Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Jul. 31, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'ROSETTA STONE INC | ' |
Entity Central Index Key | '0001351285 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 21,295,571 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $46,839 | $98,825 |
Restricted cash | 93 | 12,424 |
Accounts receivable (net of allowance for doubtful accounts of $1,545 and $1,000, respectively) | 49,643 | 60,342 |
Inventory, net | 7,552 | 6,639 |
Prepaid expenses and other current assets | 14,668 | 12,294 |
Income tax receivable | 963 | 197 |
Total current assets | 119,758 | 190,721 |
Property and equipment, net | 24,651 | 17,766 |
Goodwill | 78,684 | 50,059 |
Intangible assets, net | 38,507 | 29,006 |
Other assets | 4,315 | 3,224 |
Total assets | 265,915 | 290,776 |
Current liabilities: | ' | ' |
Accounts payable | 10,577 | 10,326 |
Accrued compensation | 15,895 | 16,380 |
Obligations under capital lease | 653 | 256 |
Other current liabilities | 29,417 | 41,936 |
Deferred revenue | 76,346 | 67,173 |
Total current liabilities | 132,888 | 136,071 |
Deferred revenue | 16,880 | 11,684 |
Deferred income taxes | 10,936 | 9,022 |
Obligations under capital lease | 3,769 | 217 |
Other long-term liabilities | 2,291 | 2,539 |
Total liabilities | 166,764 | 159,533 |
Commitments and contingencies (Note 14) | ' | ' |
Stockholders' equity: | ' | ' |
Preferred stock, $0.001 par value; 10,000 and 10,000 shares authorized, zero and zero shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | ' | ' |
Non-designated common stock, $0.00005 par value, 190,000 and 190,000 shares authorized, 22,832 and 22,588 shares issued and 21,832 and 21,588 shares outstanding at June 30, 2014 and December 31, 2013, respectively | 2 | 2 |
Additional paid-in capital | 175,124 | 171,123 |
Accumulated loss | -65,284 | -29,292 |
Treasury stock, at cost, 1,000 shares at June 30, 2014 and 1,000 shares at December 31, 2013 | -11,435 | -11,435 |
Accumulated other comprehensive income | 744 | 845 |
Total stockholders' equity | 99,151 | 131,243 |
Total liabilities and stockholders' equity | $265,915 | $290,776 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Statement of Financial Position [Abstract] | ' | ' |
Accounts receivable, allowance for doubtful accounts (in dollars) | $1,545 | $1,000 |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Non-designated common stock, par value (in dollars per share) | $0.00 | $0.00 |
Non-designated common stock, shares authorized | 190,000,000 | 190,000,000 |
Non-designated common stock, shares issued | 22,831,674 | 22,588,484 |
Non-designated common stock, shares outstanding | 21,831,674 | 21,588,484 |
Treasury stock, shares | 1,000,000 | 1,000,000 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
Revenue: | ' | ' | ' | ' | ||
Product | $28,125 | $35,458 | [1] | $60,497 | $73,049 | [1] |
Subscription and service | 29,190 | 26,681 | [1] | 57,583 | 53,013 | [1] |
Total revenue | 57,315 | 62,139 | [1] | 118,080 | 126,062 | [1] |
Cost of revenue: | ' | ' | ' | ' | ||
Cost of product revenue | 7,269 | 6,998 | [1] | 15,093 | 13,938 | [1] |
Cost of subscription and service revenue | 4,691 | 3,226 | [1] | 9,038 | 6,550 | [1] |
Total cost of revenue | 11,960 | 10,224 | [1] | 24,131 | 20,488 | [1] |
Gross profit | 45,355 | 51,915 | [1] | 93,949 | 105,574 | [1] |
Operating expenses | ' | ' | ' | ' | ||
Sales and marketing | 37,833 | 32,787 | [1] | 76,930 | 70,059 | [1] |
Research and development | 8,368 | 9,093 | [1] | 17,142 | 16,451 | [1] |
General and administrative | 14,002 | 13,634 | [1] | 30,055 | 26,222 | [1] |
Goodwill impairment | 0 | 0 | [1] | 2,199 | 0 | [1] |
Lease abandonment and termination | 118 | 35 | [1] | 3,688 | 828 | [1] |
Total operating expenses | 60,321 | 55,549 | [1] | 130,014 | 113,560 | [1] |
Loss from operations | -14,966 | -3,634 | [1] | -36,065 | -7,986 | [1] |
Other income and (expense): | ' | ' | ' | ' | ||
Interest income | 5 | 43 | [1] | 10 | 84 | [1] |
Interest expense | -50 | 0 | [1] | -106 | -45 | [1] |
Other income and (expense) | -248 | -9 | [1] | -22 | 410 | [1] |
Total other income (expense) | -293 | 34 | [1] | -118 | 449 | [1] |
Loss before income taxes | -15,259 | -3,600 | [1] | -36,183 | -7,537 | [1] |
Income tax (benefit) expense | 491 | -387 | [1] | -191 | 580 | [1] |
Net loss | ($15,750) | ($3,213) | [1] | ($35,992) | ($8,117) | [1] |
Loss per share: | ' | ' | ' | ' | ||
Basic (usd per share) | ($0.74) | ($0.15) | [1] | ($1.70) | ($0.38) | [1] |
Diluted (usd per share) | ($0.74) | ($0.15) | [1] | ($1.70) | ($0.38) | [1] |
Common shares and equivalents outstanding: | ' | ' | ' | ' | ||
Basic weighted average shares | 21,252 | 21,569 | [1] | 21,188 | 21,465 | [1] |
Diluted weighted average shares | 21,252 | 21,569 | [1] | 21,188 | 21,465 | [1] |
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
Statement of Comprehensive Income [Abstract] | ' | ' | ' | ' | ||
Net loss | ($15,750) | ($3,213) | [1] | ($35,992) | ($8,117) | [1] |
Other comprehensive income (loss), net of tax: | ' | ' | ' | ' | ||
Foreign currency translation gain (loss) | 263 | 120 | -101 | -361 | [1] | |
Other comprehensive income (loss) | 263 | 120 | -101 | -361 | [1] | |
Comprehensive loss | ($15,487) | ($3,093) | ($36,093) | ($8,478) | [1] | |
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' | |
Net loss | ($35,992) | ($8,117) | [1] |
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: | ' | ' | |
Stock-based compensation expense | 3,359 | 3,704 | [1] |
Bad debt expense | 1,472 | 227 | [1] |
Depreciation and amortization | 6,894 | 4,596 | [1] |
Deferred income tax expense (benefit) | -464 | -623 | [1] |
Loss on disposal of equipment | 109 | 205 | [1] |
Goodwill impairment | 2,199 | 0 | [1] |
Net change in: | ' | ' | |
Restricted cash | 17 | 9 | [1] |
Accounts receivable | 12,852 | 8,010 | [1] |
Inventory | -347 | 552 | [1] |
Prepaid expenses and other current assets | -1,853 | -2,744 | [1] |
Income tax receivable | -652 | 811 | [1] |
Other assets | -921 | 42 | [1] |
Accounts payable | -680 | 2,947 | [1] |
Accrued compensation | -3,457 | -1,559 | [1] |
Other current liabilities | -12,053 | -9,796 | [1] |
Other long term liabilities | -250 | 336 | [1] |
Deferred revenue | 11,663 | -1,747 | [1] |
Net cash used in operating activities | -18,104 | -3,147 | [1] |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' | |
Purchases of property and equipment | -4,544 | -4,212 | [1] |
Decrease in restricted cash for Vivity acquisition | 12,314 | 0 | [1] |
Acquisitions, net of cash acquired | -41,687 | -8,180 | [1] |
Net cash used in investing activities | -33,917 | -12,392 | [1] |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' | |
Proceeds from the exercise of stock options | 642 | 1,798 | [1] |
Payments for Repurchase of Stock Options Exercised | 0 | -1,040 | [1] |
Proceeds from Issuance of Common Stock , Net of Issuance Cost | 0 | -171 | [1] |
Payments under capital lease obligations | -366 | -196 | [1] |
Net cash provided by financing activities | 276 | 391 | [1] |
Decrease in cash and cash equivalents | -51,745 | -15,148 | [1] |
Effect of exchange rate changes in cash and cash equivalents | -241 | -972 | [1] |
Net decrease in cash and cash equivalents | -51,986 | -16,120 | [1] |
Cash and cash equivalents-beginning of year | 98,825 | 148,190 | [1] |
Cash and cash equivalents-end of year | 46,839 | 132,070 | [1] |
Cash paid during the periods for: | ' | ' | |
Interest | 106 | 1 | [1] |
Income taxes | 1,034 | 2,038 | [1] |
Noncash financing and investing activities: | ' | ' | |
Accrued purchase price of business acquisition | 0 | 0 | [1] |
Accrued liability for purchase of property and equipment | 374 | 1,033 | [1] |
Equipment acquired under capital lease | $0 | $586 | [1] |
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
NATURE_OF_OPERATIONS
NATURE OF OPERATIONS | 6 Months Ended |
Jun. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
NATURE OF OPERATIONS | ' |
NATURE OF OPERATIONS | |
Rosetta Stone Inc. and its subsidiaries ("Rosetta Stone," or the "Company") develop, market and support a suite of language, literacy and brain fitness solutions consisting of software products, online services, audio practice tools and mobile applications under the Rosetta Stone, Livemocha, Lexia, Fit Brains and Tell Me More brand names. In January 2014, Rosetta Stone acquired Vivity Labs Inc. ("Vivity") and Tell Me More S.A. ("Tell Me More") (see Footnote 3, Business Combinations). The Company's software products are sold on a direct basis and through select retailers. The Company provides its software applications to customers through the sale of packaged software and online subscriptions, domestically and in certain international markets. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended | |||||||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||||||
Accounting Policies [Abstract] | ' | |||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||||||||||||
Principles of Consolidation | ||||||||||||||||||||||||
The accompanying consolidated financial statements include the accounts of Rosetta Stone Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain numbers in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. | ||||||||||||||||||||||||
Basis of Presentation | ||||||||||||||||||||||||
The accompanying consolidated financial statements are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 3, 2014. The June 30, 2014 consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP. | ||||||||||||||||||||||||
The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s statement of financial position at June 30, 2014 and December 31, 2013, the Company’s results of operations for the three and six months ended June 30, 2014 and 2013 and its cash flows for the six months ended June 30, 2014 and 2013 have been made. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014. All references to June 30, 2014 or to the three and six months ended June 30, 2014 and 2013 in the notes to the consolidated financial statements are unaudited. | ||||||||||||||||||||||||
Use of Estimates | ||||||||||||||||||||||||
The preparation of financial statements in accordance with GAAP requires that management make certain estimates and assumptions. Significant estimates and assumptions have been made regarding the allowance for doubtful accounts, estimated sales returns, stock-based compensation, fair value of intangibles and goodwill, inventory reserve, disclosure of contingent assets and liabilities, disclosure of contingent litigation, and allowance for valuation of deferred tax assets. Actual results may differ from these estimates. | ||||||||||||||||||||||||
Revenue Recognition | ||||||||||||||||||||||||
The Company's primary sources of revenue are online subscriptions, software and bundles of software and online subscriptions. The Company also generates revenue from the sale of audio practice products and training and implementation services. Revenue is recognized when all of the following criteria are met: there is persuasive evidence of an arrangement; the product has been delivered or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. Revenues are recorded net of discounts. | ||||||||||||||||||||||||
The Company identifies the units of accounting contained within our sales arrangements in accordance with Accounting Standards Codification ("ASC") 605-25 Revenue Recognition - Multiple Element Arrangements (“ASC 605-25”). In doing so, the Company evaluates a variety of factors including whether the undelivered element(s) have value to the customer on a stand-alone basis or if the undelivered element(s) could be sold by another vendor on a stand-alone basis. | ||||||||||||||||||||||||
For multiple element arrangements that contain software products and related services, the Company allocates the total arrangement consideration to all deliverables based on vendor-specific objective evidence of fair value, or vendor-specific objective evidence ("VSOE"), in accordance with ASC subtopic 985-605-25 Software: Revenue Recognition-Multiple-Element Arrangements ("ASC 985-605-25"). The Company generates a substantial portion of its consumer revenue from Rosetta Stone Version 4 TOTALe which is a multiple element arrangement that includes perpetual software bundled with the subscription and conversational coaching components of the Company's TOTALe online service. The Company has identified two deliverables generally contained in Rosetta Stone V4 TOTALe software arrangements. The first deliverable is the perpetual software, which is delivered at the time of sale, and the second deliverable is the subscription service, which is considered a software-related element. Because the Company only sells the Version 4 TOTALe software on a stand-alone basis in its homeschool version, the Company does not have a sufficient concentration of stand-alone sales of the Version 4 TOTALe software to establish VSOE of fair value for this element. Accordingly, the Company allocates the arrangement consideration using the residual method based on the existence of VSOE of the undelivered element, the subscription service. The Company determines VSOE of fair value of the subscription service by reference to the range of stand-alone renewal sales of the three-month subscription service. The Company reviews these stand-alone sales on a quarterly basis. VSOE of fair value is established if at least 80% of the stand-alone sales are within a range of plus or minus 15% of a midpoint of the range of prices, consistent with generally accepted industry practice. | ||||||||||||||||||||||||
For non-software multiple element arrangements the Company allocates revenue to all deliverables based on their relative selling prices. The Company's non-software multiple element arrangements primarily occur as sales to its Global Enterprise & Education customers. These arrangements can include subscription-based services, audio practice materials and training or any combination thereof. The Company does not have a sufficient concentration of stand-alone sales of the various deliverables noted above to its Global Enterprise & Education customers, and therefore cannot establish VSOE of fair value of each deliverable. Third party evidence of fair value does not exist for the subscription, audio practice and training services due to the lack of interchangeable language products and services within the market. Accordingly, the Company determines the selling price of the subscription, audio practice and training services deliverables included in its non-software multiple element arrangements using the best estimated selling price. The Company determines the best estimated selling price based on its internally published price list which includes suggested sales prices for each deliverable based on the type of client and volume purchased. This price list is derived from past experience and from the expectation of obtaining a reasonable margin based on what each deliverable costs the Company. | ||||||||||||||||||||||||
In the US, the Company offers consumers who purchase packaged software and audio practice products directly from the Company a 30-day, unconditional, full money-back refund. The Company also permits some of our retailers and distributors to return packaged products, subject to certain limitations. The Company establishes revenue reserves for packaged product returns at the time of sale based on historical experience, estimated channel inventory levels, the timing of new product introductions and other factors. | ||||||||||||||||||||||||
The Company distributes its products and services both directly to the end customer and indirectly through resellers. Our resellers earn commissions generally calculated as a fixed percentage of the gross sale to the end customer. The Company evaluates each of its reseller relationships in accordance with ASC 605-45 Revenue Recognition - Principal Agent Considerations (“ASC 605-45”) to determine whether the revenue recognized from indirect sales should be the gross amount of the contract with the end customer or reduced for the reseller commission. In making this determination the Company evaluates a variety of factors including whether it is the primary obligor to the end customer. | ||||||||||||||||||||||||
Revenue for online service subscriptions is recognized ratably over the term of the subscription period, assuming all revenue recognition criteria have been met. Rosetta Stone Version 4 TOTALe bundles, which include an online service subscription including conversational coaching and packaged software, allow customers to begin their online services at any point during a registration window, which is up to six months from the date of purchase from us or an authorized reseller. Online service subscriptions that are not activated during this registration window are forfeited and revenue is recognized upon expiry. Revenue from non-refundable upfront fees that are not related to products already delivered or services already performed is deferred and recognized over the term of the related arrangement or the estimated customer life, as appropriate. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement. | ||||||||||||||||||||||||
Software products include sales to end user customers and resellers. In many cases, revenue from sales to resellers is not contingent upon resale of the software to the end user and is recorded in the same manner as all other product sales. Revenue from sales of packaged software products and audio practice products is recognized as the products are shipped and title passes and risks of loss have been transferred. For many product sales, these criteria are met at the time the product is shipped. For some sales to resellers and certain other sales, the Company defers revenue until the customer receives the product because the Company legally retains a portion of the risk of loss on these sales during transit. In other cases where packaged software products are sold to resellers on a consignment basis, revenue is recognized for these consignment transactions once the end user sale has occurred, assuming the remaining revenue recognition criteria have been met. In accordance with ASC 985-605-50 Revenue Recognition: Customer Payments and Incentives (“ASC 605-50”), cash sales incentives to resellers are accounted for as a reduction of revenue, unless a specific identified benefit is identified and the fair value is reasonably determinable. Price protection for changes in the manufacturer suggested retail value granted to resellers for the inventory that they have on hand at the date the price protection is offered is recorded as a reduction to revenue at the time of sale. | ||||||||||||||||||||||||
The Company offers customers the ability to make payments for packaged software purchases in installments over a period of time, which typically ranges between three and five months. Given that these installment payment plans are for periods less than 12 months, a successful collection history has been established and these fees are fixed and determinable, revenue is recognized at the time of sale, assuming the remaining revenue recognition criteria have been met. Packaged software is provided to customers who purchase directly from our company with a limited right of return. The Company allows its retailers to return unsold products, subject to some limitations. In accordance with ASC subtopic 985-605-15, Software: Revenue Recognition: Products ("ASC 985-605-15"), product revenue is reduced for estimated returns, which are based on historical return rates. | ||||||||||||||||||||||||
In connection with packaged software product sales and online software subscriptions, technical support is provided to customers, including customers of resellers, via telephone support at no additional cost for up to six months from the time of purchase. As the fee for technical support is included in the initial licensing fee, the technical support and services are generally provided within one year, the estimated cost of providing such support is deemed insignificant and no unspecified upgrades/enhancements are offered, technical support revenues are recognized together with the software product and license revenue. Costs associated with the technical support are accrued at the time of sale. | ||||||||||||||||||||||||
