering at roughly $299. Revenue from paid online learners was up 61% from last year at $6.3 million.

As we've been discussing, part of our transformation effort is to move to more online and digital offerings. We again made progress this quarter on that front, increasing our digital downloads and online learner revenue to 30% of total consumer revenue. This compares with 8% just a year ago and 25% in the second quarter. We are seeing nice gains in this metric across the board but in particular, internationally.

Our core E&E business saw bookings increased by 7% over $20 million. Growth in this segment was lower than expected for the reason Steve mentioned. We are growing once again in K-12 in the U.S. and continuing to make nice gains in Europe and emerging markets. Total E&E bookings in the third quarter, including 2 months of results from our acquisition of Lexia, were $24.6 million compared with $19.4 million a year-ago. Lexia contributed $4.2 million to bookings in the quarter, which represents 6% growth compared to its comparable 2 month results in 2012.

Turning to the income statement. Pro forma adjusted EBITDA was a loss of $600,000 compared with the positive $2.1 million a year ago. There were 2 primary reasons for the pro forma decline in the third quarter. The first was that reported revenues were $3.4 million lower than a year ago, offset by an improvement in COGS for a net $3 million decline. The second reason was due to the investment in product that we have been making this year.

Total R&D or product development expenses increased $3.6 million to $8.8 million, which includes expenses related to Livemocha versus $5.2 million a year ago and were 14% of revenues compared with 8% a year ago. We were able to offset some of this increase with $2 million of reductions to sales and marketing and general and administrative cost controls. Pro forma adjusted EBITDA margin in the quarter was negative 1% versus a positive 3% last year.

Before moving on, let me also note that in conjunction with acquiring Lexia during the quarter, we changed our accounting policy for deferred commissions to be consistent with their policy, which is to defer and amortize those commissions over the same period as that for which the revenue was recognized. We have included a table in our press release showing the impact of this change, which for the first 9 months of 2013 was less than $0.5 million.

We ended the third quarter with $113.2 million of cash on the balance sheet or approximately $5.25 of cash per share compared with $132.1 million at June 30 of 2013. The decrease in cash was primarily due to our acquisition of Lexia, along with a decrease in free cash flow of negative $2.8 million compared with positive $4.5 million a year ago.

Deferred revenue increased by $14.8 million to $72.6 million in the quarter compared to last year and by $11 million sequentially, of which $5.2 million was from Lexia.

CapEx in the quarter was $2.2 million compared with $900,000 a year ago.

With respect to guidance, we are maintaining our full year pro forma adjusted EBITDA guidance despite the softer 3Q performance. As Steve mentioned in his remarks, we are likely to come in at the lower end, but still within our range of $14 million to $17 million.

Regarding full year pro forma revenue, given third quarter results and our forecast for the fourth quarter, we are lowering our guidance range by 6% to $270 million to $280 million, the lower revenue guidance reflects the less than expected growth in E&E, as well as reduced contribution from Rest of World Consumer and North America Consumer.

There's no change to our CapEx guidance of $5 million to $8 million.

As for future periods beyond 2013, we will discuss our outlook when we report fourth quarter consistent with our prior practice.

With that, operator, we are ready to take questions.

Question-and-Answer Session


[Operator Instructions] The first question comes from Jeff Meuler with Baird.

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

I guess on the U.S. consumer weakness, you listed a range of factors, one of the things you said was some softness at 1 retail partner. Was wondering how significant that was in terms of the weakness with U.S. consumer? And then what's the current thinking on cannibalization from daily deals relative to traditional retail?

Stephen M. Swad

Jeff, this is Steve. Good question. My big picture view on North America was it was flat, but we also had one of the largest orders in the company's history that we're recognizing on a flow-through basis as opposed to when we sell in. And so, to me, and we have been working on that contract for 8 or 9 months. So I was pleased with the economics, although reported results are flat, which is not much to write home about. Now with respect to your specific question, we are having some softness with one of our brick-and-mortar -- large brick-and-mortar partners. And we're working with that partner to shore up activities, with introducing some new marketing ideas and so on and so forth. And then your second question was cannibalization. Remember a few quarters ago, I said we were watching that and that the overlap is minor, and I still believe that. I think we're largely reaching a new base of customers through that channel.

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then on the paid online learners, if I look at the sequential growth from Q2 to Q3 this year it was at least in terms of the net number and maybe there is some attrition that's starting to hit that, so the gross may be different. But the growth in Q2 to Q3 of this year was less than in prior years on a net basis. Just any comment there?

Stephen M. Swad

Yes. I think the large numbers are starting to hit us a little bit, our base is a little bit tougher to compare. We are seeing the growth rate decline. We're still bullish on that channel. We've got some new focus on that, particularly around the world and in Korea in particular and even Japan. And so, I think you're right. You're seeing growth rate decline and we expect that to continue, but it is the focus of the company. And as this mix of business shifts digital, that channel will benefit from it.

