Rosetta Stone 2011 Annual Report Download - page 58

Table of Contents
Comparison of the Year Ended December 31, 2011 and the Year Ended December 31, 2010
Our revenue increased $9.6 million to $268.4 million for the year ended December 31, 2011. The increase in revenue was primarily due to international
growth of $10.1 million over the prior year period. Bookings, calculated as revenue plus the change in deferred revenue, decreased from $279.9 million for
the year ended December 31, 2010 to $273.2 million for the year ended December 31, 2011. The decrease in bookings was primarily due to a $16.7 million
decrease in U.S. consumer net bookings and a $1.2 million decrease in worldwide institutional net bookings, offset by an $11.2 million increase in
international consumer net bookings. The U.S. consumer selling price per unit decreased from $381 to $310, or 19%, during the year ended December 31,
2011, compared to the prior year period, resulting in a $36.1 million decrease in revenue. The decrease in revenue per unit was the result of lower prices
across all channels in the U.S. market. Our U.S. consumer units sold increased from 455,700 to 506,500, or 11%, during the year ended December 31, 2011
compared to the prior year period, resulting in a $19.4 million increase in revenue.
We reported an operating loss of $28.4 million for the year ended December 31, 2011 compared to operating income of $12.9 million for the year ended
December 31, 2010. The operating loss was due to a decrease in gross profit of $0.6 million, from $219.9 million to $219.3 million, and an increase in
operating expenses of $40.8 million. The decrease in gross profit was primarily due to higher direct costs associated with our web-based services offering
Version 4 TOTALe that include higher direct costs to deliver to customers than our previous software solutions. The increase in operating expenses was
primarily due to $16.2 million in personnel-related costs, $20.2 million in increased media and marketing activities, primarily outside of the U.S., $1.8 million
increase in professional services and $2.0 million increase in depreciation and amortization expenses incurred to support the business expansion outside of the
U.S., and $0.6 million increase in lease abandonment due to the reversal of the lease abandonment expenses in the third quarter of 2010.
Revenue by Operating Segment
The following table sets forth revenue for each of our two operating segments for the years ended December 31, 2011 and 2010:
Year Ended December 31,
2011 versus 2010
2011 2010 Change % Change
(in thousands, except percentages)
Consumer:
Direct-to-Consumer $ 136,385 50.8% $ 118,164 45.7% $ 18,221 15.4%
Kiosk 30,171 11.2% 35,000 13.5% (4,829) (13.8)%
Retail 36,616 13.7% 46,054 17.8% (9,438) (20.5)%
Homeschool 4,854 1.8% 5,045 1.9% (191) (3.8)%
Total consumer revenue 208,026 77.5% 204,263 78.9% 3,763 1.8%
Institutional 60,423 22.5% 54,605 21.1% 5,818 10.7%
Total Revenue $ 268,449 100.0% $ 258,868 100.0% $ 9,581 3.7%
Consumer Segment
Consumer revenue was $208.0 million for the year ended December 31, 2011, an increase of $3.8 million, or 2%, from the year ended December 31,
2010. Consumer bookings, calculated as revenue plus the change in deferred revenue, decreased to $211.4 million for the year ended December 31, 2011 from
$217.0 million for the year ended December 31, 2010. The decrease in bookings was due to lower average selling price per unit in the United States. The
consumer average revenue per unit decreased from $392 to $340, resulting in a $32.1 million decrease in revenue, which was partially offset by an
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