Sales commissions from non-cancellable SaaS contracts are deferred and amortized in proportion to the revenue recognized from the related contract. | ||||||||||||||||||||||||
Changes in Accounting Principle | ||||||||||||||||||||||||
In the third quarter of 2013, the Company voluntarily changed its accounting policy for sales commissions related to non-cancellable Software-as-a-Service (“SaaS”) contracts, from recording an expense when incurred, to deferral of the sales commission in proportion to the consideration allocated to each of the elements in the arrangement and in, or over, the same period the revenue is recognized for each of the elements in the arrangement (i.e., over the non-cancellable term of the contract for the SaaS deliverable). The Company is experiencing a significant increase in contracts with multi-year subscriptions and a corresponding increase in sales commissions due, among other reasons, to its acquisition of Lexia Learning Systems, Inc. (“Lexia”) in August 2013. Lexia provides services using a SaaS model and has historically had long-term arrangements with material sales commissions paid to its network of resellers and has applied a sales commission deferral and amortization policy. | ||||||||||||||||||||||||
The Company believes the deferral method described above is preferable primarily because (i) the sales commission charges are so closely related to obtaining the revenue from the non-cancellable contracts that they should be deferred and charged to expense over the same period that the related revenue is recognized; and (ii) it provides a single accounting policy, consistent with that used by Lexia, that makes it easier for financial statement users to understand. Deferred commission amounts are recoverable through the future revenue streams under the non-cancellable arrangements. | ||||||||||||||||||||||||
Short-term deferred commissions are included in prepaid expenses and other current assets, while long-term deferred commissions are included in other assets in the accompanying consolidated balance sheets. The amortization of deferred commissions is included in sales and marketing expense in the accompanying consolidated statements of operations. | ||||||||||||||||||||||||
The accompanying consolidated financial statements and related notes have been adjusted to reflect the impact of this change and the associated deferred tax impact retrospectively to all prior periods. Under the as previously reported basis, there was no book / tax basis difference related to commission expense. Under the as adjusted basis, the deferred commission asset creates a deferred tax liability related to commissions expense which has been deducted for tax purposes. | ||||||||||||||||||||||||
The following tables present the effects of the retrospective application of the voluntary change in accounting principle for sales commissions related to non-cancellable SaaS contracts for the current periods presented, effective as of January 1, 2012 (in thousands, except per share data): | ||||||||||||||||||||||||
Consolidated Balance Sheets | ||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||
Computed | Impact of | As Reported | Computed | Impact of | As Reported | |||||||||||||||||||
under Prior | Commission | under Prior | Commission | |||||||||||||||||||||
Method | Adjustment | Method | Adjustment | |||||||||||||||||||||
Prepaid expense and other current assets | $ | 6,859 | $ | 7,809 | $ | 14,668 | $ | 7,707 | $ | 4,587 | $ | 12,294 | ||||||||||||
Total current assets | $ | 111,949 | $ | 7,809 | $ | 119,758 | $ | 186,134 | $ | 4,587 | $ | 190,721 | ||||||||||||
Other assets | $ | 862 | $ | 3,453 | $ | 4,315 | $ | 3,111 | $ | 113 | $ | 3,224 | ||||||||||||
Total assets | $ | 254,653 | $ | 11,262 | $ | 265,915 | $ | 286,076 | $ | 4,700 | $ | 290,776 | ||||||||||||
Accumulated loss | $ | (76,546 | ) | $ | 11,262 | $ | (65,284 | ) | $ | (33,992 | ) | $ | 4,700 | $ | (29,292 | ) | ||||||||
Total stockholders' equity | $ | 87,889 | $ | 11,262 | $ | 99,151 | $ | 126,543 | $ | 4,700 | $ | 131,243 | ||||||||||||
Total liabilities and stockholders' equity | $ | 254,653 | $ | 11,262 | $ | 265,915 | $ | 286,076 | $ | 4,700 | $ | 290,776 | ||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||||||
Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||
As Previously Reported | Impact of | As Adjusted | As Previously Reported | Impact of | As Adjusted | |||||||||||||||||||
Commission | Commission | |||||||||||||||||||||||
Adjustment | Adjustment | |||||||||||||||||||||||
Sales and marketing | $ | 33,144 | $ | (357 | ) | $ | 32,787 | $ | 70,203 | $ | (144 | ) | $ | 70,059 | ||||||||||
Loss from operations | $ | (3,991 | ) | $ | 357 | $ | (3,634 | ) | $ | (8,130 | ) | $ | 144 | $ | (7,986 | ) | ||||||||
Income tax (benefit) provision | $ | (400 | ) | $ | 13 | $ | (387 | ) | $ | 576 | $ | 4 | $ | 580 | ||||||||||
Net loss | $ | (3,557 | ) | $ | 344 | $ | (3,213 | ) | $ | (8,257 | ) | $ | 140 | $ | (8,117 | ) | ||||||||
Basic net loss per share | $ | (0.16 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.38 | ) | $ | — | $ | (0.38 | ) | ||||||||
Diluted net loss per share | $ | (0.16 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.38 | ) | $ | — | $ | (0.38 | ) | ||||||||
Shares used in computing basic net loss per share | 21,569 | — | 21,569 | 21,465 | — | 21,465 | ||||||||||||||||||
Shares used in computing diluted net loss per share | 21,569 | — | 21,569 | 21,465 | — | 21,465 | ||||||||||||||||||
Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | |||||||||||||||||||||||
Computed | Impact of | As Reported | Computed | Impact of | As Reported | |||||||||||||||||||
under Prior | Commission | under Prior | Commission | |||||||||||||||||||||
Method | Adjustment | Method | Adjustment | |||||||||||||||||||||
Sales and marketing | $ | 40,094 | $ | (2,261 | ) | $ | 37,833 | $ | 80,568 | $ | (3,638 | ) | $ | 76,930 | ||||||||||
Loss from operations | $ | (17,227 | ) | $ | 2,261 | $ | (14,966 | ) | $ | (39,703 | ) | $ | 3,638 | $ | (36,065 | ) | ||||||||
Income tax (benefit) provision | $ | 422 | $ | 69 | $ | 491 | $ | (374 | ) | $ | 183 | $ | (191 | ) | ||||||||||
Net loss | $ | (17,942 | ) | $ | 2,192 | $ | (15,750 | ) | $ | (39,447 | ) | $ | 3,455 | $ | (35,992 | ) | ||||||||
Basic net loss per share | $ | (0.84 | ) | $ | 0.1 | $ | (0.74 | ) | $ | (1.86 | ) | $ | 0.16 | $ | (1.70 | ) | ||||||||
Diluted net loss per share | $ | (0.84 | ) | $ | 0.1 | $ | (0.74 | ) | $ | (1.86 | ) | $ | 0.16 | $ | (1.70 | ) | ||||||||
Shares used in computing basic net loss per share | 21,252 | — | 21,252 | 21,188 | — | 21,188 | ||||||||||||||||||
Shares used in computing diluted net loss per share | 21,252 | — | 21,252 | 21,188 | — | 21,188 | ||||||||||||||||||
Consolidated Statements of Comprehensive Loss | ||||||||||||||||||||||||
Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||
As Previously Reported | Impact of | As Adjusted | As Previously Reported | Impact of | As Adjusted | |||||||||||||||||||
Commission | Commission | |||||||||||||||||||||||
Adjustment | Adjustment | |||||||||||||||||||||||
Net loss | $ | (3,557 | ) | $ | 344 | $ | (3,213 | ) | $ | (8,257 | ) | $ | 140 | $ | (8,117 | ) | ||||||||
Other comprehensive income (loss) | $ | (3,437 | ) | $ | 344 | $ | (3,093 | ) | $ | (8,618 | ) | $ | 140 | $ | (8,478 | ) | ||||||||
Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | |||||||||||||||||||||||
Computed | Impact of | As Reported | Computed | Impact of | As Reported | |||||||||||||||||||
under Prior | Commission | under Prior | Commission | |||||||||||||||||||||
Method | Adjustment | Method | Adjustment | |||||||||||||||||||||
Net loss | $ | (17,942 | ) | $ | 2,192 | $ | (15,750 | ) | $ | (39,447 | ) | $ | 3,455 | $ | (35,992 | ) | ||||||||
Other comprehensive income (loss) | $ | (17,679 | ) | $ | 2,192 | $ | (15,487 | ) | $ | (39,548 | ) | $ | 3,455 | $ | (36,093 | ) | ||||||||
Consolidated Statements of Cash Flow | ||||||||||||||||||||||||
Six Months Ended June 30, 2014 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||
Computed | Impact of | As Reported | As Previously Reported | Impact of | As Adjusted | |||||||||||||||||||
under Prior | Commission | Commission | ||||||||||||||||||||||
Method | Adjustment | Adjustment | ||||||||||||||||||||||
Net loss | $ | (39,447 | ) | $ | 3,455 | $ | (35,992 | ) | $ | (8,257 | ) | $ | 140 | $ | (8,117 | ) | ||||||||
Deferred income tax provision | $ | (647 | ) | $ | 183 | $ | (464 | ) | $ | (627 | ) | $ | 4 | $ | (623 | ) | ||||||||
Prepaid expenses and other current assets | $ | 127 | $ | (1,980 | ) | $ | (1,853 | ) | $ | (2,568 | ) | $ | (176 | ) | $ | (2,744 | ) | |||||||
Other assets | $ | 737 | $ | (1,658 | ) | $ | (921 | ) | $ | 10 | $ | 32 | $ | 42 | ||||||||||
Net cash used in operating activities | $ | (18,104 | ) | $ | — | $ | (18,104 | ) | $ | (3,147 | ) | $ | — | $ | (3,147 | ) | ||||||||
The change in accounting principle resulted in a decrease to accumulated loss of $3,591 thousand as of January 1, 2013 to $13,158 thousand from $16,749 thousand, as previously reported. | ||||||||||||||||||||||||
Income Taxes | ||||||||||||||||||||||||
The Company accounts for income taxes in accordance with ASC topic 740, Income Taxes ("ASC 740"), which provides for an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted. | ||||||||||||||||||||||||
Deferred Tax Valuation Allowance | ||||||||||||||||||||||||
The Company has recorded a valuation allowance offsetting certain of its deferred tax assets as of June 30, 2014. When measuring the need for a valuation allowance on a jurisdiction by jurisdiction basis, the Company assesses both positive and negative evidence regarding whether these deferred tax assets are realizable. In determining deferred tax assets and valuation allowances, the Company is required to make judgments and estimates related to projections of profitability, the timing and extent of the utilization of temporary differences, net operating loss carryforwards, tax credits, applicable tax rates, transfer pricing methodologies and tax planning strategies. The valuation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support a reversal. Because evidence such as the Company’s operating results during the most recent three-year period is afforded more weight than forecasted results for future periods, the Company’s cumulative loss in certain jurisdictions represents significant negative evidence in the determination of whether deferred tax assets are more likely than not to be utilized in certain jurisdictions. This determination resulted in the need for a valuation allowance on the deferred tax assets of certain jurisdictions. The Company will release this valuation allowance when it is determined that it is more likely than not that its deferred tax assets will be realized. Any future release of valuation allowance may be recorded as a tax benefit increasing net income. | ||||||||||||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||||||||||||
The Company values its assets and liabilities using the methods of fair value as described in ASC 820, Fair Value Measurements and Disclosures, ("ASC 820"). ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels of fair value hierarchy are described below: | ||||||||||||||||||||||||
Level 1: Quoted prices for identical instruments in active markets. | ||||||||||||||||||||||||
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. | ||||||||||||||||||||||||
Level 3: Significant inputs to the valuation model are unobservable. | ||||||||||||||||||||||||
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. | ||||||||||||||||||||||||
Business Combinations | ||||||||||||||||||||||||
The Company recognizes all of the assets acquired, liabilities assumed and contractual contingencies from the acquired company as well as contingent consideration at fair value on the acquisition date. The excess of the total purchase price over the fair value of the assets and liabilities acquired is recognized as goodwill. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Generally, restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price (i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as adjustments to goodwill. | ||||||||||||||||||||||||
Stock-Based Compensation | ||||||||||||||||||||||||
The Company accounts for its stock-based compensation in accordance ASC topic 718, Compensation—Stock Compensation ("ASC 718"). Under ASC 718, all stock-based awards, including employee stock option grants, are recorded at fair value as of the grant date and recognized as expense in the statement of operations on a straight-line basis over the requisite service period, which is the vesting period. | ||||||||||||||||||||||||
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. For the six months ended June 30, 2014 and 2013, the fair value of options granted was calculated using the following assumptions: | ||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||
Expected stock price volatility | 64.1%-64.6% | 67.9%-68.0% | ||||||||||||||||||||||
Expected term of options | 6 years | 6 years | ||||||||||||||||||||||
Expected dividend yield | — | — | ||||||||||||||||||||||
Risk-free interest rate | 1.53%-1.71% | 0.90%-1.06% | ||||||||||||||||||||||
The Company reviews a group of comparable industry-related companies and its own data to estimate its expected volatility over the most recent period commensurate with the estimated expected term of the awards. In addition to analyzing our own and peer group data, the Company also considers the contractual option term and vesting period when determining the expected option life and forfeiture rate. The Company estimates the expected term of options using a combination of peer company information and the simplified method for estimating the expected term described in ASC 718-10-S99. For the risk-free interest rate, the Company uses a US Treasury Bond rate consistent with the estimated expected term of the option award. | ||||||||||||||||||||||||
The Company’s restricted stock and restricted stock unit grants are accounted for as equity awards. The grant date fair value is based on the market price of the Company’s common stock at the date of grant. | ||||||||||||||||||||||||
The following table presents stock-based compensation expense included in the related financial statement line items (dollars in thousands): | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Cost of revenue | $ | 17 | $ | 20 | $ | 17 | $ | 22 | ||||||||||||||||
Sales and marketing | 513 | 224 | 941 | 398 | ||||||||||||||||||||
Research and development | 305 | 323 | 432 | 623 | ||||||||||||||||||||
General and administrative | 1,118 | 1,469 | 1,969 | 2,661 | ||||||||||||||||||||
Total | $ | 1,953 | $ | 2,036 | $ | 3,359 | $ | 3,704 | ||||||||||||||||
Foreign Currency Translation and Transactions | ||||||||||||||||||||||||
The functional currency of the Company's foreign subsidiaries is their local currency. Accordingly, assets and liabilities of the foreign subsidiaries are translated into US dollars at exchange rates in effect on the balance sheet date. Income and expense items are translated at average rates for the period. Translation adjustments are recorded as a component of other comprehensive income (loss) in stockholders' equity. | ||||||||||||||||||||||||
Cash flows of consolidated foreign subsidiaries, whose functional currency is their local currency, are translated to US dollars using average exchange rates for the period. The Company reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate item in the reconciliation of the changes in cash and cash equivalents during the period. The following table presents the effect of exchange rate changes and the net unrealized gains and losses from the available-for-sale securities on total comprehensive loss (dollars in thousands): | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
(As Adjusted)* | (As Adjusted)* | |||||||||||||||||||||||
Net loss | $ | (15,750 | ) | $ | (3,213 | ) | $ | (35,992 | ) | $ | (8,117 | ) | ||||||||||||
Foreign currency translation gain | 263 | 120 | (101 | ) | (361 | ) | ||||||||||||||||||
Total comprehensive loss | $ | (15,487 | ) | $ | (3,093 | ) | $ | (36,093 | ) | $ | (8,478 | ) | ||||||||||||
*Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2). | ||||||||||||||||||||||||
Advertising Costs | ||||||||||||||||||||||||
Costs for advertising are expensed as incurred. Advertising expense for the three and six months ended June 30, 2014 was $14.5 million and $30.2 million, respectively, and for the three and six months ended June 30, 2013 was $12.2 million and $27.2 million, respectively. | ||||||||||||||||||||||||
Recently Issued Accounting Standards | ||||||||||||||||||||||||
In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company is in the process of evaluating the impact of the new guidance, if any, on our financial statements. | ||||||||||||||||||||||||
In May 2014, the FASB issued ASUNo. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which replaces the current revenue accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply a five step model to 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract and 5) recognize revenue when (or as) the entity satisfies a performance obligation. Entities may chose from two adoption methods, with certain practical expedients. The Company is in the process of evaluating the impact of the new guidance on our financial statements and disclosures and our adoption method. | ||||||||||||||||||||||||
In July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740): Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), which requires that an unrecognized tax benefit be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except for a situation in which some or all of such net operating loss carryforward, a similar loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The Company adopted this guidance beginning in fiscal year 2014, and the adoption of such guidance did not have a material impact on the presentation of the Company’s reported results of operations or financial position. |
BUSINESS_COMBINATIONS
BUSINESS COMBINATIONS | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Business Combinations [Abstract] | ' | ||||||||||||||||
BUSINESS COMBINATIONS | ' | ||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||
Livemocha, Inc. | |||||||||||||||||
On April 1, 2013, the Company completed its acquisition of Livemocha, Inc. (the “Livemocha Merger”). Livemocha, Inc. is one of the world’s largest online language-learning communities with over 16 million registered members. The acquisition of Livemocha, Inc.’s technology platform has accelerated the Company’s transition to cloud-based learning solutions and reinforced its leadership position in the competitive language-learning industry. The aggregate amount of consideration paid by the Company was $8.4 million in cash. | |||||||||||||||||
The acquisition of Livemocha, Inc. resulted in goodwill of approximately $5.2 million, none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. | |||||||||||||||||
All expenditures incurred in connection with the Livemocha Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Livemocha Merger were $0.4 million during the year ended December 31, 2013. The results of operations for Livemocha, Inc. have been included in the consolidated results of operations since April 1, 2013. | |||||||||||||||||
The Company allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Livemocha Merger. The table below summarizes the estimates of fair value of the Livemocha, Inc. assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. | |||||||||||||||||
The Company finalized its allocation of the purchase price for Livemocha, Inc. as of March 31, 2014. | |||||||||||||||||
The purchase price was allocated as follows (in thousands): | |||||||||||||||||
Cash | $ | 191 | |||||||||||||||
Accounts receivable | 227 | ||||||||||||||||
Other current assets | 93 | ||||||||||||||||
Fixed assets | 35 | ||||||||||||||||
Accounts payable and accrued expenses | (956 | ) | |||||||||||||||
Deferred revenue | (743 | ) | |||||||||||||||
Net deferred tax liability | (1,161 | ) | |||||||||||||||
