Rosetta Stone (RST) - Get Report shares surged to an eight-year high Thursday after the education software provider smashed Wall Street forecasts with a narrower-than-expected loss and a robust revenue outlook.
Rosetta stone said late Wednesday it still expects to book a full-year loss of around $15 million, but nonetheless impressed the Street with a revenue forecast of $191 million, a figure that would mark a 10% gain from 2018. Analysts also cheered the group's transition from software sales to subscription-based revenues, which some said would make profit and margin growth more predictable.
"Sales and revenue growth will return in 2019 after three consecutive down years, with management's guidance calling for double-digit GAAP revenue growth and bookings growth in 20
19," Barrington Research analyst Alexander Paris. "The transition to a subscription model is now complete and the P&L in 2019 will be less "noisy" and improving operating metrics (bookings and revenue growth, subscriber growth, etc.) will become clearer to investors."
Rosetta Stone shares were marked 30.13% higher by mid-afternoon trading in New York and changing hands at $20.30 each, the highest in at least eight years and a move that values the Arlington County, Virginia-based group at just over $463 million.
Rosetta stone posted a loss of 19 cents per share for the three months ending in December, well ahead of the 38 cents per share loss forecast by analysts. It also sees first quarter revenues of around $44.6 million, with operating profitability expected to accelerate through 2019.
"2018 was a transformative year for Rosetta Stone, marked by exceptional growth in our Literacy business, re-imaged products in our Language business and the completion of the transition of our company to subscription sales," said CEO John Hass of the group's full year earnings late Thursday.
"The result is a more balanced, and better positioned Rosetta Stone, with a future clearly focused on leveraging our two biggest assets - our growing presence in U.S. K12 schools and our iconic brand," he noted.