Rosetta Stone Inc (RST, Financial) filed Quarterly Report for the period ended 2009-06-30.
Rosetta Stone Inc. based in Arlington Va is a leading provider of technology-based language learning solutions consisting of software online services and audio practice tools primarily under the Rosetta Stone brand. Rosetta Stone offers its self-study language learning solutions in 31 languages. Its customers include individuals educational institutions armed forces government agencies and corporations. Rosetta Stone Inc. also provides an online peer-to-peer practice environment known as SharedTalk at www.sharedtalk.com where registered language learners meet for language exchange to practice their foreign language skills. As the leading language-learning software in the world Rosetta Stone makes learning a new language second nature. Millions of learners in more than 150 countries have already used the company\'s software to gain the confidence that comes with truly knowing a new language. Rosetta Stone Inc has a market cap of $587.3 million; its shares were traded at around $28.89 .
Consumer revenue was $42.9 million for the three months ended June 30, 2009, an increase of $5.4 million, or 14.5%, from the three months ended June 30, 2008. The increase in consumer revenue was attributable to a 26% increase in the average selling price of each unit, which accounted for an $8.9 million increase in revenue, partially offset by a 9% decrease in unit sales, which resulted in a $3.5 million decrease in revenue. The reduction in unit volume was due primarily to discontinuation of our entry level three-month online subscription offering in October 2008. Online three-month subscriptions decreased from approximately 10% of total unit sales to less than 1% of total unit sales for the three months ended June 30, 2008 and 2009, respectively. In addition, we also received a $2.6 million initial stocking order from Barnes & Noble in June 2008 to support their expansion of our product line to over 650 of their stores nationally. Excluding this significant inventory stocking order and three-month subscriptions sales in the 2008 period, unit sales increased by 15%. Our sales growth was driven by a 21% increase in our direct advertising expenditures as well as growth in our retail distribution network as the number of kiosks increased from 141 at June 30, 2008 to 183 at June 30, 2009. The decline in global retail revenues was due to the significant inventory stocking order in June 2008, combined with a $0.7 million reserve related to price protection rights granted to resellers.
Institutional revenue was $13.6 million for the three months ended June 30, 2009, an increase of $3.3 million, or 31.8%, compared to the three months ended June 30, 2008. The increase in institutional revenue was primarily due to expansion of our direct sales force. As a result, we had a $1.7 million increase in education and home school revenue, a $1.1 million increase in government and military revenue and a $0.4 million increase in corporate revenue over the comparable prior year period.
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Rosetta Stone Inc. based in Arlington Va is a leading provider of technology-based language learning solutions consisting of software online services and audio practice tools primarily under the Rosetta Stone brand. Rosetta Stone offers its self-study language learning solutions in 31 languages. Its customers include individuals educational institutions armed forces government agencies and corporations. Rosetta Stone Inc. also provides an online peer-to-peer practice environment known as SharedTalk at www.sharedtalk.com where registered language learners meet for language exchange to practice their foreign language skills. As the leading language-learning software in the world Rosetta Stone makes learning a new language second nature. Millions of learners in more than 150 countries have already used the company\'s software to gain the confidence that comes with truly knowing a new language. Rosetta Stone Inc has a market cap of $587.3 million; its shares were traded at around $28.89 .
Highlight of Business Operations:
Stock Compensation Charge. Included in the respective operating expense lines is an aggregate $18.8 million expense, consisting of $18.5 million in stock-based compensation expense and $0.3 million in payroll tax expense, related to common stock grants awarded to key employees equal to a total of 591,491 shares. This grant was net of the number of shares required to be withheld to satisfy the federal, state and local tax withholding obligations. The aggregate grant date fair value of the awards was $18.5 million, which we recognized as stock-based compensation expense on the grant date, as the awards were immediately vested. We allocated this $18.8 million aggregate expense among the operating expense line items in accordance with the functions performed by the respective employees who received the grants.Consumer revenue was $42.9 million for the three months ended June 30, 2009, an increase of $5.4 million, or 14.5%, from the three months ended June 30, 2008. The increase in consumer revenue was attributable to a 26% increase in the average selling price of each unit, which accounted for an $8.9 million increase in revenue, partially offset by a 9% decrease in unit sales, which resulted in a $3.5 million decrease in revenue. The reduction in unit volume was due primarily to discontinuation of our entry level three-month online subscription offering in October 2008. Online three-month subscriptions decreased from approximately 10% of total unit sales to less than 1% of total unit sales for the three months ended June 30, 2008 and 2009, respectively. In addition, we also received a $2.6 million initial stocking order from Barnes & Noble in June 2008 to support their expansion of our product line to over 650 of their stores nationally. Excluding this significant inventory stocking order and three-month subscriptions sales in the 2008 period, unit sales increased by 15%. Our sales growth was driven by a 21% increase in our direct advertising expenditures as well as growth in our retail distribution network as the number of kiosks increased from 141 at June 30, 2008 to 183 at June 30, 2009. The decline in global retail revenues was due to the significant inventory stocking order in June 2008, combined with a $0.7 million reserve related to price protection rights granted to resellers.
Institutional revenue was $13.6 million for the three months ended June 30, 2009, an increase of $3.3 million, or 31.8%, compared to the three months ended June 30, 2008. The increase in institutional revenue was primarily due to expansion of our direct sales force. As a result, we had a $1.7 million increase in education and home school revenue, a $1.1 million increase in government and military revenue and a $0.4 million increase in corporate revenue over the comparable prior year period.
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