Net tangible assets acquired | (2,314 | ) | |||||||||||||||
Goodwill | 5,185 | ||||||||||||||||
Amortizable intangible assets | 5,500 | ||||||||||||||||
Purchase price | $ | 8,371 | |||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Useful Lives | Value | ||||||||||||||||
Online community | 3 years | $ | 1,800 | ||||||||||||||
Enterprise relationships | 5 years | 100 | |||||||||||||||
Technology platform | 5 years | 3,400 | |||||||||||||||
Tradename | 2 years | 200 | |||||||||||||||
Total assets | $ | 5,500 | |||||||||||||||
In connection with the Livemocha Merger, the Company recorded deferred tax liabilities related to definite-lived intangible assets that were acquired. As a result of this deferred tax liability balance, the Company reduced its deferred tax asset valuation allowance by $1.2 million. Such reduction was recognized as an income tax benefit in the consolidated statements of operations for the year ended December 31, 2013. | |||||||||||||||||
Lexia Learning Systems, Inc. | |||||||||||||||||
On August 1, 2013, the Company completed its acquisition of Lexia Learning Systems, Inc. (the “Lexia Merger”). Lexia is one of the most trusted and established companies in the reading technology market. The transaction marks the Company’s first extension beyond language learning and takes the Company deeper into the EdTech industry. The aggregate amount of consideration paid by the Company was $21.1 million in cash, net of working capital and deferred revenue adjustments, including a holdback of $3.4 million with 50% of such holdback paid within 30 days of the Company filing its Form 10-K for the year ended December 31, 2013 and 50% of such holdback to be paid on the 18 month anniversary of the acquisition. The Company paid $1.7 million of the holdback in April of 2014. | |||||||||||||||||
The acquisition of Lexia resulted in goodwill of approximately $9.9 million, none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. | |||||||||||||||||
All expenditures incurred in connection with the Lexia Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Lexia Merger were $0.1 million during the year ended December 31, 2013. The results of operations for Lexia have been included in the consolidated results of operations since August 1, 2013. | |||||||||||||||||
The Company allocated the purchase price based on current estimates of the fair value of assets acquired and liabilities assumed in connection with the Lexia Merger. The table below summarizes the estimates of fair value of the Lexia assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. | |||||||||||||||||
The Company finalized its allocation of the purchase price for Lexia as of June 30, 2014. | |||||||||||||||||
Cash | $ | 263 | |||||||||||||||
Accounts receivable | 2,404 | ||||||||||||||||
Other current assets | 105 | ||||||||||||||||
Fixed assets | 255 | ||||||||||||||||
Accounts payable and accrued expenses | (899 | ) | |||||||||||||||
Deferred revenue | (1,223 | ) | |||||||||||||||
Net deferred tax liability | (4,210 | ) | |||||||||||||||
Net tangible assets acquired | (3,305 | ) | |||||||||||||||
Goodwill | 9,938 | ||||||||||||||||
Amortizable intangible assets | 14,500 | ||||||||||||||||
Purchase price | $ | 21,133 | |||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Useful Lives | Value | ||||||||||||||||
Enterprise relationships | 10 years | $ | 9,400 | ||||||||||||||
Technology platform | 7 years | 4,100 | |||||||||||||||
Tradename | 5 years | 1,000 | |||||||||||||||
Total assets | $ | 14,500 | |||||||||||||||
Vivity Labs Inc. | |||||||||||||||||
On January 2, 2014, the Company completed its acquisition of Vivity Labs Inc. (the "Vivity Labs Merger" and "Vivity"). Vivity’s principal business activity is the development of brain fitness games aimed at improving the user’s cognitive function through activity, awareness and motivation through its flagship product, Fit Brains. The applications are designed for use on mobile, web and social platforms. Vivity’s emphasis on mobile solutions is especially compatible with Rosetta Stone’s focus on cloud-based technology to enable on-the-go learning. The aggregate amount of consideration paid by the Company was $12.2 million in cash. | |||||||||||||||||
The acquisition of Vivity Labs Inc. resulted in goodwill of approximately $9.3 million, none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. | |||||||||||||||||
All expenditures incurred in connection with the Vivity Labs Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Vivity Labs Merger were $57 thousand and $51 thousand during the six months ended June 30, 2014 and December 31, 2013, respectively. The results of operations for Vivity Labs have been included in the consolidated results of operations since January 2, 2014. | |||||||||||||||||
The Company has preliminarily allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Vivity Labs Merger. The table below summarizes the estimates of fair value of the Vivity Labs assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill. In the second quarter of 2014 we revised the preliminary value of the acquired technology platform which resulted in a $0.4 million increase to this acquired intangible asset and corresponding decrease to goodwill, with an immaterial impact to amortization expense. The Company has substantially completed the purchase price allocation for this acquisition. However, if additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), including finalization of asset appraisals, the Company will refine its estimates of fair value to allocate the purchase price more accurately. Any such revisions are not expected to be significant. | |||||||||||||||||
The preliminary purchase price is allocated as follows (in thousands): | |||||||||||||||||
Cash | $ | 14 | |||||||||||||||
Accounts receivable | 427 | ||||||||||||||||
Other current assets | 5 | ||||||||||||||||
Accounts payable | (287 | ) | |||||||||||||||
Net deferred tax liability | (919 | ) | |||||||||||||||
Net tangible assets acquired | (760 | ) | |||||||||||||||
Goodwill | 9,333 | ||||||||||||||||
Amortizable intangible assets | 3,577 | ||||||||||||||||
Preliminary purchase price | $ | 12,150 | |||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 2, 2014 | ||||||||||||||||
Tradename | 3 years | $ | 188 | ||||||||||||||
Technology platform | 5 years | 2,448 | |||||||||||||||
Customer relationships | 3 years | 941 | |||||||||||||||
Total assets | $ | 3,577 | |||||||||||||||
Tell Me More S.A. | |||||||||||||||||
On January 9, 2014, the Company completed its acquisition of Tell Me More S.A., (the "Tell Me More Merger" and "Tell Me More") a company organized under the laws of France. Tell Me More provides on-line language learning subscriptions and learning services primarily to corporate and educational organizations. Tell Me More offers a robust suite of SaaS-based language learning products and services that provide intermediate, advanced and business language solutions in nine languages. The Tell Me More Merger strengthens the Company's growing Enterprise & Education business and expands its global footprint. The aggregate amount of consideration paid by the Company was €22.1 million ($30.2 million), including assumed net debt. | |||||||||||||||||
The Tell Me More Merger resulted in goodwill of approximately $21.4 million, none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. | |||||||||||||||||
All expenditures incurred in connection with the Tell Me More Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Merger were $1.0 million and $0.5 million during the six months ended June 30, 2014 and the year ended December 31, 2013, respectively. The results of operations for Tell Me More S.A. have been included in the consolidated results of operations since January 9, 2014. | |||||||||||||||||
The Company has preliminarily allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Tell Me More Merger. The table below summarizes the estimates of fair value of the Tell Me More S.A. assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill. The Company has substantially completed the purchase price allocations for this acquisition. However, if additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), including finalization of asset appraisals, the Company will refine its estimates of fair value to allocate the purchase price more accurately. Any such revisions are not expected to be significant. | |||||||||||||||||
The preliminary purchase price is allocated as follows (in thousands): | |||||||||||||||||
Cash | $ | 2,323 | |||||||||||||||
Accounts receivable | 3,107 | ||||||||||||||||
Inventory | 526 | ||||||||||||||||
Prepaid expenses | 227 | ||||||||||||||||
Fixed assets | 5,594 | ||||||||||||||||
Other non current assets | 130 | ||||||||||||||||
Accounts payable | (732 | ) | |||||||||||||||
Accrued compensation | (2,863 | ) | |||||||||||||||
Deferred revenue | (2,190 | ) | |||||||||||||||
Other current liabilities | (1,098 | ) | |||||||||||||||
Obligation under capital lease | (3,958 | ) | |||||||||||||||
Net deferred tax liability | (1,392 | ) | |||||||||||||||
Net tangible assets acquired | (326 | ) | |||||||||||||||
Goodwill | 21,407 | ||||||||||||||||
Amortizable intangible assets | 9,105 | ||||||||||||||||
Preliminary purchase price | $ | 30,186 | |||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 9, 2014 | ||||||||||||||||
Customer relationships | 5 years | $ | 4,348 | ||||||||||||||
Technology platform | 5 years | 4,144 | |||||||||||||||
Tradename | 1 year | 613 | |||||||||||||||
Total assets | $ | 9,105 | |||||||||||||||
Pro Forma Adjusted Summary | |||||||||||||||||
The results of Livemocha, Lexia, Vivity and Tell Me More’s operations have been included in the consolidated financial statements subsequent to their respective acquisition dates. | |||||||||||||||||
The following schedule presents unaudited consolidated pro forma results of operations data as if the Vivity Labs and Tell Me More Mergers had occurred on January 1, 2013 and the Livemocha and Lexia Mergers had occurred on January 1, 2012 (collectively "the Mergers"). This information does not purport to be indicative of the actual results that would have occurred if the Mergers had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in thousands, except per share amounts): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Revenue | $ | 61,563 | $ | 73,167 | $ | 127,104 | $ | 146,555 | |||||||||
Net loss | $ | (11,352 | ) | $ | (13,597 | ) | $ | (26,661 | ) | $ | (14,577 | ) | |||||
Basic loss per share | $ | (0.53 | ) | $ | (0.63 | ) | $ | (1.25 | ) | $ | (0.68 | ) | |||||
Diluted loss per share | $ | (0.53 | ) | $ | (0.63 | ) | $ | (1.25 | ) | $ | (0.68 | ) | |||||
The operations of Livemocha and Tell Me More have been integrated into the overall operations of the Company. The results of Livemocha and Tell Me More are reported within the results of the Company’s operating segments and are not recorded on a stand-alone basis. Therefore, it is impracticable to report revenue and earnings from Livemocha and Tell Me More for the six months ended June 30, 2014. Revenue and net loss from Lexia were $3.3 million and $4.6 million for the six months ended June 30, 2014, respectively. Revenue and net loss from Vivity were $0.8 million and $1.1 million for the six months ended June 30, 2014, respectively. |
NET_LOSS_PER_SHARE
NET LOSS PER SHARE | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | ||||||||||||||||
Earnings Per Share [Abstract] | ' | |||||||||||||||
NET LOSS PER SHARE | ' | |||||||||||||||
NET LOSS PER SHARE | ||||||||||||||||
Net loss per share is computed under the provisions of ASC topic 260 - Earnings Per Share. Basic loss per share is computed using net loss and the weighted average number of shares of common stock outstanding. Diluted earnings per share reflect the weighted average number of shares of common stock outstanding plus any potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of shares issuable upon the exercise of stock options, restricted stock awards, restricted stock units and conversion of shares of preferred stock. Common stock equivalent shares are excluded from the diluted computation if their effect is anti-dilutive. | ||||||||||||||||
The following table sets forth the computation of basic and diluted net loss per common share (in thousands, except per share amounts): | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(As Adjusted)* | (As Adjusted)* | |||||||||||||||
Numerator: | ||||||||||||||||
Net Loss | $ | (15,750 | ) | $ | (3,213 | ) | $ | (35,992 | ) | $ | (8,117 | ) | ||||
Denominator: | ||||||||||||||||
Weighted average number of common shares: | ||||||||||||||||
Basic | 21,252 | 21,569 | 21,188 | 21,465 | ||||||||||||
Diluted | 21,252 | 21,569 | 21,188 | 21,465 | ||||||||||||
Loss per common share: | ||||||||||||||||
Basic | $ | (0.74 | ) | $ | (0.15 | ) | $ | (1.70 | ) | $ | (0.38 | ) | ||||
Diluted | $ | (0.74 | ) | $ | (0.15 | ) | $ | (1.70 | ) | $ | (0.38 | ) | ||||
*Certain amounts have been adjusted for the retrospective change in accounting principle for sales commission (See Note 2). | ||||||||||||||||
For the three and six months ended June 30, 2014 and 2013, no common stock equivalent shares were included in the calculation of the Company’s diluted net income per share. | ||||||||||||||||
The following is a summary of common stock equivalents for the securities outstanding during the respective periods that have been excluded from the earnings per share calculations as their impact was anti-dilutive. | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Stock options | 71,000 | 376,000 | 90,000 | 365,000 | ||||||||||||
Restricted stock units | 97,000 | 96,000 | 92,000 | 91,000 | ||||||||||||
Restricted stocks | 37,000 | 216,000 | 81,000 | 228,000 | ||||||||||||
Total common stock equivalent shares | 205,000 | 688,000 | 263,000 | 684,000 | ||||||||||||
INVENTORY
INVENTORY | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
INVENTORY | ' | ||||||||
INVENTORY | |||||||||
Inventory consisted of the following (in thousands): | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 3,872 | $ | 3,267 | |||||
Finished goods | 3,680 | 3,372 | |||||||
Total inventory | $ | 7,552 | $ | 6,639 | |||||
GOODWILL
GOODWILL | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||
GOODWILL | ' | ||||||||||||||||
GOODWILL | |||||||||||||||||
The value of goodwill is primarily derived from the acquisition of Rosetta Stone Ltd. (formerly known as Fairfield & Sons, Ltd.) in January 2006, the acquisition of certain assets of SGLC International Co. Ltd ("SGLC") in November 2009, the acquisitions of Livemocha and Lexia in 2013 and the acquisitions of Vivity and Tell Me More in January 2014. | |||||||||||||||||
The Company tests goodwill for impairment annually on June 30 of each year at the reporting unit level using a fair value approach, in accordance with the provisions of ASC 350, or more frequently, if impairment indicators arise. The Company's reporting units are: North America Consumer (excluding Vivity), Lexia, Rest of World Consumer, Global Enterprise and Education (excluding Lexia) and Vivity. Both Lexia and Vivity are components of larger operating segments; however, each of these businesses is considered a reporting unit for goodwill impairment testing purposes. Prior to the acquisitions of Vivity and Lexia, the Company's reporting units were the same as its operating segments. | |||||||||||||||||
The following table represents the balance and changes in goodwill for the six months ended June 30, 2014 (in thousands): | |||||||||||||||||
North America Consumer | Rest of World | Global Enterprise & Education | Total | ||||||||||||||
Consumer | |||||||||||||||||
Balance as of December 31, 2013 | $ | 17,971 | $ | 2,200 | $ | 29,888 | $ | 50,059 | |||||||||
Acquisition of Vivity | 9,333 | — | — | 9,333 | |||||||||||||
Acquisition of Tell Me More | — | — | 21,407 | 21,407 | |||||||||||||
Impairment charge | — | (2,199 | ) | — | (2,199 | ) | |||||||||||
Effect of change in foreign currency rate | (33 | ) | (1 | ) | 118 | 84 | |||||||||||
Balance as of June 30, 2014 | $ | 27,271 | $ | — | $ | 51,413 | $ | 78,684 | |||||||||
Interim Impairment Testing of Goodwill for ROW Consumer | |||||||||||||||||
As discussed in more detail in “Note 2” to the Company’s audited consolidated financial statements included in the Annual Report, goodwill is tested annually for impairment on June 30 of each year or more frequently if impairment indicators arise. In connection with the annual goodwill impairment analysis performed in the prior year at June 30, 2013, the Company determined that the fair value of each of the Company's reporting units exceeded its carrying value, and therefore no goodwill impairment charge was recorded in 2013. | |||||||||||||||||
During the three months ended March 31, 2014, the Company determined sufficient indication existed to require performance of an interim goodwill impairment analysis as of March 31, 2014 for the ROW Consumer reporting unit (“ROW Consumer”). This indicator was due to a further unexpected decline in the operations of the ROW Consumer reporting unit, with further decreases in revenue and bookings within the reporting unit driving lower than expected operating results for the quarter and impacting the forecast going forward. In this interim goodwill impairment test, the ROW Consumer reporting unit failed step one. | |||||||||||||||||
The combination of the lower reporting unit fair value calculated in step one and the identification of unrecognized fair value changes to the carrying values of other assets and liabilities (primarily tradename and deferred revenue) in the second step of the interim goodwill impairment test, resulted in an implied fair value of goodwill below the carrying value of goodwill for ROW Consumer. As a result, the Company recorded its best estimate of the goodwill impairment loss of $2.2 million, which represents a full impairment of ROW Consumer’s goodwill. In the second quarter we finalized the measurement of the impairment with no adjustment to the estimated impairment loss initially recorded in the first quarter. | |||||||||||||||||
Annual Impairment Testing of Goodwill | |||||||||||||||||
In connection with the annual goodwill impairment analysis performed as of June 30, 2014, the Company determined that the fair value of each of the Company's reporting units with material goodwill balances exceeded its carrying value, and therefore no goodwill impairment charges were recorded in connection with the annual analysis. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 6 Months Ended | ||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ' | ||||||||||||||||||||||||
INTANGIBLE ASSETS | ' | ||||||||||||||||||||||||
INTANGIBLE ASSETS | |||||||||||||||||||||||||
Intangible assets consisted of the following items as of the dates indicated (in thousands): | |||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||
Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | ||||||||||||||||||||
Amount | Amount | Amount | Amount | ||||||||||||||||||||||
Tradename/trademark | $ | 12,609 | $ | (646 | ) | $ | 11,963 | $ | 11,807 | $ | (158 | ) | $ | 11,649 | |||||||||||
Core technology | 16,541 | (4,499 | ) | 12,042 | 9,954 | (3,207 | ) | 6,747 | |||||||||||||||||
Customer relationships | 27,448 | (13,104 | ) | 14,344 | 22,152 | (11,720 | ) | 10,432 | |||||||||||||||||
Website | 12 | (12 | ) | — | 12 | (12 | ) | — | |||||||||||||||||
Patents | 300 | (142 | ) | 158 | 300 | (122 | ) | 178 | |||||||||||||||||
Total | $ | 56,910 | $ | (18,403 | ) | $ | 38,507 | $ | 44,225 | $ | (15,219 | ) | $ | 29,006 | |||||||||||
The intangible assets recorded as a result of the Vivity Labs Merger are included in the June 30, 2014 balances. The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 2, 2014 | ||||||||||||||||||||||||
Tradename | 3 years | $ | 188 | ||||||||||||||||||||||
Technology platform | 5 years | 2,448 | |||||||||||||||||||||||
Customer relationships | 3 years | 941 | |||||||||||||||||||||||
Total assets | $ | 3,577 | |||||||||||||||||||||||
The intangible assets recorded as a result of the Tell Me More Merger are included in the June 30, 2014 balances. The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 8, 2014 | ||||||||||||||||||||||||
