Rosetta Stone 2011 Annual Report Download - page 69
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Table of Contents
Service and Support Revenue
Subscription and service revenue increased $9.6 million, or 28%, to $43.3 million for the year ended December 31, 2010, from $33.7 million during the
year ended December 31, 2009. The increase in subscription and service revenues was due to an $11.0 million increase in institutional subscription and
service revenue related to growth in the institutional customer base with renewing online subscriptions, partially offset by a decrease of $1.4 million in
consumer online service revenue.
Cost of Revenue and Gross Profit
Year Ended
December 31, 2010 versus 2009
2010 2009 Change % Change
(in thousands, except percentages)
Revenue
Product $ 215,590 $ 218,549 $ (2,959) (1.4)%
Subscription and service 43,278 33,722 9,556 28.3%
Total revenue 258,868 252,271 6,597 2.6%
Cost of revenue
Cost of product revenue 32,549 30,264 2,285 7.6%
Cost of subscription and service revenue 6,450 3,163 3,287 103.9%
Total cost of revenue 38,999 33,427 5,572 16.7%
Gross profit $ 219,869 $ 218,844 $ 1,025 0.5%
Gross margin percentages 84.9% 86.7% (1.8)%
Cost of Product Revenue
Cost of product revenue for the year ended December 31, 2010 was $32.5 million, an increase of $2.3 million, or 8%, from the year ended December 31,
2009. As a percentage of product revenue, cost of product revenue increased to 15% for the ended December 31, 2010 compared to 14% for the ended
December 31, 2009. The increase in cost was primarily attributable to the $2.2 million increase in expense for inventory scrap of our Version 3 product
associated with the launch of Rosetta Stone Version 4 TOTALe in the U.S. market.
Cost of Subscription and Service Revenue
Cost of subscription and service revenue for the year ended December 31, 2010 was $6.5 million, an increase of $3.3 million, or 104%, from the year
ended December 31, 2009. As a percentage of subscription and service revenue, cost of subscription and service revenue increased to 15% for the year ended
December 31, 2010 compared to 9% for the year ended December 31, 2009. The increase in cost was primarily attributable to our web-based service offering
in our Version 4 TOTALe product that includes a component of dedicated online language conversation coaching and higher direct costs to deliver to
customers than our previous software solutions.
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