Rosetta Stone Slides on Cloudy Outlook
NEW YORK (
) -- Shares of
Rosetta Stone
(RST) - Get Report
dipped on light volume in extended trading on Wednesday after the Arlington, Va.-based maker of language learning software gave an outlook for the current quarter that includes plenty of potential downside to Wall Street's current expectations.
The company said it expects non-GAAP
generally accepted accounting principles earnings of 31 to 41 cents a share for the fourth quarter ending in December with total revenue projected between $76 million and $81 million. The average estimate of analysts polled by
Thomson Reuters
is for earnings of 38 cents a share on revenue of $83.2 million in the period.
For the third quarter ended Sept. 30, Rosetta Stone posted a non-GAAP profit of a penny per share on revenue of $60.9 million, which was down 9% from the prior year. The consensus view was for a loss of 6 cents a share in the September period with revenue pegged at $62.7 million.
The stock was last quoted at $21.02, down 7.7%, in afterhours trades, according to
Nasdaq.com
; although volume was miniscule with a little more than 6,000 shares changing hands. Based on a regular session close at $22.78, the shares were up roughly 28% so far in 2010. Since hitting a 52-week high of $27.50 on April 26, however, the stock has been on a roller coaster ride, sinking as low as $16.75 on Aug. 31 before building back to a near-term high of $24.50 last week.
The
summer's volatility
was a product of upheaval in the company's management team, wide swings in the guidance it provided Wall Street and the numbers in eventually reported in certain quarter, and execution risk around the late third-quarter launch of Version 4 TOTALe, the latest version of the company's main product offering, which added more online capabilities, including a subscription component.
In Wednesday's press release, Rosetta Stone President and CEO Tom Adams said initial customer response to Version 4 TOTALe is "very positive." The product was released on Sept. 14, and the company said deferred revenue rose by $12.4 million on a year-over-year basis in the latest quarter, in part because of Version 4 TOTALe sales.
"Sales bookings, revenue and per-share income were all consistent with our expectations," Adams said. "Highlights in the quarter included the continued strength in our international business, with revenue up 119% from a year ago, and growth in our institutional segment of 12% from a year ago."
Consumer revenue, which currently still makes up the bulk of Rosetta Stone's revenue base, totaled $42.7 million in the latest quarter, down 16% from last year. The company attributed the decline to lower advertising spending, which it said reflected "higher prices and lower availability of spot television ads."
This problem of not being able to purchase the advertising it wants at the price it wants has beset Rosetta Stone before and the company said its management is now "testing new marketing strategies and tactics" for the U.S. consumer market.
Headed into Wednesday's report, Wall Street sentiment on Rosetta Stone was still very mixed with six of the nine analysts covering the company rating it at hold.
--
Written by Michael Baron in New York.
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