Customer relationships | 5 years | $ | 4,348 | ||||||||||||||||||||||
Technology platform | 5 years | 4,144 | |||||||||||||||||||||||
Tradename | 1 year | 613 | |||||||||||||||||||||||
Total assets | $ | 9,105 | |||||||||||||||||||||||
The following table presents amortization of intangible assets included in the related financial statement line items during the respective periods (in thousands): | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Cost of revenue | $ | 146 | $ | — | $ | 293 | $ | — | |||||||||||||||||
Sales and marketing | 931 | 183 | 1,876 | 183 | |||||||||||||||||||||
Research and development | 531 | 180 | 1,015 | 190 | |||||||||||||||||||||
Total | $ | 1,608 | $ | 363 | $ | 3,184 | $ | 373 | |||||||||||||||||
The increase in amortization expense is due to the amortization of intangible assets recorded as a result of the Livemocha and Lexia acquisitions in 2013 and the Vivity and Tell Me More acquisitions in 2014. | |||||||||||||||||||||||||
The following table summarizes the estimated future amortization expense related to intangible assets for the remaining six months of 2014 and years thereafter (in thousands): | |||||||||||||||||||||||||
As of June 30, 2014 | |||||||||||||||||||||||||
2014-remaining | $ | 3,170 | |||||||||||||||||||||||
2015 | 5,651 | ||||||||||||||||||||||||
2016 | 5,169 | ||||||||||||||||||||||||
2017 | 4,641 | ||||||||||||||||||||||||
2018 | 4,028 | ||||||||||||||||||||||||
Thereafter | 5,242 | ||||||||||||||||||||||||
Total | $ | 27,901 | |||||||||||||||||||||||
OTHER_CURRENT_LIABILITIES
OTHER CURRENT LIABILITIES | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Other Liabilities Disclosure [Abstract] | ' | ||||||||
OTHER CURRENT LIABILITIES | ' | ||||||||
OTHER CURRENT LIABILITIES | |||||||||
The following table summarizes other current liabilities (in thousands): | |||||||||
June 30, | December 31, 2013 | ||||||||
2014 | |||||||||
Accrued marketing expenses | $ | 12,481 | $ | 19,885 | |||||
Accrued professional and consulting fees | 4,122 | 4,570 | |||||||
Sales return reserve | 2,796 | 4,834 | |||||||
Sales, withholding and property taxes payable | 4,432 | 3,968 | |||||||
Accrued purchase price of business acquisition | 1,688 | 1,688 | |||||||
Other | 3,898 | 6,991 | |||||||
Total other current liabilities | $ | 29,417 | $ | 41,936 | |||||
CAPITAL_LEASES
CAPITAL LEASES | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Leases [Abstract] | ' | ||||
CAPITAL LEASES | ' | ||||
CAPITAL LEASES | |||||
The Company enters into capital leases under non-committed arrangements for equipment and software. In addition, as a result of the Tell Me More Merger, the Company assumed a capital lease for a building near Versailles, France, where Tell Me More’s headquarters are located. The fair value of the lease liability at the date of acquisition was $4.0 million. | |||||
During the six months ended June 30, 2013 the Company acquired $0.6 million in equipment and software through the issuance of capital leases. This non-cash investing activity has been excluded from the consolidated statement of cash flows. | |||||
Future minimum payments under capital leases with initial terms of one year or more are as follows (in thousands): | |||||
As of June 30, 2014 | |||||
2014-remaining | $ | 338 | |||
2015 | 820 | ||||
2016 | 618 | ||||
2017 | 618 | ||||
2018-Thereafter | 2,901 | ||||
Total minimum lease payments | 5,295 | ||||
Less amount representing interest | 873 | ||||
Present value of net minimum lease payments | 4,422 | ||||
Less current portion | 653 | ||||
Obligations under capital lease, long-term | $ | 3,769 | |||
INCOME_TAXES
INCOME TAXES | 6 Months Ended | |
Jun. 30, 2014 | ||
Income Tax Disclosure [Abstract] | ' | |
INCOME TAXES | ' | |
INCOME TAXES | ||
In accordance with ASC topic 740, Income Taxes (“ASC 740”), and ASC subtopic 740-270, Income Taxes: Interim Reporting, the income tax provision for the six months ended June 30, 2014 is based on the estimated annual effective tax rate for fiscal year 2014. The estimated effective tax rate may be subject to adjustment in subsequent quarterly periods as the estimates of pretax income for the year, along with other items that may affect the rate, may change and may create a different relationship between domestic and foreign income and loss. | ||
The Company accounts for uncertainty in income taxes under ASC subtopic 740-10-25, Income Taxes: Overall: Background (“ASC 740-10-25”). ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. | ||
As of June 30, 2014, the Company is under audit in the United States for the 2009, 2010 and 2011 tax years. Currently we expect IRS field work to be completed no later than the third quarter 2014 and may provide additional information at that time. While the ultimate results cannot be predicted with certainty, the Company believes that the resulting adjustments, if any, will not have a material adverse effect on its consolidated financial condition or results of operations. | ||
As of June 30, 2014 and December 31, 2013, the Company had $140,000 and $143,000, respectively, of unrecognized tax benefits, which if recognized, $99,000 would affect income tax expense. These liabilities for unrecognized tax benefits are presented as a reduction to the related deferred tax asset where appropriate and the remaining amount is included in “Other Long Term Liabilities.” Interest and penalties related to uncertain tax positions are recorded as part of the income tax provision and are approximately $20,000 as of June 30, 2014. | ||
Valuation Allowance Recorded for Deferred Tax Assets | ||
The Company evaluates the recoverability of its deferred tax assets at each reporting period for each tax jurisdiction and establishes a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be recovered. As of June 30, 2014, the analysis of the need for a valuation allowance on US deferred tax assets considered that the US entity has incurred a three-year cumulative loss. As previously disclosed, if the Company does not have sufficient objective positive evidence to overcome a three-year cumulative loss, a valuation allowance may be necessary. In evaluating whether to record a valuation allowance, the guidance in ASC 740 deems that the existence of cumulative losses in recent years is a significant piece of objectively verifiable negative evidence that is difficult to overcome. An enterprise that has cumulative losses is generally prohibited from using an estimate of future earnings to support a conclusion that realization of an existing deferred tax asset is more likely than not. | ||
Consideration has been given to the following positive and negative evidence: | ||
• | Three-year cumulative evaluation period ended June 30, 2014 results in a cumulative US pre-tax loss; | |
• | from 2006, when the US entity began filing as a C-corporation for income tax purposes, through 2010, the US entity generated taxable income each year; | |
• | the Company has a history of utilizing all operating tax loss carryforwards and has not had any tax loss carryforwards or credits expire unused; | |
• | lengthy loss carryforward periods of 20 years for US federal and most state jurisdictions apply; and | |
• | the Company incurred a US federal jurisdiction net operating loss for the most recently completed calendar year and has additional net operating loss carryforwards subject to limitation pursuant to IRC Section 382. | |
As of June 30, 2014, a full valuation allowance was provided for the US, Korea, Japan, China, Hong Kong, Mexico, Spain and Brazil where the Company has determined the deferred tax assets will not more likely than not be realized. Further, in France a partial valuation allowance has been recorded on deferred tax assets the Company believes are not more likely than not to be realized. | ||
Evaluation of the remaining jurisdictions as of June 30, 2014 resulted in the determination that no additional valuation allowances were necessary at this time. However, the Company will continue to assess the need for a valuation allowance against its deferred tax assets in the future and the valuation will be adjusted accordingly, which could materially affect the Company’s financial position and results of operations. | ||
As of June 30, 2014, and December 31, 2013, the Company’s US deferred tax liability was $9.7 million and $9.6 million, respectively, related to its goodwill and indefinite lived intangibles. As of June 30, 2014 the Company had foreign net deferred tax liabilities of $1.8 million compared to net deferred tax assets of $36 thousand at December 31, 2013. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | |||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
STOCK-BASED COMPENSATION | ||||||||||||||
2006 Stock Incentive Plan | ||||||||||||||
On January 4, 2006, the Company established the Rosetta Stone Inc. 2006 Stock Incentive Plan (the "2006 Plan") under which the Company's Board of Directors, at its discretion, could grant stock options to employees and certain directors of the Company and affiliated entities. The 2006 Plan initially authorized the grant of stock options for up to 1,942,200 shares of common stock. On May 28, 2008, the Board of Directors authorized the grant of additional stock options for up to 195,000 shares of common stock under the plan, resulting in total stock options available for grant under the 2006 Plan of 2,137,200 as of December 31, 2008. The stock options granted under the 2006 Plan generally expire at the earlier of a specified period after termination of service or the date specified by the Board or its designated committee at the date of grant, but not more than ten years from such grant date. Stock issued as a result of exercises of stock options will be issued from the Company's authorized available stock. | ||||||||||||||
2009 Omnibus Incentive Plan | ||||||||||||||
On February 27, 2009, the Company's Board of Directors approved the 2009 Omnibus Incentive Plan (the "2009 Plan") that provides for the ability of the Company to grant up to 2,437,744 new stock incentive awards or options including Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Performance based Restricted Stock, Share Awards, Phantom Stock and Cash Incentive Awards. The stock incentive awards and options granted under the 2009 Plan generally expire at the earlier of a specified period after termination of service or the date specified by the Board or its designated committee at the date of grant, but not more than ten years from such grant date. On May 26, 2011 the Board of Directors authorized and the Company's shareholders' approved the allocation of an additional 1,000,000 shares of common stock to the 2009 Plan. On May 23, 2012, the Board of Directors authorized and the Company's shareholders approved the allocation of 1,122,930 additional shares of common stock to the 2009 Plan. On May 23, 2013, the Board of Directors authorized and the Company's shareholders approved the allocation of 2,317,000 additional shares of common stock to the 2009 Plan. On May 20, 2014, the Board of Directors authorized and the Company's shareholders approved the allocation of 500,000 additional shares of common stock to the 2009 Plan. | ||||||||||||||
Concurrent with the approval of the 2009 Plan, the 2006 Plan was terminated for purposes of future grants. At June 30, 2014 there were 2,460,005 shares available for future grant under the 2009 Plan. | ||||||||||||||
In accordance with ASC 718, the fair value of stock-based awards to employees is calculated as of the date of grant. Compensation expense is then recognized on a straight-line basis over the requisite service period of the award. The Company uses the Black-Scholes pricing model to value its stock options, which requires the use of estimates, including future stock price volatility, expected term and forfeitures. Stock-based compensation expense recognized is based on the estimated portion of the awards that are expected to vest. Estimated forfeiture rates were applied in the expense calculation. | ||||||||||||||
Stock Options | ||||||||||||||
The following table summarizes the Company's stock option activity from January 1, 2014 to June 30, 2014: | ||||||||||||||
Options | Weighted | Weighted | Aggregate | |||||||||||
Outstanding | Average | Average | Intrinsic | |||||||||||
Exercise | Contractual | Value | ||||||||||||
Price | Life (years) | |||||||||||||
Options Outstanding, January 1, 2014 | 1,927,552 | $ | 13.61 | 7.54 | $ | 2,829,380 | ||||||||
Options granted | 608,574 | 11.64 | ||||||||||||
Options exercised | (112,307 | ) | 5.72 | |||||||||||
Options canceled | (373,399 | ) | 14.72 | |||||||||||
Options Outstanding, June 30, 2014 | 2,050,420 | 13.34 | 7.83 | 724,525 | ||||||||||
Vested and expected to vest June 30, 2014 | 1,871,360 | 13.43 | 7.7 | 715,585 | ||||||||||
Exercisable at June 30, 2014 | 821,204 | $ | 14.54 | 6.28 | $ | 582,808 | ||||||||
As of June 30, 2014, there were approximately $7.8 million of unrecognized stock-based compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 2.73 years. | ||||||||||||||
Stock options are granted at the discretion of the Board of Directors or the Compensation Committee (or its authorized member(s)) and expire 10 years from the date of the grant. Options generally vest over a four-year period based upon required service conditions. No options have performance or market conditions. The Company calculates the pool of additional paid-in capital associated with excess tax benefits using the "simplified method" in accordance with ASC 718. | ||||||||||||||
Restricted Stock Awards | ||||||||||||||
The following table summarizes the Company's restricted stock award activity from January 1, 2014 to June 30, 2014: | ||||||||||||||
Nonvested | Weighted | Aggregate | ||||||||||||
Outstanding | Average | Intrinsic | ||||||||||||
Grant Date | Value | |||||||||||||
Fair Value | ||||||||||||||
Nonvested Awards, January 1, 2014 | 634,031 | $ | 12.28 | $ | 7,785,901 | |||||||||
Awards granted | 223,923 | 11.83 | ||||||||||||
Awards vested | (220,409 | ) | 10.33 | |||||||||||
Awards canceled | (97,414 | ) | 13.45 | |||||||||||
Nonvested Awards, June 30, 2014 | 540,131 | $ | 12.71 | $ | 6,864,579 | |||||||||
As of June 30, 2014, future compensation cost related to the nonvested portion of the restricted stock awards not yet recognized in the consolidated statement of operations was $6.3 million and is expected to be recognized over a period of 2.84 years. | ||||||||||||||
Restricted stock awards are granted at the discretion of the Board of Directors or Compensation Committee (or its authorized member(s)). Restricted stock awards generally vest over a four-year period based upon required service conditions. | ||||||||||||||
Restricted Stock Units | ||||||||||||||
During the six months ended June 30, 2014, 34,498 restricted stock units were granted. The Company did not grant any restricted stock units prior to April 2009. | ||||||||||||||
Long Term Incentive Program | ||||||||||||||
On February 21, 2013, the Company’s board of directors approved the 2013 Rosetta Stone Inc. Long Term Incentive Program (“2013 LTIP”). The 2013 LTIP is administered under the Rosetta Stone Inc. 2009 Omnibus Incentive Plan (the “2009 Plan”) and the shares awarded under the 2013 LTIP will be taken from the shares reserved under the 2009 Plan. The purpose of the 2013 LTIP is to: motivate senior management and other executives to achieve key financial and strategic business objectives of the Company; offer eligible executives of the Company a competitive total compensation package; reward executives in the success of the Company; provide ownership in the Company; and retain key talent. The 2013 LTIP is effective from January 1, 2013 until December 31, 2014. | ||||||||||||||
Executives designated by the board of directors will be eligible to receive performance stock awards and cash upon the Company’s achievement of specified performance goals between January 1, 2013 and December 31, 2014. In order for the granting of any performance stock award or any cash payment to be made under the 2013 LTIP, the Company must meet the minimum threshold requirements for a performance goal for the 2014 fiscal year in addition to the cumulative threshold performance goals for the two year period ended December 31, 2014. Each performance goal is mutually exclusive. Each performance goal has a range of payout levels depending on the achievement of the goal ranging from zero to 200% of the incentive target. | ||||||||||||||
The maximum number of shares to be issued as performance share awards is 482,629 and the maximum cash payout is $2.5 million. However, executives hired after the approval of the 2013 LTIP may be allowed to participate at the discretion of the board of directors, which could raise the overall share awards and cash payouts. The minimum number of shares to be issued as performance stock awards is zero, and the minimum cash payout is zero. If performance stock awards are granted, the shares will be 100% vested as of the date of grant. There will be no subsequent holding period requirement. | ||||||||||||||
Before any granting of performance stock awards or payment of cash pursuant to an award granted under the 2013 LTIP can be made, the material terms of the performance goals must be disclosed to, and subsequently approved by, the stockholders, in accordance with Treasury Regulation Section 1.162-27(e)(4). | ||||||||||||||
The Company’s stockholders approved the material terms of the performance goals on May 23, 2013, the grant date for the performance stock awards. |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2014 | |
Stockholders' Equity Note [Abstract] | ' |
STOCKHOLDERS' EQUITY | ' |
STOCKHOLDERS' EQUITY | |
At June 30, 2014, the Company's board of directors had the authority to issue 200,000,000 shares of stock, of which 190,000,000 were designated as Common Stock, with a par value of $0.00005 per share, and 10,000,000 were designated as Preferred Stock, with a par value of $0.001 per share. At June 30, 2014, the Company had shares of common stock issued of 22,831,674 and shares of common stock outstanding of 21,831,674. | |
On May 8, 2013, the Company filed a universal shelf registration statement which became effective on May 30, 2013. The registration statement permitted certain holders of the Company’s stock to offer the shares of common stock held by them. On June 11, 2013 the selling shareholders, ABS Capital Partners IV Trust and Norwest Equity Partners VIII, LP, sold a combined total of 3,490,000 shares at an offering price of $16.00. During November and December 2013, ABS Capital Partners IV Trust sold the remainder of its common stock holdings in the Company. As of June 30, 2014, Norwest Equity Partners VIII, LP continues to hold only a nominal number of shares of common stock. The shelf also provides the Company with the flexibility to offer an amount of equity or issue debt in the amount of $150.0 million. The Company issued and sold an additional 10,000 shares at a per share price of $16.00 in the offering. | |
On August 22, 2013, the Company’s Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $25 million of its outstanding common stock from time to time in the open market or in privately negotiated transactions depending on market conditions, other corporate considerations and applicable legal requirements. The Company expects to fund the repurchases through existing cash balances and cash generated from operations. For the year ended December 31, 2013, the Company paid $11.4 million to repurchase 1.0 million shares | |
at a weighted average price of $11.44 per share as part of this program. No shares were repurchased during the six months ended June 30, 2014. Shares repurchased under the program were recorded as treasury stock on the Company’s consolidated balance sheet. The shares repurchased under this program during the year ended December 31, 2013 were not the result of an accelerated share repurchase agreement. Management has not made a decision on whether shares purchased under this program will be retired or reissued. |
LEASE_ABANDONMENT
LEASE ABANDONMENT | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Restructuring and Related Activities [Abstract] | ' | |||||||