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then just finally, you made a comment I think about some efficiencies in terms of international operations. It seems like in Asia you've been weak for a while and I know that you're to some extent taking a product that you're already making and selling it into more channels. But if I think about your Asian markets, are they losing money?

Stephen M. Swad

They are losing money, but they're losing less money this year than they did last year, but still losing money. And so, we're working with those teams to be much more efficient. I will tell you, a big piece of the top line decline is we are pulling back on marketing spend because we haven't found efficient ways to spend it. And so, we had a 29% decline Rest of World and most of that was planned because we de-invested materially that our profits are actually better year-on-year.

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

And I guess just what's the long-term commitment there and how clear is the path to getting it profitable?

Stephen M. Swad

A couple of things. What we're doing is I call it like targeted growth. And so in Korea, I mentioned that we're seeing increases in the PAL channel, the Proctor channel. While the increase is on a very, very small base. But I'm seeing like high, high, high renewal rates, north of 80% renewal rates and customer satisfaction that's north of 90%. And so, we're investing behind that channel and that's a recurring business. And so, the quality of that revenue is much higher than any other revenue we've seen out of that area in the history of that company. And so, we are nurturing that. And actually, on the -- my old term of empty calorie revenue, we're pulling that back. If we can't get a return on it, we are pulling it back and so you're seeing that. But in Korea, I'm committed to pushing that channel because I think we're value creating and I'd like to see that -- you know the power of our recurring revenue business with high renewal rates. And so -- and we're seeing it in very low -- very early stages. So I'm committed to that. On the Japan side, we are still trying to find footing. I mentioned in my comments some small gains in an important segment with a new product and a new price point, a 1 month subscription at a lower price point. And we're in early days on that, I don't know renewal rates, I don't know lifetime value and I don't know a lot of stuff, but that, on the surface, is performing better than we had thought. And so, I'm going to nurture that. I'm not -- if we can't figure it out, we're going to keep pulling back.


Our next question comes from Peter Appert with Piper Jaffray.

John D. Crowther - Piper Jaffray Companies, Research Division

This is John Crowther on for Peter. Just first question is, if I look at your full year revenue range, obviously leaves a pretty wide band implied for Q4. So wondering maybe if you could just walk through some of the assumptions that sort of get you towards the bottom versus the top end of the range so that maybe we can understand what we should be focusing on in the fourth quarter?

Stephen M. Swad

John, a good question. Strength of our E&E business, we've got ranges around that. You know that business and kind of predicting exactly when a deal is going to close is not easy. It frequently slips or gets pulled in. I think the strength of the holiday season around -- in the U.S. is a big variable. We are assuming strength equal to or slightly in excess of last year. We also have a big new relationship with Target. It's been a year in the making. You heard me say we stocked in one of the biggest orders in the company's history. We are looking for that to deliver and we're going to put some marketing behind that to move some feet into that space. And so those are the bigger variables.

John D. Crowther - Piper Jaffray Companies, Research Division

Okay. And then getting back to an earlier question and sort of the weakness in one large brick-and-mortar. Was that more client specific or overall macro driven? I was just wondering obviously you're expanding your relationship with brick-and-mortar as well. So just wondering what went into that pattern versus the weakness at one of the other larger clients.

Stephen M. Swad

Yes. Very good question. Tough for me to know exactly. Our view, because we see this performance in one of these customers is different than our other customers. And so, our view is that footfall maybe a little bit low, but we don't know that. So it's hard for me to comment. We do think that there are pockets of our retail channel that are performing well and we're investing behind those. And then we're going to work with these partners that are underperforming to try to get them at least in line or better than average.

John D. Crowther - Piper Jaffray Companies, Research Division

Okay. And then just lastly, it's obviously still very early, but you guys have talked a lot about here recently about apps as a way, digital apps as a way to drive traffic, bundling with tablets given that the tablet's such a great, a nice platform for your product. Just wondering if you've got any sort of early anecdotal evidence there on sort of the conversion of that sort of traffic into sort of new customers that you would like?

Stephen M. Swad

Yes. Great question, John. I'd say the apps are doing their job. They're introducing our product to customers. And they're importantly doing it on a mobile device. And so, it's a push by the company this year and we're seeing folks that need mobility to be able to experience our brand. And so -- and then once they experience it, they are more likely to buy our product. I told you in the past that those are very strong leads for us and they continue to be strong. And so, early reads are we're pretty happy with these taste products in iOS and Android ecosystems. And we're early days on how to optimize that. So I think that's responsive to your question.


[Operator Instructions] Our next question comes from John Lewis from Osmium Partners.

John H. Lewis - Osmium Partners, LLC

Just a couple of quick questions. On the deferred revenue side, I saw you guys were up about $11 million for the third quarter. I know there's also usually an increase in Q4. Can you give any idea of what you think the increase in deferred's ballpark could be for Q4?

