Rosetta Stone 2015 Annual Report Download - page 5

Table of Contents


Rosetta Stone Inc. (“Rosetta Stone,” “the Company,” “we” or “us”) is dedicated to changing people's lives through the power of language and literacy
education. Our innovative, personalized language and reading programs drive positive learning outcomes in thousands of schools, businesses, government
organizations and for millions of individuals around the world. Our cloud-based programs allow users to learn online or on-the-go via tablet or smartphone,
whether in a classroom, corporate setting, or personal learning environment. Rosetta Stone is also a leader in the literacy education space, helping millions of
students build fundamental reading skills. Additionally, our Fit Brains business offers personalized brain training programs that are both exciting and
challenging.
Rosetta Stone Inc. 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 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 us to meet the changing needs of learners around the world.
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 consumers' 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;
◦ right-sizing our Enterprise & Education segment to target those geographies and customer segments where we have the greatest
opportunity; and
◦ reducing our general and administrative costs.
In pursuing these priorities, we will (i) allocate capital to the areas of our business that we believe have the greatest growth potential, including our
literacy-learning business, (ii) focus our businesses on their best customers, including Corporate and K-12 learners primarily in North America and Northern
Europe in our Enterprise & Education language business and passionate learners in the United States and select non-US geographies in our Consumer
language business, and (iii) optimize the sales and marketing costs for these businesses and the costs of our business overall.
4