LEASE ABANDONMENT | ' | |||||||
LEASE ABANDONMENT | ||||||||
As part of the Company’s effort to reduce general and administrative expenses through a planned space consolidation at its Arlington, Virginia headquarters location, the Company incurred a lease abandonment charge of $3.2 million for the six months ended June 30, 2014. Prior to January 31, 2014, the Company occupied the 6th and 7th floors at its Arlington, Virginia headquarters. The Company estimated the liability under operating lease agreements and accrued lease abandonment costs in accordance with ASC 420, Exit or Disposal Cost Obligation ("ASC 420"), as the Company has no future economic benefit from the abandoned space and the lease does not terminate until December 31, 2018. All leased space related to the 6th floor was abandoned and ceased to be used by the Company on January 31, 2014. | ||||||||
In March 2013 Rosetta Stone Japan Inc. partially abandoned its Japan office as a result of excess office space due to reduction in staff along with overall local operations business performance. The Company estimated the liability under the operating lease agreement reduced for anticipated sublease income in accordance with ASC 420 as the Company has no future economic benefit from the abandoned space and the lease does not terminate until February 28, 2015. As of March 31, 2014, the Company ceased to use the remaining office space in this facility and simultaneously negotiated and paid a lease termination fee of $0.4 million. The Company has been released from all obligations under the lease arrangement as of June 30, 2014. | ||||||||
A summary of the Company’s lease abandonment activity for the six months ended June 30, 2014 is as follows (in thousands): | ||||||||
As of June 30, | ||||||||
2014 | 2013 | |||||||
Accrued lease abandonment costs, beginning of period | $ | 413 | $ | — | ||||
Costs incurred and charged to expense | 3,688 | 828 | ||||||
Principal reductions | (1,993 | ) | (211 | ) | ||||
Accrued lease abandonment costs, end of period | $ | 2,108 | $ | 617 | ||||
Accrued lease abandonment costs liability: | ||||||||
Short-term | $ | 743 | $ | 377 | ||||
Long-term | 1,365 | 240 | ||||||
Total | $ | 2,108 | $ | 617 | ||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
COMMITMENTS AND CONTINGENCIES | ' | ||||
COMMITMENTS AND CONTINGENCIES | |||||
Operating Leases | |||||
The Company leases copiers, parking spaces, buildings, a warehouse and office space under operating lease and site license arrangements, some of which contain renewal options. Building, warehouse and office space leases range from 12 months to 72 months. Certain leases also include lease renewal options. | |||||
The following table summarizes future minimum operating lease payments for the remaining six months of 2014 and the years thereafter (in thousands): | |||||
As of June 30, 2014 | |||||
Periods Ending December 31, | |||||
2014-remaining | $ | 2,906 | |||
2015 | 4,233 | ||||
2016 | 3,428 | ||||
2017 | 2,857 | ||||
2018-Thereafter | 2,547 | ||||
Total | $ | 15,971 | |||
Rent expense was $1.4 million and $2.2 million for the three months ended June 30, 2014 and 2013, respectively. Rent expense was $2.9 million and $5.0 million for the six months ended June 30, 2014 and 2013, respectively. | |||||
The Company accounts for its leases under the provisions of ASC topic 840, Accounting for Leases ("ASC 840"), and subsequent amendments, which require that leases be evaluated and classified as operating leases or capital leases for financial reporting purposes. Certain operating leases contain rent escalation clauses, which are recorded on a straight-line basis over the initial term of the lease with the difference between the rent paid and the straight-line rent recorded as either a deferred rent asset or liability depending on the calculation. Lease incentives received from landlords are recorded as deferred rent liabilities and are amortized on a straight-line basis over the lease term as a reduction to rent expense. The deferred rent liability was $0.5 million at June 30, 2014. The deferred rent asset was $27 thousand at June 30, 2014. The deferred rent asset is classified in prepaid and other assets as all associated leases have less than one year remaining on their term. | |||||
Litigation | |||||
In June 2011, Rosetta Stone GmbH was served with a writ filed by Langenscheidt KG (“Langenscheidt”) in the District Court of Cologne, Germany alleging trademark infringement due to Rosetta Stone GmbH’s use of the color yellow on its packaging of its language-learning software and the advertising thereof in Germany. In January 2012, the District Court of Cologne ordered an injunction of Rosetta Stone GmbH’s use of the color yellow in packaging, on its website and in television commercials and declared Rosetta Stone liable for damages, attorneys’ fees and costs to Langenscheidt. No dollar amounts have been specified yet for the award of damages by the District Court of Cologne. In its decision, the District Court of Cologne also ordered the destruction of Rosetta Stone GmbH’s product and packaging which utilized the color yellow and which was deemed to have infringed Langenscheidt’s trademark. The Court of Appeals in Cologne affirmed the District Court's decision. Rosetta Stone GmbH commenced a separate proceeding for the cancellation of Langenscheidt’s German trademark registration of yellow as an abstract color mark. In June 2012, the German Patent and Trademark Office rendered a decision in the cancellation proceeding denying our request to cancel Langenscheidt’s German trademark registration. Rosetta Stone GmbH has filed appeals of the decisions in both cases to the German Federal Supreme Court on the grounds of law. A hearing on the appeal in the infringement proceeding took place before the German Federal Supreme Court on June 18, 2014; however, a decision has not been rendered in that appeal. A hearing on the appeal in the cancellation proceeding has been scheduled for October 23, 2014. | |||||
The Company cannot predict the timing and ultimate outcome of this matter, however, the Company believes the range of possible loss is immaterial to our financial statements. Even if the plaintiff is unsuccessful in its claims against us, the Company will incur legal fees and other costs in the defense of these claims and appeals. | |||||
From time to time, we have been subject to various claims and legal actions in the ordinary course of our business. We are not currently involved in any legal proceeding the ultimate outcome of which, in our judgment based on information currently available, would have a material impact on our business, financial condition or results of operations. |
SEGMENT_INFORMATION
SEGMENT INFORMATION | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
SEGMENT INFORMATION | ' | ||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||
The Company is managed in three operating segments—North America Consumer, Rest of World ("ROW") Consumer and Global Enterprise & Education. These segments also represent the Company's reportable segments. Segment contribution includes segment revenue and expenses incurred directly by the segment, including material costs, service costs, customer care and coaching costs, and sales and marketing expenses. The Company does not allocate expenses beneficial to all segments, which include certain general and administrative expenses, facilities and communication expenses, purchasing expenses and manufacturing support and logistic expenses. These expenses are included in the unallocated expenses section of the table presented below. Revenue from transactions between the Company's operating segments is not material. | |||||||||||||||||
With the exception of goodwill, the Company does not identify or allocate its assets by operating segment. Consequently, the Company does not present assets or liabilities by operating segment. | |||||||||||||||||
Operating results by segment for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(As Adjusted)* | (As Adjusted)* | ||||||||||||||||
Revenue: | |||||||||||||||||
North America Consumer | $ | 32,434 | $ | 39,934 | $ | 68,649 | $ | 81,318 | |||||||||
Rest of World Consumer | 5,467 | 7,478 | 12,136 | 16,048 | |||||||||||||
Global Enterprise & Education | 19,414 | 14,727 | 37,295 | 28,696 | |||||||||||||
Total revenue | $ | 57,315 | $ | 62,139 | $ | 118,080 | $ | 126,062 | |||||||||
Segment contribution: | |||||||||||||||||
North America Consumer | $ | 9,805 | $ | 19,141 | $ | 21,513 | $ | 35,480 | |||||||||
Rest of World Consumer | (335 | ) | (174 | ) | 11 | (552 | ) | ||||||||||
Global Enterprise & Education | 3,324 | 5,194 | 7,526 | 10,288 | |||||||||||||
Total segment contribution | 12,794 | $ | 24,161 | $ | 29,050 | $ | 45,216 | ||||||||||
Unallocated expenses, net: | |||||||||||||||||
Unallocated cost of sales | 2,264 | $ | 971 | $ | 4,776 | $ | 1,501 | ||||||||||
Unallocated sales and marketing | 4,159 | 4,711 | 9,384 | 8,771 | |||||||||||||
Unallocated research and development | 8,368 | 9,092 | 17,141 | 16,449 | |||||||||||||
Unallocated general and administrative | 13,437 | 12,986 | 28,513 | 25,653 | |||||||||||||
Unallocated non-operating income/(expense) | (293 | ) | (34 | ) | (468 | ) | (449 | ) | |||||||||
Unallocated goodwill impairment | — | — | 2,199 | — | |||||||||||||
Unallocated lease abandonment | 118 | 35 | 3,688 | 828 | |||||||||||||
Total unallocated expenses, net | 28,053 | $ | 27,761 | $ | 65,233 | $ | 52,753 | ||||||||||
Loss before income taxes | $ | (15,259 | ) | $ | (3,600 | ) | $ | (36,183 | ) | $ | (7,537 | ) | |||||
*Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2). | |||||||||||||||||
Geographic Information | |||||||||||||||||
Revenue by major geographic region is based primarily upon the geographic location of the customers who purchase the Company's products. The geographic locations of distributors and resellers who purchase and resell the Company's products may be different from the geographic locations of end customers. | |||||||||||||||||
The information below summarizes revenue from customers by geographic area for the three and six months ended June 30, 2014 and 2013 (in thousands): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
United States | $ | 46,637 | $ | 52,163 | $ | 96,047 | $ | 104,953 | |||||||||
International | 10,678 | 9,976 | 22,033 | 21,109 | |||||||||||||
Total | $ | 57,315 | $ | 62,139 | $ | 118,080 | $ | 126,062 | |||||||||
The information below summarizes long-lived assets by geographic area as of June 30, 2014 and December 31, 2013 (in thousands): | |||||||||||||||||
June 30, | December 31, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
United States | $ | 18,986 | $ | 17,205 | |||||||||||||
International | 5,665 | 561 | |||||||||||||||
Total | $ | 24,651 | $ | 17,766 | |||||||||||||
Revenue by Product and Service | |||||||||||||||||
The Company earns revenue from the sale of language-learning, literacy and brain fitness products and services. The information below summarizes revenue by type for the three and six months ended June 30 2014 and 2013 (in thousands): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Language learning | $ | 54,852 | $ | 62,139 | $ | 113,964 | $ | 126,062 | |||||||||
Literacy | 1,923 | — | 3,334 | — | |||||||||||||
Brain fitness | 540 | — | 782 | — | |||||||||||||
Total | $ | 57,315 | $ | 62,139 | $ | 118,080 | $ | 126,062 | |||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Accounting Policies [Abstract] | ' | ||||
Principles of Consolidation | ' | ||||
Principles of Consolidation | |||||
The accompanying consolidated financial statements include the accounts of Rosetta Stone Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain numbers in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. | |||||
Use of Estimates | ' | ||||
Use of Estimates | |||||
The preparation of financial statements in accordance with GAAP requires that management make certain estimates and assumptions. Significant estimates and assumptions have been made regarding the allowance for doubtful accounts, estimated sales returns, stock-based compensation, fair value of intangibles and goodwill, inventory reserve, disclosure of contingent assets and liabilities, disclosure of contingent litigation, and allowance for valuation of deferred tax assets. Actual results may differ from these estimates. | |||||
Revenue Recognition | ' | ||||
Revenue Recognition | |||||
The Company's primary sources of revenue are online subscriptions, software and bundles of software and online subscriptions. The Company also generates revenue from the sale of audio practice products and training and implementation services. Revenue is recognized when all of the following criteria are met: there is persuasive evidence of an arrangement; the product has been delivered or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. Revenues are recorded net of discounts. | |||||
The Company identifies the units of accounting contained within our sales arrangements in accordance with Accounting Standards Codification ("ASC") 605-25 Revenue Recognition - Multiple Element Arrangements (“ASC 605-25”). In doing so, the Company evaluates a variety of factors including whether the undelivered element(s) have value to the customer on a stand-alone basis or if the undelivered element(s) could be sold by another vendor on a stand-alone basis. | |||||
For multiple element arrangements that contain software products and related services, the Company allocates the total arrangement consideration to all deliverables based on vendor-specific objective evidence of fair value, or vendor-specific objective evidence ("VSOE"), in accordance with ASC subtopic 985-605-25 Software: Revenue Recognition-Multiple-Element Arrangements ("ASC 985-605-25"). The Company generates a substantial portion of its consumer revenue from Rosetta Stone Version 4 TOTALe which is a multiple element arrangement that includes perpetual software bundled with the subscription and conversational coaching components of the Company's TOTALe online service. The Company has identified two deliverables generally contained in Rosetta Stone V4 TOTALe software arrangements. The first deliverable is the perpetual software, which is delivered at the time of sale, and the second deliverable is the subscription service, which is considered a software-related element. Because the Company only sells the Version 4 TOTALe software on a stand-alone basis in its homeschool version, the Company does not have a sufficient concentration of stand-alone sales of the Version 4 TOTALe software to establish VSOE of fair value for this element. Accordingly, the Company allocates the arrangement consideration using the residual method based on the existence of VSOE of the undelivered element, the subscription service. The Company determines VSOE of fair value of the subscription service by reference to the range of stand-alone renewal sales of the three-month subscription service. The Company reviews these stand-alone sales on a quarterly basis. VSOE of fair value is established if at least 80% of the stand-alone sales are within a range of plus or minus 15% of a midpoint of the range of prices, consistent with generally accepted industry practice. | |||||
For non-software multiple element arrangements the Company allocates revenue to all deliverables based on their relative selling prices. The Company's non-software multiple element arrangements primarily occur as sales to its Global Enterprise & Education customers. These arrangements can include subscription-based services, audio practice materials and training or any combination thereof. The Company does not have a sufficient concentration of stand-alone sales of the various deliverables noted above to its Global Enterprise & Education customers, and therefore cannot establish VSOE of fair value of each deliverable. Third party evidence of fair value does not exist for the subscription, audio practice and training services due to the lack of interchangeable language products and services within the market. Accordingly, the Company determines the selling price of the subscription, audio practice and training services deliverables included in its non-software multiple element arrangements using the best estimated selling price. The Company determines the best estimated selling price based on its internally published price list which includes suggested sales prices for each deliverable based on the type of client and volume purchased. This price list is derived from past experience and from the expectation of obtaining a reasonable margin based on what each deliverable costs the Company. | |||||
In the US, the Company offers consumers who purchase packaged software and audio practice products directly from the Company a 30-day, unconditional, full money-back refund. The Company also permits some of our retailers and distributors to return packaged products, subject to certain limitations. The Company establishes revenue reserves for packaged product returns at the time of sale based on historical experience, estimated channel inventory levels, the timing of new product introductions and other factors. | |||||
The Company distributes its products and services both directly to the end customer and indirectly through resellers. Our resellers earn commissions generally calculated as a fixed percentage of the gross sale to the end customer. The Company evaluates each of its reseller relationships in accordance with ASC 605-45 Revenue Recognition - Principal Agent Considerations (“ASC 605-45”) to determine whether the revenue recognized from indirect sales should be the gross amount of the contract with the end customer or reduced for the reseller commission. In making this determination the Company evaluates a variety of factors including whether it is the primary obligor to the end customer. | |||||
Revenue for online service subscriptions is recognized ratably over the term of the subscription period, assuming all revenue recognition criteria have been met. Rosetta Stone Version 4 TOTALe bundles, which include an online service subscription including conversational coaching and packaged software, allow customers to begin their online services at any point during a registration window, which is up to six months from the date of purchase from us or an authorized reseller. Online service subscriptions that are not activated during this registration window are forfeited and revenue is recognized upon expiry. Revenue from non-refundable upfront fees that are not related to products already delivered or services already performed is deferred and recognized over the term of the related arrangement or the estimated customer life, as appropriate. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement. | |||||
Software products include sales to end user customers and resellers. In many cases, revenue from sales to resellers is not contingent upon resale of the software to the end user and is recorded in the same manner as all other product sales. Revenue from sales of packaged software products and audio practice products is recognized as the products are shipped and title passes and risks of loss have been transferred. For many product sales, these criteria are met at the time the product is shipped. For some sales to resellers and certain other sales, the Company defers revenue until the customer receives the product because the Company legally retains a portion of the risk of loss on these sales during transit. In other cases where packaged software products are sold to resellers on a consignment basis, revenue is recognized for these consignment transactions once the end user sale has occurred, assuming the remaining revenue recognition criteria have been met. In accordance with ASC 985-605-50 Revenue Recognition: Customer Payments and Incentives (“ASC 605-50”), cash sales incentives to resellers are accounted for as a reduction of revenue, unless a specific identified benefit is identified and the fair value is reasonably determinable. Price protection for changes in the manufacturer suggested retail value granted to resellers for the inventory that they have on hand at the date the price protection is offered is recorded as a reduction to revenue at the time of sale. | |||||
