Don't Buy Rosetta Stone Until It Can Translate Cost Cuts Into Cash Flow
Rosetta Stone's Terminal Decline Continues Despite Acquisitions And Accounting Changes
Ian Bezek • 24 Comments
Ian Bezek • 24 Comments
May 5, 2015, 3:29 PM
- With the Nasdaq down 1.4%, major tech decliners are easily outnumbering major gainers.
- Notable decliners include carrier/enterprise Wi-Fi hardware vendor Ruckus (RKUS -5.6%), IP licensing firm Acacia (ACTG -4.9%), VoIP/unified communications software vendor BroadSoft (BSFT -8.4%), LED/chip equipment maker Veeco (VECO -4.6%), language software vendor Rosetta Stone (RST -8.5%) mortgage origination software vendor Ellie Mae (ELLI -5.6%), and online video hosting platform Brightcove (BCOV -8.4%).
- Veeco has been hit by a downgrade to Outperform from Buy by CLSA; its Q1 report arrives tomorrow. Ruckus and Brightcove are adding to last week's post-earnings losses (I, II), while Acacia and Ellie Mae are giving back some of their recent post-earnings gains (I, II). BroadSoft soared yesterday after beating Q1 estimates and slightly hiking its 2015 EPS guidance.
- Previously covered: Chinese Internet stocks, cybersecurity stocks, LendingClub, Allot, Kulicke & Soffa, InterCloud, MicroVision
- Notable gainers: Salesforce, RetailMeNot, ChannelAdvisor, A10 Networks, IDT
Apr. 20, 2015, 3:12 PM
- With the Nasdaq up 1.3%, many tech companies are posting big gains, and only a few are seeing major losses.
- Notable gainers include audio codec chipmaker Cirrus Logic (CRUS +4%), gaming headset maker Turtle Beach (HEAR +11.4%), video processor developer Pixelworks (PXLW +6%), U.S. solar installer Vivint (VSLR +5.4%), CDN owner Limelight (LLNW +5.9%), cloud revenue management software firm ServiceSource (SREV +4.9%), language software firm Rosetta Stone (RST +4.6%), and storage hardware maker Quantum (QTM +5.3%).
- Notable decliners include craft goods marketplace/recent IPO Etsy (ETSY -8%) and touch sensor developer UniPixel (UNXL -12.2%).
- Cirrus, a major beneficiary of strong iPhone 6 sales, has made fresh 52-week highs; the company reports on April 28, a day after Apple. Beaten-down Turtle Beach is up 52% from an early April low of $1.85; new executive hires and product launches might be helping. Quantum (also making new 52-week highs) is up 38% since pre-announcing strong March quarter sales on April 9. Pixelworks reports on April 30.
- Etsy is now down 18% from last Thursday's post-IPO opening trade of $31.00, as investors balance strong growth and a fervently loyal user base with steep multiples; shares are still up 60% from their $16 IPO price. Likewise, UniPixel is down 18% since announcing a deal to buy Atmel's XSense touch sensor assets on Friday morning.
- Previously covered: Microsoft, Manhattan Associates, Ascent Solar, Check Point/FireEye, Rovi, FARO Technologies
Mar. 26, 2015, 2:53 PM
- Stephen Swad has resigned as Rosetta Stone's (NYSE:RST) CEO after three years on the job, as well as from the company's board. Director/ex-Goldman managing partner A. John Hass will serve as interim CEO while the board looks for a replacement.
- The announcement comes two weeks after the language software vendor announced (along with its Q4 results) it's cutting jobs and lowering its consumer product investments. Shares tumbled on account of Rosetta's light bookings and 2015 guidance.
Mar. 12, 2015, 10:22 AM
- Rosetta Stone (RST -12.9%) has nosedived after missing Q4 estimates and stating it's cutting its consumer product investments to focus on enterprise/education opportunities.
- On the CC (transcript), the company noted consumer bookings are expected to fall to $110M-$130M in 2015 from 2014's $196M, and will come in around ~$50M-$75M during the next few years. It also mentioned Q4 North American consumer bookings ($61.9M, +18% Y/Y) fell short of guidance of $64M-$69M, as price cuts dampened the impact of 34% unit growth.
Mar. 11, 2015, 5:00 PM
- Rosetta Stone (NYSE:RST) uses its Q4 report to state it's "refocusing its corporate strategy and realigning resources" around its Global Enterprise & Education (E&E) ops. It plans to "reduce global non-E&E headcount approximately 15%, resulting in annual expense reductions of approximately $50 million."
