Rosetta Stone 2014 Annual Report Download - page 5

Table of Contents
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Rosetta Stone Inc. (“Rosetta Stone,” “the Company,” “we” or “us”) is dedicated to changing the way the world learns. Our innovative, technology-
driven language, reading and brain fitness solutions are used by thousands of schools, businesses, government organizations and millions of individuals
around the world.
Rosetta Stone Inc. was incorporated in Delaware in 2005. Founded in 1992, Rosetta Stone pioneered the use of interactive software to accelerate
language learning. Today we offer courses in 30 languages across a broad range of formats, including web-based software subscriptions, digital downloads,
mobile applications, and perpetual CD packages. Rosetta Stone has continued to invest in language learning and expanded beyond language learning and
deeper into education-technology with its acquisitions of Livemocha Inc. ("Livemocha") and Lexia Learning Systems Inc. ("Lexia") in 2013 and Vivity Labs,
Inc. ("Vivity") and Tell Me More S.A. ("Tell Me More") in January 2014. These acquisitions have enabled the Company to meet the changing needs of
learners around the world.
Over the last two years, we have expanded the breadth of our language and literacy products with the acquisitions of Tell Me More and Lexia. These
acquisitions have reinforced our belief that the Global Enterprise & Education segment is our largest opportunity for long-term value creation. The customers
in these markets have demands that recur each year, creating a more predictable revenue opportunity. This demand profile also fits well with our suite of
products and the well-known Rosetta Stone brand. We also believe the opportunity to deliver English language learning is growing around the globe.
As a result, we recently communicated a strategic reorganization and realignment of our business to accelerate and prioritize our focus on satisfying the
needs of more serious Corporate and K-12 learners, and emphasizing those who need to speak and read English. This focus will carry over to the Consumer
segment where we will prioritize more serious learners, rather than trying to address the entire consumer marketplace. To position the organization for
success, we are doing four things:
1. We are taking immediate action to reorganize our business around our Global Enterprise & Education segment;
2. We will be focusing our product investment on building effective, personalized English learning experiences that deliver clear and measurable
outcomes;
3. We are beginning to right-size the entire cost base of the Company, with the first steps being
◦ optimization of our media spend and other marketing costs in Consumer sales and marketing;
◦ rationing our Consumer investment; and
◦ reducing our general and administrative costs.
4. We are cutting back on the number of new business initiatives we take on - particularly in Consumer - to improve focus and enhance efficacy.
In pursuing these priorities, we plan to grow the Global Enterprise & Education segment by focusing the majority of our resources and assets on providing a
comprehensive language learning experience focused on more serious language learners while at the same time accelerating the migration of our Consumer
business to digital as well as reducing the number of marketing and promotional campaigns aimed at the casual learner, relying less on promotional pricing
to generate Consumer sales, reducing the number of retailers that sell our products, and streamlining operations with a clear focus to support the Global
Enterprise & Education segment.
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Our business is organized into three operating segments: North America Consumer ("NA"), Rest of World ("ROW") Consumer and Global Enterprise &
Education.
The North America Consumer and ROW Consumer segments derive revenues from sales to individuals and retail partners. The North America
Consumer segment includes sales made within the U.S. and Canada; the ROW Consumer segment includes sales made in countries other than the U.S. and
Canada. The Global Enterprise & Education segment derives revenues from sales to educational institutions, government agencies and corporations
worldwide.
For additional information regarding our segments, see Note 17 of Item 8, . Prior periods are presented
consistently with our current operating segments and definition of segment contribution.
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