The Company offers customers the ability to make payments for packaged software purchases in installments over a period of time, which typically ranges between three and five months. Given that these installment payment plans are for periods less than 12 months, a successful collection history has been established and these fees are fixed and determinable, revenue is recognized at the time of sale, assuming the remaining revenue recognition criteria have been met. Packaged software is provided to customers who purchase directly from our company with a limited right of return. The Company allows its retailers to return unsold products, subject to some limitations. In accordance with ASC subtopic 985-605-15, Software: Revenue Recognition: Products ("ASC 985-605-15"), product revenue is reduced for estimated returns, which are based on historical return rates. | |||||
In connection with packaged software product sales and online software subscriptions, technical support is provided to customers, including customers of resellers, via telephone support at no additional cost for up to six months from the time of purchase. As the fee for technical support is included in the initial licensing fee, the technical support and services are generally provided within one year, the estimated cost of providing such support is deemed insignificant and no unspecified upgrades/enhancements are offered, technical support revenues are recognized together with the software product and license revenue. Costs associated with the technical support are accrued at the time of sale. | |||||
Sales commissions from non-cancellable SaaS contracts are deferred and amortized in proportion to the revenue recognized from the related contract. | |||||
Changes in Accounting Principle | |||||
In the third quarter of 2013, the Company voluntarily changed its accounting policy for sales commissions related to non-cancellable Software-as-a-Service (“SaaS”) contracts, from recording an expense when incurred, to deferral of the sales commission in proportion to the consideration allocated to each of the elements in the arrangement and in, or over, the same period the revenue is recognized for each of the elements in the arrangement (i.e., over the non-cancellable term of the contract for the SaaS deliverable). The Company is experiencing a significant increase in contracts with multi-year subscriptions and a corresponding increase in sales commissions due, among other reasons, to its acquisition of Lexia Learning Systems, Inc. (“Lexia”) in August 2013. Lexia provides services using a SaaS model and has historically had long-term arrangements with material sales commissions paid to its network of resellers and has applied a sales commission deferral and amortization policy. | |||||
The Company believes the deferral method described above is preferable primarily because (i) the sales commission charges are so closely related to obtaining the revenue from the non-cancellable contracts that they should be deferred and charged to expense over the same period that the related revenue is recognized; and (ii) it provides a single accounting policy, consistent with that used by Lexia, that makes it easier for financial statement users to understand. Deferred commission amounts are recoverable through the future revenue streams under the non-cancellable arrangements. | |||||
Short-term deferred commissions are included in prepaid expenses and other current assets, while long-term deferred commissions are included in other assets in the accompanying consolidated balance sheets. The amortization of deferred commissions is included in sales and marketing expense in the accompanying consolidated statements of operations. | |||||
The accompanying consolidated financial statements and related notes have been adjusted to reflect the impact of this change and the associated deferred tax impact retrospectively to all prior periods. Under the as previously reported basis, there was no book / tax basis difference related to commission expense. Under the as adjusted basis, the deferred commission asset creates a deferred tax liability related to commissions expense which has been deducted for tax purposes. | |||||
Income Taxes | ' | ||||
Income Taxes | |||||
The Company accounts for income taxes in accordance with ASC topic 740, Income Taxes ("ASC 740"), which provides for an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted. | |||||
Deferred Tax Valuation Allowance | |||||
The Company has recorded a valuation allowance offsetting certain of its deferred tax assets as of June 30, 2014. When measuring the need for a valuation allowance on a jurisdiction by jurisdiction basis, the Company assesses both positive and negative evidence regarding whether these deferred tax assets are realizable. In determining deferred tax assets and valuation allowances, the Company is required to make judgments and estimates related to projections of profitability, the timing and extent of the utilization of temporary differences, net operating loss carryforwards, tax credits, applicable tax rates, transfer pricing methodologies and tax planning strategies. The valuation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support a reversal. Because evidence such as the Company’s operating results during the most recent three-year period is afforded more weight than forecasted results for future periods, the Company’s cumulative loss in certain jurisdictions represents significant negative evidence in the determination of whether deferred tax assets are more likely than not to be utilized in certain jurisdictions. This determination resulted in the need for a valuation allowance on the deferred tax assets of certain jurisdictions. The Company will release this valuation allowance when it is determined that it is more likely than not that its deferred tax assets will be realized. Any future release of valuation allowance may be recorded as a tax benefit increasing net income. | |||||
Fair Value of Financial Instruments | ' | ||||
Fair Value of Financial Instruments | |||||
The Company values its assets and liabilities using the methods of fair value as described in ASC 820, Fair Value Measurements and Disclosures, ("ASC 820"). ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels of fair value hierarchy are described below: | |||||
Level 1: Quoted prices for identical instruments in active markets. | |||||
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. | |||||
Level 3: Significant inputs to the valuation model are unobservable. | |||||
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. | |||||
Business Combinations | ' | ||||
Business Combinations | |||||
The Company recognizes all of the assets acquired, liabilities assumed and contractual contingencies from the acquired company as well as contingent consideration at fair value on the acquisition date. The excess of the total purchase price over the fair value of the assets and liabilities acquired is recognized as goodwill. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Generally, restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price (i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as adjustments to goodwill. | |||||
Stock-Based Compensation | ' | ||||
Stock-Based Compensation | |||||
The Company accounts for its stock-based compensation in accordance ASC topic 718, Compensation—Stock Compensation ("ASC 718"). Under ASC 718, all stock-based awards, including employee stock option grants, are recorded at fair value as of the grant date and recognized as expense in the statement of operations on a straight-line basis over the requisite service period, which is the vesting period. | |||||
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. For the six months ended June 30, 2014 and 2013, the fair value of options granted was calculated using the following assumptions: | |||||
Six Months Ended | |||||
June 30, | |||||
2014 | 2013 | ||||
Expected stock price volatility | 64.1%-64.6% | 67.9%-68.0% | |||
Expected term of options | 6 years | 6 years | |||
Expected dividend yield | — | — | |||
Risk-free interest rate | 1.53%-1.71% | 0.90%-1.06% | |||
The Company reviews a group of comparable industry-related companies and its own data to estimate its expected volatility over the most recent period commensurate with the estimated expected term of the awards. In addition to analyzing our own and peer group data, the Company also considers the contractual option term and vesting period when determining the expected option life and forfeiture rate. The Company estimates the expected term of options using a combination of peer company information and the simplified method for estimating the expected term described in ASC 718-10-S99. For the risk-free interest rate, the Company uses a US Treasury Bond rate consistent with the estimated expected term of the option award. | |||||
Foreign Currency Translation and Transactions | ' | ||||
Foreign Currency Translation and Transactions | |||||
The functional currency of the Company's foreign subsidiaries is their local currency. Accordingly, assets and liabilities of the foreign subsidiaries are translated into US dollars at exchange rates in effect on the balance sheet date. Income and expense items are translated at average rates for the period. Translation adjustments are recorded as a component of other comprehensive income (loss) in stockholders' equity. | |||||
Cash flows of consolidated foreign subsidiaries, whose functional currency is their local currency, are translated to US dollars using average exchange rates for the period. The Company reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate item in the reconciliation of the changes in cash and cash equivalents during the period. | |||||
Advertising Costs | ' | ||||
Advertising Costs | |||||
Costs for advertising are expensed as incurred. | |||||
Recently Issued Accounting Standards | ' | ||||
Recently Issued Accounting Standards | |||||
In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company is in the process of evaluating the impact of the new guidance, if any, on our financial statements. | |||||
In May 2014, the FASB issued ASUNo. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which replaces the current revenue accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply a five step model to 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract and 5) recognize revenue when (or as) the entity satisfies a performance obligation. Entities may chose from two adoption methods, with certain practical expedients. The Company is in the process of evaluating the impact of the new guidance on our financial statements and disclosures and our adoption method. | |||||
In July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740): Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), which requires that an unrecognized tax benefit be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except for a situation in which some or all of such net operating loss carryforward, a similar loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The Company adopted this guidance beginning in fiscal year 2014, and the adoption of such guidance did not have a material impact on the presentation of the Company’s reported results of operations or financial position. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended | |||||||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||||||
Accounting Policies [Abstract] | ' | |||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | ' | |||||||||||||||||||||||
The following tables present the effects of the retrospective application of the voluntary change in accounting principle for sales commissions related to non-cancellable SaaS contracts for the current periods presented, effective as of January 1, 2012 (in thousands, except per share data): | ||||||||||||||||||||||||
Consolidated Balance Sheets | ||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||
Computed | Impact of | As Reported | Computed | Impact of | As Reported | |||||||||||||||||||
under Prior | Commission | under Prior | Commission | |||||||||||||||||||||
Method | Adjustment | Method | Adjustment | |||||||||||||||||||||
Prepaid expense and other current assets | $ | 6,859 | $ | 7,809 | $ | 14,668 | $ | 7,707 | $ | 4,587 | $ | 12,294 | ||||||||||||
Total current assets | $ | 111,949 | $ | 7,809 | $ | 119,758 | $ | 186,134 | $ | 4,587 | $ | 190,721 | ||||||||||||
Other assets | $ | 862 | $ | 3,453 | $ | 4,315 | $ | 3,111 | $ | 113 | $ | 3,224 | ||||||||||||
Total assets | $ | 254,653 | $ | 11,262 | $ | 265,915 | $ | 286,076 | $ | 4,700 | $ | 290,776 | ||||||||||||
Accumulated loss | $ | (76,546 | ) | $ | 11,262 | $ | (65,284 | ) | $ | (33,992 | ) | $ | 4,700 | $ | (29,292 | ) | ||||||||
Total stockholders' equity | $ | 87,889 | $ | 11,262 | $ | 99,151 | $ | 126,543 | $ | 4,700 | $ | 131,243 | ||||||||||||
Total liabilities and stockholders' equity | $ | 254,653 | $ | 11,262 | $ | 265,915 | $ | 286,076 | $ | 4,700 | $ | 290,776 | ||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||||||
Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||
As Previously Reported | Impact of | As Adjusted | As Previously Reported | Impact of | As Adjusted | |||||||||||||||||||
Commission | Commission | |||||||||||||||||||||||
Adjustment | Adjustment | |||||||||||||||||||||||
Sales and marketing | $ | 33,144 | $ | (357 | ) | $ | 32,787 | $ | 70,203 | $ | (144 | ) | $ | 70,059 | ||||||||||
Loss from operations | $ | (3,991 | ) | $ | 357 | $ | (3,634 | ) | $ | (8,130 | ) | $ | 144 | $ | (7,986 | ) | ||||||||
Income tax (benefit) provision | $ | (400 | ) | $ | 13 | $ | (387 | ) | $ | 576 | $ | 4 | $ | 580 | ||||||||||
Net loss | $ | (3,557 | ) | $ | 344 | $ | (3,213 | ) | $ | (8,257 | ) | $ | 140 | $ | (8,117 | ) | ||||||||
Basic net loss per share | $ | (0.16 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.38 | ) | $ | — | $ | (0.38 | ) | ||||||||
Diluted net loss per share | $ | (0.16 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.38 | ) | $ | — | $ | (0.38 | ) | ||||||||
Shares used in computing basic net loss per share | 21,569 | — | 21,569 | 21,465 | — | 21,465 | ||||||||||||||||||
Shares used in computing diluted net loss per share | 21,569 | — | 21,569 | 21,465 | — | 21,465 | ||||||||||||||||||
Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | |||||||||||||||||||||||
Computed | Impact of | As Reported | Computed | Impact of | As Reported | |||||||||||||||||||
under Prior | Commission | under Prior | Commission | |||||||||||||||||||||
Method | Adjustment | Method | Adjustment | |||||||||||||||||||||
Sales and marketing | $ | 40,094 | $ | (2,261 | ) | $ | 37,833 | $ | 80,568 | $ | (3,638 | ) | $ | 76,930 | ||||||||||
Loss from operations | $ | (17,227 | ) | $ | 2,261 | $ | (14,966 | ) | $ | (39,703 | ) | $ | 3,638 | $ | (36,065 | ) | ||||||||
Income tax (benefit) provision | $ | 422 | $ | 69 | $ | 491 | $ | (374 | ) | $ | 183 | $ | (191 | ) | ||||||||||
Net loss | $ | (17,942 | ) | $ | 2,192 | $ | (15,750 | ) | $ | (39,447 | ) | $ | 3,455 | $ | (35,992 | ) | ||||||||
Basic net loss per share | $ | (0.84 | ) | $ | 0.1 | $ | (0.74 | ) | $ | (1.86 | ) | $ | 0.16 | $ | (1.70 | ) | ||||||||
Diluted net loss per share | $ | (0.84 | ) | $ | 0.1 | $ | (0.74 | ) | $ | (1.86 | ) | $ | 0.16 | $ | (1.70 | ) | ||||||||
Shares used in computing basic net loss per share | 21,252 | — | 21,252 | 21,188 | — | 21,188 | ||||||||||||||||||
Shares used in computing diluted net loss per share | 21,252 | — | 21,252 | 21,188 | — | 21,188 | ||||||||||||||||||
Consolidated Statements of Comprehensive Loss | ||||||||||||||||||||||||
Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||
As Previously Reported | Impact of | As Adjusted | As Previously Reported | Impact of | As Adjusted | |||||||||||||||||||
Commission | Commission | |||||||||||||||||||||||
Adjustment | Adjustment | |||||||||||||||||||||||
Net loss | $ | (3,557 | ) | $ | 344 | $ | (3,213 | ) | $ | (8,257 | ) | $ | 140 | $ | (8,117 | ) | ||||||||
Other comprehensive income (loss) | $ | (3,437 | ) | $ | 344 | $ | (3,093 | ) | $ | (8,618 | ) | $ | 140 | $ | (8,478 | ) | ||||||||
Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | |||||||||||||||||||||||
Computed | Impact of | As Reported | Computed | Impact of | As Reported | |||||||||||||||||||
under Prior | Commission | under Prior | Commission | |||||||||||||||||||||
Method | Adjustment | Method | Adjustment | |||||||||||||||||||||
Net loss | $ | (17,942 | ) | $ | 2,192 | $ | (15,750 | ) | $ | (39,447 | ) | $ | 3,455 | $ | (35,992 | ) | ||||||||
Other comprehensive income (loss) | $ | (17,679 | ) | $ | 2,192 | $ | (15,487 | ) | $ | (39,548 | ) | $ | 3,455 | $ | (36,093 | ) | ||||||||
Consolidated Statements of Cash Flow | ||||||||||||||||||||||||
Six Months Ended June 30, 2014 | Six Months Ended June 30, 2013 | |||||||||||||||||||||||
Computed | Impact of | As Reported | As Previously Reported | Impact of | As Adjusted | |||||||||||||||||||
under Prior | Commission | Commission | ||||||||||||||||||||||
Method | Adjustment | Adjustment | ||||||||||||||||||||||
Net loss | $ | (39,447 | ) | $ | 3,455 | $ | (35,992 | ) | $ | (8,257 | ) | $ | 140 | $ | (8,117 | ) | ||||||||
Deferred income tax provision | $ | (647 | ) | $ | 183 | $ | (464 | ) | $ | (627 | ) | $ | 4 | $ | (623 | ) | ||||||||
Prepaid expenses and other current assets | $ | 127 | $ | (1,980 | ) | $ | (1,853 | ) | $ | (2,568 | ) | $ | (176 | ) | $ | (2,744 | ) | |||||||
Other assets | $ | 737 | $ | (1,658 | ) | $ | (921 | ) | $ | 10 | $ | 32 | $ | 42 | ||||||||||
Net cash used in operating activities | $ | (18,104 | ) | $ | — | $ | (18,104 | ) | $ | (3,147 | ) | $ | — | $ | (3,147 | ) | ||||||||
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | ' | |||||||||||||||||||||||
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. For the six months ended June 30, 2014 and 2013, the fair value of options granted was calculated using the following assumptions: | ||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||
Expected stock price volatility | 64.1%-64.6% | 67.9%-68.0% | ||||||||||||||||||||||
Expected term of options | 6 years | 6 years | ||||||||||||||||||||||
Expected dividend yield | — | — | ||||||||||||||||||||||
Risk-free interest rate | 1.53%-1.71% | 0.90%-1.06% | ||||||||||||||||||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Cost | ' | |||||||||||||||||||||||
The following table presents stock-based compensation expense included in the related financial statement line items (dollars in thousands): | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Cost of revenue | $ | 17 | $ | 20 | $ | 17 | $ | 22 | ||||||||||||||||
Sales and marketing | 513 | 224 | 941 | 398 | ||||||||||||||||||||
Research and development | 305 | 323 | 432 | 623 | ||||||||||||||||||||
General and administrative | 1,118 | 1,469 | 1,969 | 2,661 | ||||||||||||||||||||
Total | $ | 1,953 | $ | 2,036 | $ | 3,359 | $ | 3,704 | ||||||||||||||||
Schedule of total comprehensive income (loss) | ' | |||||||||||||||||||||||
The following table presents the effect of exchange rate changes and the net unrealized gains and losses from the available-for-sale securities on total comprehensive loss (dollars in thousands): | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
(As Adjusted)* | (As Adjusted)* | |||||||||||||||||||||||
Net loss | $ | (15,750 | ) | $ | (3,213 | ) | $ | (35,992 | ) | $ | (8,117 | ) | ||||||||||||
Foreign currency translation gain | 263 | 120 | (101 | ) | (361 | ) | ||||||||||||||||||
Total comprehensive loss | $ | (15,487 | ) | $ | (3,093 | ) | $ | (36,093 | ) | $ | (8,478 | ) |
BUSINESS_COMBINATIONS_Tables
BUSINESS COMBINATIONS (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Business Acquisition [Line Items] | ' | ||||||||||||||||
Schedule of Pro Forma information | ' | ||||||||||||||||
The following schedule presents unaudited consolidated pro forma results of operations data as if the Vivity Labs and Tell Me More Mergers had occurred on January 1, 2013 and the Livemocha and Lexia Mergers had occurred on January 1, 2012 (collectively "the Mergers"). This information does not purport to be indicative of the actual results that would have occurred if the Mergers had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in thousands, except per share amounts): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Revenue | $ | 61,563 | $ | 73,167 | $ | 127,104 | $ | 146,555 | |||||||||