- The cost cuts will "target Consumer sales and marketing, Consumer product investment, and G&A costs." A $7M Q1 charge is expected, and an $18M Q4 non-cash impairment charge has been recorded. Chief product officer Nick Macey will now report to E&E chief Judy Verses, as will Rosetta's IT and business development teams.
- The language software vendor's North American and international consumer revenue both declined 11% Y/Y in Q4, respectively falling to $48M and $6.4M. Global E&E revenue rose 51% to $24.9M, thanks largely to acquisitions.
- Bookings rose 15% Y/Y to $96.6M (above revenue of $79.3M). Rosetta is guiding for 2015 Global E&E bookings of $120M-$130M, up 8%-15% Y/Y.
- For now, shares are unchanged AH.
- Q4 results, PR
Mar. 11, 2015, 4:20 PM
- Rosetta Stone (NYSE:RST): Q4 EPS of -$1.01 may not be comparable to consensus of -$0.13.
- Revenue of $79.25M (+2.0% Y/Y) misses by $2.07M.
Mar. 10, 2015, 5:35 PM
Oct. 29, 2014, 4:28 PM
- Rosetta Stone (NYSE:RST): Q3 EPS of -$0.76 misses by $0.42.
- Revenue of $64.51M (+6.0% Y/Y) misses by $4.48M.
Aug. 5, 2014, 4:09 PM
- Rosetta Stone (NYSE:RST): Q2 EPS of -$0.74 may not be comparable to consensus of -$0.20.
- Revenue of $57.32M (-7.8% Y/Y) misses by $9.46M.
Jun. 16, 2014, 11:57 AM
- Nierenberg Investment has disclosed a 1.7M-share (8%) stake in Rosetta Stone (RST +4.8%), and is calling for actions it thinks "could help tighten the company’s strategic focus and substantially improve its free cash flow."
- The firm thinks Rosetta is "undertaking too many initiatives simultaneously," and is skeptical "all of the many product, pricing, distribution, and channel initiatives being pursued in RST’s North American consumer (NAC) business are equally worthy."
- Nierenberg also argues Rosetta's board is too small (it currently has 6 members), and "should evolve into a 'post-venture' board which possesses relevant digital marketing expertise and customer/end-user domain experience consistent with RST’s tightened strategic focus."
May 7, 2014, 5:04 PM
- Rosetta Stone (RST): Q1 EPS of -$0.96 misses by $0.76.
- Revenue of $60.77M (-4.9% Y/Y) misses by $2.78M.
- Shares -0.9% AH.
Feb. 25, 2014, 8:05 AM
- Rosetta Stone Inc. (RST): Q4 EPS of $0.05 misses by $0.06.
- Revenue of $77.71M (-1.3% Y/Y) misses by $4.7M.
Feb. 25, 2014, 12:05 AM
Feb. 24, 2014, 5:30 PM
Jan. 10, 2014, 4:04 PM
- Following a rough 2013, Rosetta Stone (RST -0.7%) is shutting down its Japanese office (the company will now rely on Japanese partners) and "streamlining" its South Korean ops to make them more focused on its proctor-assisted learning products. (PR)
- These moves will results in 66 jobs being cut, and a $2.5M-$3.5M charge being taken.
- Rosetta also says Pragnesh Shah, the head of its Global Consumer unit, will be leaving the company by the end of March, after overseeing the Japanese/Korean restructuring. With Rosetta's international consumer ops having been downsized, no replacement is expected to be named.
- Rosetta's Rest of World Consumer sales (12% of total revenue) fell 28% Y/Y in Q3 to $7.2M. Over the first nine months of 2013, Japan accounted for 1/4 of the business' sales.
Dec. 19, 2013, 9:11 AM
- Rosetta Stone (RST) acquires Fit Brains developer Vivity Labs for $12M cash, expanding Rosetta's offerings outside language learning into "adjacent categories of technology-driven education." Transaction close is expected in Jan.
- Vivity's flagship app, Fit Brains Trainer, has been downloaded nearly 5M times in the last year.
- Rosetta expects Vivity to contribute revenue of $3M-$5M in 2014 and EBITDA of $1M-$2M. Beyond 2015, Rosetta expects double-digit revenue and EBITDA growth.
Rosetta Stone, Inc. provides technology-based language learning solutions. It develops, markets and sells language learning solutions consisting of software products, online services and audio practice tools under the Rosetta Stone brand. The company's software products are sold on a direct... More
Industry: Multimedia & Graphics Software
Country: United States
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