Rosetta Stone 2015 Annual Report Download - page 9

Table of Contents
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Our business is affected by variations in seasonal trends. Within our Enterprise & Education segment, revenue in our education, government, and
corporate sales channels are seasonally stronger in the second half of the calendar year due to purchasing and budgeting cycles. Our Consumer revenue is
affected by seasonal trends associated with the holiday shopping season. In particular, we generate a significant portion of our Consumer sales in the fourth
quarter during the period beginning on Black Friday through the end of the calendar year. We sell to a significant number of our Consumer retailers and
distributors and Enterprise & Education customers on a purchase order basis and we receive orders when these customers need products and services. As a
result, their orders are typically not evenly distributed throughout the year and generally are highest in the third and fourth quarters. Our Enterprise &
Education segment and our Consumer segment are affected by different sales-to-cash patterns. Historically, in the first half of the year we have been a net user
of cash and in the second half of the year we have been a net generator of cash since Consumer sales typically turn to cash more quickly than Enterprise &
Education sales, which have longer collection cycles.
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Our intellectual property is critical to our success. We rely on a combination of measures to protect our intellectual property, including patents, trade
secrets, trademarks, trade dress, copyrights and non-disclosure and other contractual arrangements.
We have ten U.S. patents, fourteen foreign patents and several U.S. and foreign patent applications pending that cover various aspects of our language-
learning and literacy technologies.
We have registered a variety of trademarks, including our primary or house marks, , The Blue Stone Logo
and These trademarks are the subject of either registrations or pending applications in the U.S., as well as numerous countries worldwide
where we do business. We have been issued trademark registrations for our yellow color from the U.S. Patent and Trademark Office. We intend to continue to
strategically register, both domestically and internationally, trademarks we use today and those we develop in the future. We believe that the distinctive
marks that we use in connection with our solutions are important in building our brand image and distinguishing our offerings from those of our competitors.
These marks are among our most valuable assets.
In addition to our distinctive marks, we own numerous registered and unregistered copyrights, and trade dress rights, to our products and packaging. We
intend to continue to strategically register copyrights in our various products. We also place significant value on our trade dress, which is the overall image
and appearance of our products, as we believe that our trade dress helps to distinguish our products in the marketplace from our competitors.
Since 2006, we have held a perpetual, irrevocable and worldwide license from the University of Colorado allowing us to use speech recognition
technology for language-learning solutions. Since 2014, we have also held a commercial license from the Florida State University Research Foundation
allowing us to use certain computer software and technology in our literacy offerings. These types of arrangements are often subject to royalty or license fees.
We diligently protect our intellectual property through the use of patents, trademarks and copyrights and through enforcement efforts in litigation. We
routinely monitor for potential infringement in the countries where we do business. In addition, our employees, contractors and other parties with access to
our confidential information are required to sign agreements that prohibit the unauthorized disclosure of our proprietary rights, information and technology.
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As of December 31, 2015, we had 1,148 total employees, consisting of 855 full-time and 293 part-time employees. We have employees in France, Spain
and Italy who are represented by a collective bargaining agreement. We believe that we have good relations with our employees. In the first quarter of 2015,
we implemented a program to reduce costs as part of an alignment of resources around our Enterprise & Education segment, including the reduction of non-
Enterprise & Education headcount by approximately 15%. On March 14, 2016, we announced that we intend to exit our direct sales presence in almost all of
our non-U.S. and non-northern European geographies related to the distribution of our Enterprise & Education language offerings. If our intentions are
realized, these actions will reduce headcount by approximately 17% of our full-time workforce. For more information about these employee reductions, see
Notes 13 and 21 of Item 8,  contained in this Annual Report on Form 10-K.
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For a discussion of financial information by segment and geographic area, see Note 17 of Item 8, 
contained in this Annual Report on Form 10-K.
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