Net loss | $ | (11,352 | ) | $ | (13,597 | ) | $ | (26,661 | ) | $ | (14,577 | ) | |||||
Basic loss per share | $ | (0.53 | ) | $ | (0.63 | ) | $ | (1.25 | ) | $ | (0.68 | ) | |||||
Diluted loss per share | $ | (0.53 | ) | $ | (0.63 | ) | $ | (1.25 | ) | $ | (0.68 | ) | |||||
Livemocha Merger | ' | ||||||||||||||||
Business Acquisition [Line Items] | ' | ||||||||||||||||
Summary of fair value of assets acquired in the asset acquisition | ' | ||||||||||||||||
The purchase price was allocated as follows (in thousands): | |||||||||||||||||
Cash | $ | 191 | |||||||||||||||
Accounts receivable | 227 | ||||||||||||||||
Other current assets | 93 | ||||||||||||||||
Fixed assets | 35 | ||||||||||||||||
Accounts payable and accrued expenses | (956 | ) | |||||||||||||||
Deferred revenue | (743 | ) | |||||||||||||||
Net deferred tax liability | (1,161 | ) | |||||||||||||||
Net tangible assets acquired | (2,314 | ) | |||||||||||||||
Goodwill | 5,185 | ||||||||||||||||
Amortizable intangible assets | 5,500 | ||||||||||||||||
Purchase price | $ | 8,371 | |||||||||||||||
Schedule of amortizable intangible assets and the related estimated useful lives | ' | ||||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Useful Lives | Value | ||||||||||||||||
Online community | 3 years | $ | 1,800 | ||||||||||||||
Enterprise relationships | 5 years | 100 | |||||||||||||||
Technology platform | 5 years | 3,400 | |||||||||||||||
Tradename | 2 years | 200 | |||||||||||||||
Total assets | $ | 5,500 | |||||||||||||||
Lexia Merger | ' | ||||||||||||||||
Business Acquisition [Line Items] | ' | ||||||||||||||||
Summary of fair value of assets acquired in the asset acquisition | ' | ||||||||||||||||
Cash | $ | 263 | |||||||||||||||
Accounts receivable | 2,404 | ||||||||||||||||
Other current assets | 105 | ||||||||||||||||
Fixed assets | 255 | ||||||||||||||||
Accounts payable and accrued expenses | (899 | ) | |||||||||||||||
Deferred revenue | (1,223 | ) | |||||||||||||||
Net deferred tax liability | (4,210 | ) | |||||||||||||||
Net tangible assets acquired | (3,305 | ) | |||||||||||||||
Goodwill | 9,938 | ||||||||||||||||
Amortizable intangible assets | 14,500 | ||||||||||||||||
Purchase price | $ | 21,133 | |||||||||||||||
Schedule of amortizable intangible assets and the related estimated useful lives | ' | ||||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Useful Lives | Value | ||||||||||||||||
Enterprise relationships | 10 years | $ | 9,400 | ||||||||||||||
Technology platform | 7 years | 4,100 | |||||||||||||||
Tradename | 5 years | 1,000 | |||||||||||||||
Total assets | $ | 14,500 | |||||||||||||||
Vivity Labs Inc. | ' | ||||||||||||||||
Business Acquisition [Line Items] | ' | ||||||||||||||||
Summary of fair value of assets acquired in the asset acquisition | ' | ||||||||||||||||
The preliminary purchase price is allocated as follows (in thousands): | |||||||||||||||||
Cash | $ | 14 | |||||||||||||||
Accounts receivable | 427 | ||||||||||||||||
Other current assets | 5 | ||||||||||||||||
Accounts payable | (287 | ) | |||||||||||||||
Net deferred tax liability | (919 | ) | |||||||||||||||
Net tangible assets acquired | (760 | ) | |||||||||||||||
Goodwill | 9,333 | ||||||||||||||||
Amortizable intangible assets | 3,577 | ||||||||||||||||
Preliminary purchase price | $ | 12,150 | |||||||||||||||
Schedule of amortizable intangible assets and the related estimated useful lives | ' | ||||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 9, 2014 | ||||||||||||||||
Customer relationships | 5 years | $ | 4,348 | ||||||||||||||
Technology platform | 5 years | 4,144 | |||||||||||||||
Tradename | 1 year | 613 | |||||||||||||||
Total assets | $ | 9,105 | |||||||||||||||
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 2, 2014 | ||||||||||||||||
Tradename | 3 years | $ | 188 | ||||||||||||||
Technology platform | 5 years | 2,448 | |||||||||||||||
Customer relationships | 3 years | 941 | |||||||||||||||
Total assets | $ | 3,577 | |||||||||||||||
Tell Me More SA. | ' | ||||||||||||||||
Business Acquisition [Line Items] | ' | ||||||||||||||||
Summary of fair value of assets acquired in the asset acquisition | ' | ||||||||||||||||
The preliminary purchase price is allocated as follows (in thousands): | |||||||||||||||||
Cash | $ | 2,323 | |||||||||||||||
Accounts receivable | 3,107 | ||||||||||||||||
Inventory | 526 | ||||||||||||||||
Prepaid expenses | 227 | ||||||||||||||||
Fixed assets | 5,594 | ||||||||||||||||
Other non current assets | 130 | ||||||||||||||||
Accounts payable | (732 | ) | |||||||||||||||
Accrued compensation | (2,863 | ) | |||||||||||||||
Deferred revenue | (2,190 | ) | |||||||||||||||
Other current liabilities | (1,098 | ) | |||||||||||||||
Obligation under capital lease | (3,958 | ) | |||||||||||||||
Net deferred tax liability | (1,392 | ) | |||||||||||||||
Net tangible assets acquired | (326 | ) | |||||||||||||||
Goodwill | 21,407 | ||||||||||||||||
Amortizable intangible assets | 9,105 | ||||||||||||||||
Preliminary purchase price | $ | 30,186 | |||||||||||||||
NET_LOSS_PER_SHARE_Tables
NET LOSS PER SHARE (Tables) | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | ||||||||||||||||
Earnings Per Share [Abstract] | ' | |||||||||||||||
Schedule of antidilutive securities excluded from computation of EPS | ' | |||||||||||||||
The following is a summary of common stock equivalents for the securities outstanding during the respective periods that have been excluded from the earnings per share calculations as their impact was anti-dilutive. | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Stock options | 71,000 | 376,000 | 90,000 | 365,000 | ||||||||||||
Restricted stock units | 97,000 | 96,000 | 92,000 | 91,000 | ||||||||||||
Restricted stocks | 37,000 | 216,000 | 81,000 | 228,000 | ||||||||||||
Total common stock equivalent shares | 205,000 | 688,000 | 263,000 | 684,000 | ||||||||||||
Schedule of computation of net loss per share | ' | |||||||||||||||
The following table sets forth the computation of basic and diluted net loss per common share (in thousands, except per share amounts): | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(As Adjusted)* | (As Adjusted)* | |||||||||||||||
Numerator: | ||||||||||||||||
Net Loss | $ | (15,750 | ) | $ | (3,213 | ) | $ | (35,992 | ) | $ | (8,117 | ) | ||||
Denominator: | ||||||||||||||||
Weighted average number of common shares: | ||||||||||||||||
Basic | 21,252 | 21,569 | 21,188 | 21,465 | ||||||||||||
Diluted | 21,252 | 21,569 | 21,188 | 21,465 | ||||||||||||
Loss per common share: | ||||||||||||||||
Basic | $ | (0.74 | ) | $ | (0.15 | ) | $ | (1.70 | ) | $ | (0.38 | ) | ||||
Diluted | $ | (0.74 | ) | $ | (0.15 | ) | $ | (1.70 | ) | $ | (0.38 | ) |
INVENTORY_Tables
INVENTORY (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Schedule of inventory | ' | ||||||||
Inventory consisted of the following (in thousands): | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 3,872 | $ | 3,267 | |||||
Finished goods | 3,680 | 3,372 | |||||||
Total inventory | $ | 7,552 | $ | 6,639 | |||||
GOODWILL_Tables
GOODWILL (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||
Schedule of the balance and changes in goodwill, by reporting unit | ' | ||||||||||||||||
The following table represents the balance and changes in goodwill for the six months ended June 30, 2014 (in thousands): | |||||||||||||||||
North America Consumer | Rest of World | Global Enterprise & Education | Total | ||||||||||||||
Consumer | |||||||||||||||||
Balance as of December 31, 2013 | $ | 17,971 | $ | 2,200 | $ | 29,888 | $ | 50,059 | |||||||||
Acquisition of Vivity | 9,333 | — | — | 9,333 | |||||||||||||
Acquisition of Tell Me More | — | — | 21,407 | 21,407 | |||||||||||||
Impairment charge | — | (2,199 | ) | — | (2,199 | ) | |||||||||||
Effect of change in foreign currency rate | (33 | ) | (1 | ) | 118 | 84 | |||||||||||
Balance as of June 30, 2014 | $ | 27,271 | $ | — | $ | 51,413 | $ | 78,684 | |||||||||
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 6 Months Ended | ||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ' | ||||||||||||||||||||||||
Schedule of intangible assets | ' | ||||||||||||||||||||||||
Intangible assets consisted of the following items as of the dates indicated (in thousands): | |||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||
Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | ||||||||||||||||||||
Amount | Amount | Amount | Amount | ||||||||||||||||||||||
Tradename/trademark | $ | 12,609 | $ | (646 | ) | $ | 11,963 | $ | 11,807 | $ | (158 | ) | $ | 11,649 | |||||||||||
Core technology | 16,541 | (4,499 | ) | 12,042 | 9,954 | (3,207 | ) | 6,747 | |||||||||||||||||
Customer relationships | 27,448 | (13,104 | ) | 14,344 | 22,152 | (11,720 | ) | 10,432 | |||||||||||||||||
Website | 12 | (12 | ) | — | 12 | (12 | ) | — | |||||||||||||||||
Patents | 300 | (142 | ) | 158 | 300 | (122 | ) | 178 | |||||||||||||||||
Total | $ | 56,910 | $ | (18,403 | ) | $ | 38,507 | $ | 44,225 | $ | (15,219 | ) | $ | 29,006 | |||||||||||
Schedule of estimated useful lives of acquired intangible assets | ' | ||||||||||||||||||||||||
The intangible assets recorded as a result of the Vivity Labs Merger are included in the June 30, 2014 balances. The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 2, 2014 | ||||||||||||||||||||||||
Tradename | 3 years | $ | 188 | ||||||||||||||||||||||
Technology platform | 5 years | 2,448 | |||||||||||||||||||||||
Customer relationships | 3 years | 941 | |||||||||||||||||||||||
Total assets | $ | 3,577 | |||||||||||||||||||||||
The intangible assets recorded as a result of the Tell Me More Merger are included in the June 30, 2014 balances. The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): | |||||||||||||||||||||||||
Preliminary Estimated Useful Lives | Preliminary Estimated Value January 8, 2014 | ||||||||||||||||||||||||
Customer relationships | 5 years | $ | 4,348 | ||||||||||||||||||||||
Technology platform | 5 years | 4,144 | |||||||||||||||||||||||
Tradename | 1 year | 613 | |||||||||||||||||||||||
Total assets | $ | 9,105 | |||||||||||||||||||||||
Schedule of amortization expense of intangible assets | ' | ||||||||||||||||||||||||
The following table presents amortization of intangible assets included in the related financial statement line items during the respective periods (in thousands): | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Cost of revenue | $ | 146 | $ | — | $ | 293 | $ | — | |||||||||||||||||
Sales and marketing | 931 | 183 | 1,876 | 183 | |||||||||||||||||||||
Research and development | 531 | 180 | 1,015 | 190 | |||||||||||||||||||||
Total | $ | 1,608 | $ | 363 | $ | 3,184 | $ | 373 | |||||||||||||||||
Summary of the estimated future amortization expense related to intangible assets | ' | ||||||||||||||||||||||||
The following table summarizes the estimated future amortization expense related to intangible assets for the remaining six months of 2014 and years thereafter (in thousands): | |||||||||||||||||||||||||
As of June 30, 2014 | |||||||||||||||||||||||||
2014-remaining | $ | 3,170 | |||||||||||||||||||||||
2015 | 5,651 | ||||||||||||||||||||||||
2016 | 5,169 | ||||||||||||||||||||||||
2017 | 4,641 | ||||||||||||||||||||||||
2018 | 4,028 | ||||||||||||||||||||||||
Thereafter | 5,242 | ||||||||||||||||||||||||
Total | $ | 27,901 | |||||||||||||||||||||||
OTHER_CURRENT_LIABILITIES_Tabl
OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Other Liabilities Disclosure [Abstract] | ' | ||||||||
Summary of other current liabilities | ' | ||||||||
The following table summarizes other current liabilities (in thousands): | |||||||||
June 30, | December 31, 2013 | ||||||||
2014 | |||||||||
Accrued marketing expenses | $ | 12,481 | $ | 19,885 | |||||
Accrued professional and consulting fees | 4,122 | 4,570 | |||||||
Sales return reserve | 2,796 | 4,834 | |||||||
Sales, withholding and property taxes payable | 4,432 | 3,968 | |||||||
Accrued purchase price of business acquisition | 1,688 | 1,688 | |||||||
Other | 3,898 | 6,991 | |||||||
Total other current liabilities | $ | 29,417 | $ | 41,936 | |||||
CAPITAL_LEASES_Tables
CAPITAL LEASES (Tables) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Leases [Abstract] | ' | ||||
Schedule of Future Minimum Lease Payments for Capital Leases | ' | ||||
Future minimum payments under capital leases with initial terms of one year or more are as follows (in thousands): | |||||
As of June 30, 2014 | |||||
2014-remaining | $ | 338 | |||
2015 | 820 | ||||
2016 | 618 | ||||
2017 | 618 | ||||
2018-Thereafter | 2,901 | ||||
Total minimum lease payments | 5,295 | ||||
Less amount representing interest | 873 | ||||
Present value of net minimum lease payments | 4,422 | ||||
Less current portion | 653 | ||||
Obligations under capital lease, long-term | $ | 3,769 | |||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | |||||||||||||
Schedule of stock option activity | ' | |||||||||||||
The following table summarizes the Company's stock option activity from January 1, 2014 to June 30, 2014: | ||||||||||||||
Options | Weighted | Weighted | Aggregate | |||||||||||
Outstanding | Average | Average | Intrinsic | |||||||||||
Exercise | Contractual | Value | ||||||||||||
Price | Life (years) | |||||||||||||
Options Outstanding, January 1, 2014 | 1,927,552 | $ | 13.61 | 7.54 | $ | 2,829,380 | ||||||||
Options granted | 608,574 | 11.64 | ||||||||||||
Options exercised | (112,307 | ) | 5.72 | |||||||||||
Options canceled | (373,399 | ) | 14.72 | |||||||||||
Options Outstanding, June 30, 2014 | 2,050,420 | 13.34 | 7.83 | 724,525 | ||||||||||
Vested and expected to vest June 30, 2014 | 1,871,360 | 13.43 | 7.7 | 715,585 | ||||||||||
Exercisable at June 30, 2014 | 821,204 | $ | 14.54 | 6.28 | $ | 582,808 | ||||||||
Schedule of restricted stock activity | ' | |||||||||||||
The following table summarizes the Company's restricted stock award activity from January 1, 2014 to June 30, 2014: | ||||||||||||||
Nonvested | Weighted | Aggregate | ||||||||||||
Outstanding | Average | Intrinsic | ||||||||||||
Grant Date | Value | |||||||||||||
Fair Value | ||||||||||||||
Nonvested Awards, January 1, 2014 | 634,031 | $ | 12.28 | $ | 7,785,901 | |||||||||
Awards granted | 223,923 | 11.83 | ||||||||||||
Awards vested | (220,409 | ) | 10.33 | |||||||||||
Awards canceled | (97,414 | ) | 13.45 | |||||||||||
Nonvested Awards, June 30, 2014 | 540,131 | $ | 12.71 | $ | 6,864,579 | |||||||||
LEASE_ABANDONMENT_Tables
LEASE ABANDONMENT (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Restructuring and Related Activities [Abstract] | ' | |||||||
Summary of Lease Abandonment Activity | ' | |||||||
A summary of the Company’s lease abandonment activity for the six months ended June 30, 2014 is as follows (in thousands): | ||||||||
As of June 30, | ||||||||
2014 | 2013 | |||||||
Accrued lease abandonment costs, beginning of period | $ | 413 | $ | — | ||||
Costs incurred and charged to expense | 3,688 | 828 | ||||||
Principal reductions | (1,993 | ) | (211 | ) | ||||
Accrued lease abandonment costs, end of period | $ | 2,108 | $ | 617 | ||||
Accrued lease abandonment costs liability: | ||||||||
Short-term | $ | 743 | $ | 377 | ||||
Long-term | 1,365 | 240 | ||||||
Total | $ | 2,108 | $ | 617 | ||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Summary of future minimum operating lease payments | ' | ||||
The following table summarizes future minimum operating lease payments for the remaining six months of 2014 and the years thereafter (in thousands): | |||||
As of June 30, 2014 | |||||
Periods Ending December 31, | |||||
2014-remaining | $ | 2,906 | |||
2015 | 4,233 | ||||
2016 | 3,428 | ||||
2017 | 2,857 | ||||
2018-Thereafter | 2,547 | ||||
Total | $ | 15,971 | |||
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Schedule of operating results by segment | ' | ||||||||||||||||
Operating results by segment for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(As Adjusted)* | (As Adjusted)* | ||||||||||||||||
Revenue: | |||||||||||||||||
North America Consumer | $ | 32,434 | $ | 39,934 | $ | 68,649 | $ | 81,318 | |||||||||
Rest of World Consumer | 5,467 | 7,478 | 12,136 | 16,048 | |||||||||||||
Global Enterprise & Education | 19,414 | 14,727 | 37,295 | 28,696 | |||||||||||||
Total revenue | $ | 57,315 | $ | 62,139 | $ | 118,080 | $ | 126,062 | |||||||||
Segment contribution: | |||||||||||||||||
North America Consumer | $ | 9,805 | $ | 19,141 | $ | 21,513 | $ | 35,480 | |||||||||
Rest of World Consumer | (335 | ) | (174 | ) | 11 | (552 | ) | ||||||||||
Global Enterprise & Education | 3,324 | 5,194 | 7,526 | 10,288 | |||||||||||||
Total segment contribution | 12,794 | $ | 24,161 | $ | 29,050 | $ | 45,216 | ||||||||||
Unallocated expenses, net: | |||||||||||||||||
Unallocated cost of sales | 2,264 | $ | 971 | $ | 4,776 | $ | 1,501 | ||||||||||
Unallocated sales and marketing | 4,159 | 4,711 | 9,384 | 8,771 | |||||||||||||
Unallocated research and development | 8,368 | 9,092 | 17,141 | 16,449 | |||||||||||||
Unallocated general and administrative | 13,437 | 12,986 | 28,513 | 25,653 | |||||||||||||
Unallocated non-operating income/(expense) | (293 | ) | (34 | ) | (468 | ) | (449 | ) | |||||||||
Unallocated goodwill impairment | — | — | 2,199 | — | |||||||||||||
Unallocated lease abandonment | 118 | 35 | 3,688 | 828 | |||||||||||||
Total unallocated expenses, net | 28,053 | $ | 27,761 | $ | 65,233 | $ | 52,753 | ||||||||||
Loss before income taxes | $ | (15,259 | ) | $ | (3,600 | ) | $ | (36,183 | ) | $ | (7,537 | ) | |||||
Summary of revenue from customers by geographic area | ' | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
United States | $ | 46,637 | $ | 52,163 | $ | 96,047 | $ | 104,953 | |||||||||
International | 10,678 | 9,976 | 22,033 | 21,109 | |||||||||||||
Total | $ | 57,315 | $ | 62,139 | $ | 118,080 | $ | 126,062 | |||||||||
Summary of long-lived assets by geographic area | ' | ||||||||||||||||
The information below summarizes long-lived assets by geographic area as of June 30, 2014 and December 31, 2013 (in thousands): | |||||||||||||||||
June 30, | December 31, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
United States | $ | 18,986 | $ | 17,205 | |||||||||||||
International | 5,665 | 561 | |||||||||||||||
Total | $ | 24,651 | $ | 17,766 | |||||||||||||
Summary of revenue by products and services | ' | ||||||||||||||||
The Company earns revenue from the sale of language-learning, literacy and brain fitness products and services. The information below summarizes revenue by type for the three and six months ended June 30 2014 and 2013 (in thousands): | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Language learning | $ | 54,852 | $ | 62,139 | $ | 113,964 | $ | 126,062 | |||||||||
Literacy | 1,923 | — | 3,334 | — | |||||||||||||
Brain fitness | 540 | — | 782 | — | |||||||||||||
Total | $ | 57,315 | $ | 62,139 | $ | 118,080 | $ | 126,062 | |||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 6 Months Ended |
Jun. 30, 2014 | |
deliverable | |
Rosetta Stone Version 4 TOTALe bundles | ' |
Revenue Recognition | ' |
Number of deliverables identified | 2 |
Rosetta Stone Version 4 TOTALe bundles | Maximum | ' |
Revenue Recognition | ' |
Period of registration window to begin services from the date of purchase from the entity | '6 months |
Packaged software and online software subscriptions | Maximum | ' |
Revenue Recognition | ' |
Period of providing technical support in connection with packaged software product sales and online software subscriptions | '6 months |
Packaged software | Minimum | ' |
Revenue Recognition | ' |
Period offered to customers for payment of purchases in installments | '3 months |
Packaged software | Maximum | ' |
Revenue Recognition | ' |
Period offered to customers for payment of purchases in installments | '5 months |
Period of installment payment plans | '12 months |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Change in Accounting Policy - Balance Sheet) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Prepaid expense and other current assets | $14,668 | $12,294 | ' |
