Rosetta Stone 2014 Annual Report Download - page 47
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Table of Contents
Revenue by Product Revenue and Subscription and Service Revenue
The following table sets forth revenue for products and subscription and services for the years ended December 31, 2013 and 2012:
Product revenue
$ 156,792
59.2%
$ 180,919
66.2%
$ (24,127)
(13.3)%
Subscription and service revenue
107,853
40.8%
92,322
33.8%
15,531
16.8 %
Total revenue
$ 264,645
100.0%
$ 273,241
100.0%
$ (8,596)
(3.1)%
Product Revenue
Product revenue decreased $24.1 million, or 13%, to $156.8 million during the year ended December 31, 2013 from $180.9 million during the year
ended December 31, 2012. Consumer product revenue decreased $19.7 million driven by lower prices on our Rosetta Stone language-learning product
software bundle driven by promotional pricing in our North America Consumer segment, increased levels of daily deals and a shift in our sales channel mix.
$2.9 million of the decrease in Global Enterprise & Education product revenues is a result of a shift from sales of product licenses to sales associated with the
renewal of online subscriptions.
Subscription and Service Revenue
Subscription and service revenue increased $15.5 million, or 17%, to $107.9 million for the year ended December 31, 2013. The increase in
subscription and service revenues was due to an $11.1 million increase in consumer service revenues related to online services bundled with our language-
learning product software packages as well as a growing base of exclusively online web-based software subscription sales. Enterprise and education
subscription and service revenues also increased $4.5 million related to growth in the enterprise and education customer base with renewing online
subscriptions. $1.2 million of the increase in Global Enterprise & Education revenue is attributable to literacy due to the acquisition of Lexia on August 1,
2013.
Deferred revenue increased $15.4 million during the year ended December 31, 2013, primarily related to acquired deferred revenue of $2.0 million, an
increase of $7.1 million in literacy deferred revenue and the increase in our base of paid subscribers.
The following table sets forth cost of product revenue and subscription and service revenue, as well as gross profit for the years ended December 31,
2013 and 2012:
Product
$ 156,792
$ 180,919
$ (24,127)
(13.3)%
Subscription and service
107,853
92,322
15,531
16.8 %
Total revenue
264,645
273,241
(8,596)
(3.1)%
Cost of product revenue
32,191
33,684
(1,493)
(4.4)%
Cost of subscription and service revenue
13,523
15,226
(1,703)
(11.2)%
Total cost of revenue
45,714
48,910
(3,196)
(6.5)%
$ 218,931
$ 224,331
$ (5,400)
(2.4)%
Gross margin percentages
82.7%
82.1%
0.6%
Cost of Product Revenue
45