Rosetta Stone 2015 Annual Report Download - page 28

Table of Contents
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Rosetta Stone is dedicated to changing people's lives through the power of language and literacy education. Our innovative, technology-driven
language, reading, and brain fitness programs drive positive learning outcomes in thousands of schools, businesses, government organizations, and for
millions of individuals around the world. Rosetta Stone was incorporated in Delaware in 2005. Founded in 1992, Rosetta Stone pioneered the use of
interactive software to accelerate language learning and is widely recognized today as the industry leader in providing effective language programs. 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 and Lexia in 2013 and Vivity and Tell Me More in January 2014. These acquisitions have enabled us to meet
the changing needs of learners around the world.
The Enterprise & Education segment derives revenue from sales to educational institutions, corporations, and government agencies worldwide. The
Consumer segment derives revenue from sales to individuals and retail partners. Our Enterprise & Education language distribution model is focused on
targeted sales activity primarily through a direct sales force in five markets: K-12 schools; colleges and universities; federal government agencies;
corporations; and not-for-profit organizations. Our Enterprise & Education literacy distribution channel utilizes a direct sales force as well as relationships
with third-party resellers focused on the sale of Lexia Learning solutions to K-12 schools. Our Consumer distribution channel comprises a mix of our call
centers, websites, third party e-commerce websites such as the Apple App Store, select retail resellers, such as Amazon.com, Barnes & Noble, Target, Best
Buy, Books-a-Million, Sam's Club, Staples, consignment distributors such as Wynit Distribution and Software Packaging Associates, and daily deal partners.
As our Company has evolved, we believe that our language and literacy Enterprise & Education segment is our largest opportunity for long-term value
creation. The customers in these marketplaces have demands that recur each year, creating a more predictable revenue opportunity. This demand profile also
fits well with our suite of products, the well-known Rosetta Stone brand and the demonstrated efficacy of our literacy tools. We also believe the demand for e-
learning based literacy solutions in the US and English language-learning around the globe is growing.
As a result, we are emphasizing the development of products and solutions for Corporate and K-12 learners who need to speak and read English. This
focus extends to the Consumer segment where we continue to make product investments serving the needs of passionate language learners who are
motivated, results focused and willing to pay for a quality language-learning experience.
To position the organization for success, we are focused on the following four priorities:
1. Grow literacy sales by providing fully aligned digital instruction and assessment tools for K-12, building a direct distribution sales force to replace
our historical reseller model, and continuing to develop our implementation services business;
2. Position our Enterprise & Education language business for profitable growth by focusing on our best geographies and customer segments and
successfully delivering a new language-learning suite for Corporate customers that offers a simple, more modern, metrics-driven suite of tools that
are results-oriented and easily integrated with leading corporate language-learning systems;
3. Maximize the profitability of our Consumer language business by providing an attractive value proposition and a streamlined, mobile-oriented
product portfolio focused on customers' demand, while optimizing our marketing spend appropriately; and
4. Right-size the entire cost base of the Company, including
◦ optimizing our media spend and other marketing costs in Consumer sales and marketing;
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