Stephen M. Swad

No john, we are not giving that. We do think it's going to increase in Q4 is one of our stronger quarters, so we think it's going to move meaningfully. I kind of look at that increase this year and say that, that's kind of one of the reasons why the health of the business -- that's a good indicator of the health of the business. And so while we did negative EBITDA reported, we put up $11 million in deferred, and that's high-margin deferred. And that was split between the traditional Rosetta Stone business and then Lexia is doing well and contributed a lot to that.

John H. Lewis - Osmium Partners, LLC

That was part of the question as what is Lexia bring to deferred revenue. One other thing, on the income tax receivable for the fourth quarter, what ballpark -- is there any kind of income tax receivable for Q4?

Stephen M. Swad

No. That's a great question. Certainly not even close to the size that we had last year. In fact, we're paying some cash taxes.

Thomas M. Pierno

Outside the U.S.

Stephen M. Swad

Outside the U.S. So I would -- I think that's a small number.

John H. Lewis - Osmium Partners, LLC

Got it. Because I think last -- on the last call, I asked you do you think operating cash flow will be higher in 2013 than '12 and given where your guidance is, $14 million to $17 million in EBITDA plus the change, you guys should generate, I think, at least north of $20 million in operating cash flow for Q4. I mean, is that seem reasonable?

Stephen M. Swad

Yes. I mean, it is hard for me to nail that number. Here's a couple of points. I think we're going to be cash flow positive for the year. Q4, historically, is our strongest quarter for cash. Included in the 9 month numbers of cash is about $5 million of 1x that remember we closed kiosks. We had 2 rounds of changes in our product group, 1 in Q1 and 1 in Q2. We made some tightening in Japan, and those things sum to $5 million. So you need to keep that in mind as you look at our 9 month numbers. And I'm not comfortable commenting higher or lower relative to last year. I still think cash flow positive. I think Q4 is a big quarter. I think deferred revenue is going to go up in Q4.

John H. Lewis - Osmium Partners, LLC

Could you also give a little bit of color, my last question is on the R&D front, there's obviously a considerable planning[ph] being made with and West and his team. Can you give any color on, it looks like you'll spend well north of $30 million this year on R&D. Can you just talk about how that's progressing and how your roadmap looks?

Stephen M. Swad

Yes. I'll probably touch on roadmap next call. We're in the midst of 2014 planning and 2015 planning. But here's my take on product. We retooled that organization materially in 2013. And in Q1, there were, I don't know, 50 to 60 people that changed, we changed, and then in Q2, there was another 20. So roughly half of that organization turned over, over the first 6 months, which is material. Then we began to rebuild it. And I feel like we have a great cadence in that organization. I was actually there Monday, and I see productivity going. I see customer centricity going, I certainly align it with our strategy. There's a mobile -- we're building for mobile and so I'm happy. I think -- well I don't think, in Q4, we will release the most significant product that this company has released in probably 2 years, 2.5 years around advanced English. We're going to sell it through the corporate channels, both in the U.S. and overseas in the E&E business. And it's a suite product. We also are materially improving the administrative tools around that product and the ones that we use in K-12. And so, I feel good about the team. I think our run rate today is materially better and our productivity today is materially better than it ever has been. And because we changed in the first half, it just comes with bumps and we're kind of moving through those bumps now. And as we look at '14, I continue to believe this is a good investment for the company and want to make us more relevant to our customers. And so, I'll be pushing to continue that investment.

John H. Lewis - Osmium Partners, LLC

Okay. And did you guys buy back any stock this quarter?

Stephen M. Swad

No, John, we did not. A couple of things. Our blackout rules are tight. And so, we're going to work through that with our board. But the direct answer to your question is no, no stock has been purchased back.

John H. Lewis - Osmium Partners, LLC

You guys should be open in the next couple of days?

Stephen M. Swad

Yes, yes. I'm working through implementation details with our board. And in a way, I think of it and I think the board too is that we're going to be opportunistic with our buys and make those buys in the context of the other things available to the business, including M&A.

John H. Lewis - Osmium Partners, LLC

Sounds great, but there's a $13 bid after-hours, so it seems like a pretty attractive price and book, we love where you're headed and thanks for the time today.


There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.

Stephen M. Swad

I appreciate everyone's time. I think you get a sense from our comments that there's a lot going on. We bought Lexia, we've closed the kiosks, we've moved the E&E business from a onetime sale to recurring sale, and we're re-focusing and tightening our energy around Rest of World. We are seeing some small green arrows, although it's hard really to see. And we try to make our message clear, and we look forward to reporting to you in Q4. And at that time, we'll also update 2014 and give you a look at '15 as well. Until then, we'll talk to you next time.


This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

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