Total current assets | 119,758 | 190,721 | ' |
Other assets | 4,315 | 3,224 | ' |
Total assets | 265,915 | 290,776 | ' |
Accumulated loss | -65,284 | -29,292 | 13,158 |
Total stockholders' equity | 99,151 | 131,243 | ' |
Total liabilities and stockholders' equity | 265,915 | 290,776 | ' |
Computed under Prior Method | ' | ' | ' |
Prepaid expense and other current assets | 6,859 | 7,707 | ' |
Total current assets | 111,949 | 186,134 | ' |
Other assets | 862 | 3,111 | ' |
Total assets | 254,653 | 286,076 | ' |
Accumulated loss | -76,546 | -33,992 | 16,749 |
Total stockholders' equity | 87,889 | 126,543 | ' |
Total liabilities and stockholders' equity | 254,653 | 286,076 | ' |
Sales Commissions for Non-cancellable Software-as-a-Service | Impact of Commission Adjustment | ' | ' | ' |
Prepaid expense and other current assets | 7,809 | 4,587 | ' |
Total current assets | 7,809 | 4,587 | ' |
Other assets | 3,453 | 113 | ' |
Total assets | 11,262 | 4,700 | ' |
Accumulated loss | 11,262 | 4,700 | 3,591 |
Total stockholders' equity | 11,262 | 4,700 | ' |
Total liabilities and stockholders' equity | $11,262 | $4,700 | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Change in Accounting Policy - Income Statement) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
Sales and marketing | $37,833 | $32,787 | [1] | $76,930 | $70,059 | [1] |
Loss from operations | -14,966 | -3,634 | [1] | -36,065 | -7,986 | [1] |
Income tax (benefit) provision | 491 | -387 | [1] | -191 | 580 | [1] |
Net loss | -15,750 | -3,213 | [1] | -35,992 | -8,117 | [1] |
Other comprehensive income (loss) | -15,487 | -3,093 | -36,093 | -8,478 | [1] | |
Basic net loss per share | ($0.74) | ($0.15) | [1] | ($1.70) | ($0.38) | [1] |
Diluted net loss per share | ($0.74) | ($0.15) | [1] | ($1.70) | ($0.38) | [1] |
Shares used in computing basic net loss per share | 21,252 | 21,569 | [1] | 21,188 | 21,465 | [1] |
Shares used in computing diluted net loss per share | 21,252 | 21,569 | [1] | 21,188 | 21,465 | [1] |
Computed under Prior Method | ' | ' | ' | ' | ||
Sales and marketing | 40,094 | 33,144 | 80,568 | 70,203 | ||
Loss from operations | -17,227 | -3,991 | -39,703 | -8,130 | ||
Income tax (benefit) provision | 422 | -400 | -374 | 576 | ||
Net loss | -17,942 | -3,557 | -39,447 | -8,257 | ||
Other comprehensive income (loss) | -17,679 | -3,437 | -39,548 | -8,618 | ||
Basic net loss per share | ($0.84) | ($0.16) | ($1.86) | ($0.38) | ||
Diluted net loss per share | ($0.84) | ($0.16) | ($1.86) | ($0.38) | ||
Shares used in computing basic net loss per share | ' | 21,569 | ' | 21,465 | ||
Shares used in computing diluted net loss per share | ' | 21,569 | ' | 21,465 | ||
Sales Commissions for Non-cancellable Software-as-a-Service | Impact of Commission Adjustment | ' | ' | ' | ' | ||
Sales and marketing | -2,261 | -357 | -3,638 | -144 | ||
Loss from operations | 2,261 | 357 | 3,638 | 144 | ||
Income tax (benefit) provision | 69 | 13 | 183 | 4 | ||
Net loss | 2,192 | 344 | 3,455 | 140 | ||
Other comprehensive income (loss) | ' | ' | ' | $3,455 | ||
Basic net loss per share | $0.10 | $0.01 | $0.16 | $0 | ||
Diluted net loss per share | $0.10 | $0.01 | $0.16 | $0 | ||
Shares used in computing basic net loss per share | ' | 0 | ' | 0 | ||
Shares used in computing diluted net loss per share | ' | 0 | ' | 0 | ||
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
SUMMARY_OF_SIGNIFICANT_ACCOUNT6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Change in Accounting Policy - Comprehensive Income Statement) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
Net loss | ($15,750) | ($3,213) | [1] | ($35,992) | ($8,117) | [1] |
Other comprehensive income (loss) | -15,487 | -3,093 | -36,093 | -8,478 | [1] | |
Computed under Prior Method | ' | ' | ' | ' | ||
Net loss | -17,942 | -3,557 | -39,447 | -8,257 | ||
Other comprehensive income (loss) | -17,679 | -3,437 | -39,548 | -8,618 | ||
Sales Commissions for Non-cancellable Software-as-a-Service | Impact of Commission Adjustment | ' | ' | ' | ' | ||
Net loss | 2,192 | 344 | 3,455 | 140 | ||
Other comprehensive income (loss) | ' | ' | ' | $3,455 | ||
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
SUMMARY_OF_SIGNIFICANT_ACCOUNT7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Change in Accounting Policy - Statement of Cash Flow) (Details) (USD $) | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | |
Net loss | ($35,992) | ($8,117) | [1] |
Net loss | -35,992 | -8,117 | [1] |
Deferred income tax provision | -464 | -623 | [1] |
Prepaid expenses and other current assets | -1,853 | -2,744 | [1] |
Other assets | -921 | 42 | [1] |
Net cash used in operating activities | -18,104 | -3,147 | [1] |
Computed under Prior Method | ' | ' | |
Net loss | -39,447 | -8,257 | |
Deferred income tax provision | -647 | -627 | |
Prepaid expenses and other current assets | 127 | -2,568 | |
Other assets | 737 | 10 | |
Net cash used in operating activities | -18,104 | -3,147 | |
Sales Commissions for Non-cancellable Software-as-a-Service | Impact of Commission Adjustment | ' | ' | |
Net loss | 3,455 | 140 | |
Deferred income tax provision | 183 | 4 | |
Prepaid expenses and other current assets | -1,980 | -176 | |
Other assets | -1,658 | 32 | |
Net cash used in operating activities | $0 | $0 | |
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
SUMMARY_OF_SIGNIFICANT_ACCOUNT8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Stock Based Compensation) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Stock-based compensation | ' | ' | ' | ' |
Stock-based compensation expense | $1,953 | $2,036 | $3,359 | $3,704 |
Stock options | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' |
Expected stock price volatility Minimum | ' | ' | 64.10% | 67.90% |
Expected stock price volatility Maximum | ' | ' | 64.60% | 68.00% |
Expected term of options | ' | ' | '6 years | '6 years |
Expected dividend yield | ' | ' | 0.00% | 0.00% |
Risk-free interest rate Minimum | ' | ' | 1.53% | 0.90% |
Risk-free interest rate Maximum | ' | ' | 1.71% | 1.06% |
General and administrative | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' |
Stock-based compensation expense | 1,118 | 1,469 | 1,969 | 2,661 |
Research & development | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' |
Stock-based compensation expense | 305 | 323 | 432 | 623 |
Sales and marketing | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' |
Stock-based compensation expense | 513 | 224 | 941 | 398 |
Cost of revenue | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' |
Stock-based compensation expense | $17 | $20 | $17 | $22 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Foreign Currency Translation and Transaction, Advertising Costs) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |||
Foreign Currency Translation and Transactions | ' | ' | ' | ' | ||
Net loss | ($15,750,000) | ($3,213,000) | [1] | ($35,992,000) | ($8,117,000) | [1] |
Foreign currency translation gain (loss) | 263,000 | 120,000 | -101,000 | -361,000 | [1] | |
Comprehensive loss | -15,487,000 | -3,093,000 | -36,093,000 | -8,478,000 | [1] | |
Advertising Costs | ' | ' | ' | ' | ||
Advertising expense | $14,500,000 | $12,200,000 | $30,200,000 | $27,200,000 | ||
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
BUSINESS_COMBINATIONS_Details
BUSINESS COMBINATIONS (Details) | 0 Months Ended | 0 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 6 Months Ended | 12 Months Ended | 0 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Apr. 02, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Apr. 02, 2013 | Jun. 30, 2014 | Aug. 01, 2013 | Apr. 30, 2014 | Jan. 02, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jan. 08, 2014 | Jan. 08, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jan. 09, 2014 | |
member | USD ($) | USD ($) | Livemocha Merger | Livemocha Merger | Lexia Merger | Lexia Merger | Vivity Labs Inc. | Vivity Labs Inc. | Vivity Labs Inc. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | EUR (€) | USD ($) | USD ($) | USD ($) | ||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of registered members in community of online language learning | 16,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consideration paid | ' | ' | ' | $8,400,000 | ' | $21,100,000 | $1,700,000 | $12,200,000 | ' | ' | $30,200,000 | € 22,100,000 | ' | ' | ' |
Amount of holdback consideration to be transferred within specified period from date of filing of form 10K | ' | ' | ' | ' | ' | 3,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of holdback consideration to be transferred within specified period from date of filing of form 10K | ' | ' | ' | ' | ' | 50.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Period from date of filing of form 10K specified percentage of holdback consideration to be transferred | ' | ' | ' | ' | ' | '30 days | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of remaining holdback consideration to be transferred within specified period | ' | ' | ' | ' | ' | 50.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill | ' | 78,684,000 | 50,059,000 | 5,185,000 | ' | 9,938,000 | ' | 9,333,000 | ' | ' | ' | ' | ' | ' | 21,407,000 |
Transaction costs | ' | ' | ' | ' | $400,000 | $100,000 | ' | ' | $57,000 | $51,000 | ' | ' | $1,000,000 | $500,000 | ' |
BUSINESS_COMBINATIONS_Purchase
BUSINESS COMBINATIONS (Purchase price of allocation) (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jan. 02, 2014 | Jan. 02, 2014 | Jan. 02, 2014 | Jan. 02, 2014 | Jan. 09, 2014 | Jan. 09, 2014 | Jan. 09, 2014 | Jan. 09, 2014 | Apr. 02, 2013 | Apr. 02, 2013 | Apr. 02, 2013 | Apr. 02, 2013 | Apr. 02, 2013 | Aug. 01, 2013 | Aug. 01, 2013 | Aug. 01, 2013 | Aug. 01, 2013 |
In Thousands, unless otherwise specified | Vivity Labs Inc. | Vivity Labs Inc. | Vivity Labs Inc. | Vivity Labs Inc. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | Livemocha Merger | Livemocha Merger | Livemocha Merger | Livemocha Merger | Livemocha Merger | Lexia Merger | Lexia Merger | Lexia Merger | Lexia Merger | ||
Technology platform | Tradename | Customer relationships | Technology platform | Tradename | Customer relationships | Online community | Enterprise relationships | Technology platform | Tradename | Enterprise relationships | Technology platform | Tradename | |||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash | ' | ' | $14 | ' | ' | ' | $2,323 | ' | ' | ' | $191 | ' | ' | ' | ' | $263 | ' | ' | ' |
Accounts receivable | ' | ' | 427 | ' | ' | ' | 3,107 | ' | ' | ' | 227 | ' | ' | ' | ' | 2,404 | ' | ' | ' |
Prepaid and other current assets | ' | ' | 5 | ' | ' | ' | 227 | ' | ' | ' | 93 | ' | ' | ' | ' | 105 | ' | ' | ' |
Accounts payable | ' | ' | -287 | ' | ' | ' | -732 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed assets | ' | ' | ' | ' | ' | ' | 5,594 | ' | ' | ' | 35 | ' | ' | ' | ' | 255 | ' | ' | ' |
Accounts payable and accrued expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -956 | ' | ' | ' | ' | -899 | ' | ' | ' |
Deferred revenue | ' | ' | ' | ' | ' | ' | -2,190 | ' | ' | ' | -743 | ' | ' | ' | ' | -1,223 | ' | ' | ' |
Net deferred tax liability | ' | ' | -919 | ' | ' | ' | -1,392 | ' | ' | ' | -1,161 | ' | ' | ' | ' | -4,210 | ' | ' | ' |
Inventory | ' | ' | ' | ' | ' | ' | 526 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other non current assets | ' | ' | ' | ' | ' | ' | 130 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accrued compensation | ' | ' | ' | ' | ' | ' | -2,863 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other current liabilities | ' | ' | ' | ' | ' | ' | -1,098 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Obligation under capital lease | ' | ' | ' | ' | ' | ' | -3,958 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net tangible assets acquired | ' | ' | -760 | ' | ' | ' | -326 | ' | ' | ' | -2,314 | ' | ' | ' | ' | -3,305 | ' | ' | ' |
Goodwill | 78,684 | 50,059 | 9,333 | ' | ' | ' | 21,407 | ' | ' | ' | 5,185 | ' | ' | ' | ' | 9,938 | ' | ' | ' |
Amortizable intangible assets | ' | ' | 3,577 | 2,448 | 188 | 941 | 9,105 | 4,144 | 613 | 4,348 | 5,500 | 1,800 | 100 | 3,400 | 200 | 14,500 | 9,400 | 4,100 | 1,000 |
Purchase Price | ' | ' | $12,150 | ' | ' | ' | $30,186 | ' | ' | ' | $8,371 | ' | ' | ' | ' | $21,133 | ' | ' | ' |
Acquired intangible asset, estimated useful lives | ' | ' | ' | '5 years | '3 years | '3 years | ' | '5 years | '1 year | '5 years | ' | '3 years | '5 years | '5 years | '2 years | ' | '10 years | '7 years | '5 years |
BUSINESS_COMBINATIONS_Proforma
BUSINESS COMBINATIONS (Proforma information) (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Business Acquisition [Line Items] | ' | ' | ' | ' |
Revenue | $61,563 | $73,167 | $127,104 | $146,555 |
Net loss | -11,352 | -13,597 | -26,661 | -14,577 |
Basic loss per share | ($0.53) | ($0.63) | ($1.25) | ($0.68) |
Diluted loss per share | ($0.53) | ($0.63) | ($1.25) | ($0.68) |
Vivity Labs Inc. | ' | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' | ' |
Revenue | ' | ' | 800 | ' |
Net loss | ' | ' | 1,100 | ' |
Lexia Merger | ' | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' | ' |
Revenue | ' | ' | 3,300 | ' |
Net loss | ' | ' | $4,600 | ' |
NET_LOSS_PER_SHARE_Details
NET LOSS PER SHARE (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
Numerator: | ' | ' | ' | ' | ||
Net loss | ($15,750) | ($3,213) | [1] | ($35,992) | ($8,117) | [1] |
Weighted average number of common shares: | ' | ' | ' | ' | ||
Basic (in shares) | 21,252 | 21,569 | [1] | 21,188 | 21,465 | [1] |
Diluted (in shares) | 21,252 | 21,569 | [1] | 21,188 | 21,465 | [1] |
Loss per common share: | ' | ' | ' | ' | ||
Basic net loss per share | ($0.74) | ($0.15) | [1] | ($1.70) | ($0.38) | [1] |
Diluted net loss per share | ($0.74) | ($0.15) | [1] | ($1.70) | ($0.38) | [1] |
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
NET_LOSS_PER_SHARE_Details_2
NET LOSS PER SHARE (Details 2) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Earnings Per Share [Abstract] | ' | ' | ' | ' |
Common stock equivalent shares included in calculation of the company's diluted net income per share | ' | ' | 0 | 0 |
Anti-dilutive securities | ' | ' | ' | ' |
Outstanding securities not included in the diluted net loss per share calculation | 205,000 | 688,000 | 263,000 | 684,000 |
Stock options | ' | ' | ' | ' |
Anti-dilutive securities | ' | ' | ' | ' |
Outstanding securities not included in the diluted net loss per share calculation | 71,000 | 376,000 | 90,000 | 365,000 |
Restricted stock units | ' | ' | ' | ' |
Anti-dilutive securities | ' | ' | ' | ' |
Outstanding securities not included in the diluted net loss per share calculation | 97,000 | 96,000 | 92,000 | 91,000 |
Restricted stocks | ' | ' | ' | ' |
Anti-dilutive securities | ' | ' | ' | ' |
Outstanding securities not included in the diluted net loss per share calculation | 37,000 | 216,000 | 81,000 | 228,000 |
INVENTORY_Details
INVENTORY (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Raw materials | $3,872 | $3,267 |
Finished goods | 3,680 | 3,372 |
Total inventory | $7,552 | $6,639 |
GOODWILL_Details
GOODWILL (Details) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | |||||||||||||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jan. 02, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jan. 09, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | ||
North America Consumer | Rest of World Consumer Reporting Unit | Institutional Operating Segment | Vivity Labs Inc. | Vivity Labs Inc. | Vivity Labs Inc. | Vivity Labs Inc. | Vivity Labs Inc. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | Tell Me More SA. | |||||||
North America Consumer | Rest of World Consumer Reporting Unit | Institutional Operating Segment | North America Consumer | Rest of World Consumer Reporting Unit | Institutional Operating Segment | ||||||||||||||
Changes in goodwill | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Balance at the beginning of the period | ' | ' | $50,059 | ' | $17,971 | $2,200 | $29,888 | ' | $9,333 | ' | ' | ' | ' | $21,407 | ' | ' | ' | ||
Acquisition during the period | ' | ' | ' | ' | ' | ' | ' | 9,333 | ' | 9,333 | 0 | 0 | 21,407 | ' | 0 | 0 | 21,407 | ||
Impairment charge | 0 | 0 | [1] | -2,199 | 0 | [1] | 0 | -2,199 | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Effect of change in foreign currency rate | ' | ' | 84 | ' | -33 | -1 | 118 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Balance at the end of the period | $78,684 | ' | $78,684 | ' | $27,271 | $0 | $51,413 | ' | $9,333 | ' | ' | ' | ' | $21,407 | ' | ' | ' | ||
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 0 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | |||||||||||||||||||||||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jan. 02, 2014 | Jan. 09, 2014 | Jan. 02, 2014 | Jan. 09, 2014 | Jan. 02, 2014 | Jan. 09, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jan. 02, 2014 | Jan. 09, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Vivity Labs Inc. | Tell Me More SA. | Technology platform | Technology platform | Tradename | Tradename | Tradename/trademark | Tradename/trademark | Core technology | Core technology | Customer relationships | Customer relationships | Customer relationships | Customer relationships | Website | Website | Patents | Patents | Sales and marketing | Sales and marketing | Sales and marketing | Sales and marketing | Research & development | Research & development | Research & development | Research & development | Cost of revenue | Cost of revenue | Cost of revenue | Cost of revenue | ||||||
Vivity Labs Inc. | Tell Me More SA. | Vivity Labs Inc. | Tell Me More SA. | Vivity Labs Inc. | Tell Me More SA. | ||||||||||||||||||||||||||||||
Intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross carrying amount of finite and indefinite lived intangible assets | $56,910 | ' | $56,910 | ' | $44,225 | ' | ' | ' | ' | ' | ' | $12,609 | $11,807 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross carrying amount of finite-lived intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 16,541 | 9,954 | 27,448 | 22,152 | ' | ' | 12 | 12 | 300 | 300 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accumulated Amortization | -18,403 | ' | -18,403 | ' | -15,219 | ' | ' | ' | ' | ' | ' | -646 | -158 | -4,499 | -3,207 | -13,104 | -11,720 | ' | ' | -12 | -12 | -142 | -122 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net carrying amount of finite and indefinite lived intangible assets | 38,507 | ' | 38,507 | ' | 29,006 | ' | ' | ' | ' | ' | ' | 11,963 | 11,649 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net carrying amount of finite-lived intangible assets | 27,901 | ' | 27,901 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 12,042 | 6,747 | 14,344 | 10,432 | ' | ' | 0 | 0 | 158 | 178 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Finite lived intangibles associated with acquisitions | ' | ' | ' | ' | ' | 3,577 | 9,105 | 2,448 | 4,144 | 188 | 613 | ' | ' | ' | ' | ' | ' | 941 | 4,348 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Acquired intangible asset, estimated useful lives | ' | ' | ' | ' | ' | ' | ' | '5 years | '5 years | '3 years | '1 year | ' | ' | ' | ' | ' | ' | '3 years | '5 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization of intangible assets | $1,608 | $363 | $3,184 | $373 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $931 | $183 | $1,876 | $183 | $531 | $180 | $1,015 | $190 | $146 | $0 | $293 | $0 |
INTANGIBLE_ASSETS_Future_Amort
INTANGIBLE ASSETS (Future Amortization Expense) (Details) (USD $) | Jun. 30, 2014 |
In Thousands, unless otherwise specified | |
Summary of the estimated future amortization expense related to intangible assets | ' |
2014-remaining | $3,170 |
2015 | 5,651 |
2016 | 5,169 |
2017 | 4,641 |
2018 | 4,028 |
Thereafter | 5,242 |
Net carrying amount of finite-lived intangible assets | $27,901 |
OTHER_CURRENT_LIABILITIES_Deta
OTHER CURRENT LIABILITIES (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Other Liabilities Disclosure [Abstract] | ' | ' |
Marketing expenses | $12,481 | $19,885 |
Professional and consulting fees | 4,122 | 4,570 |
Sales return reserve | 2,796 | 4,834 |
Sales, withholding, and property taxes payable | 4,432 | 3,968 |
Accrued purchase price of business acquisition | 1,688 | 1,688 |
Other | 3,898 | 6,991 |
Other current liabilities, net | $29,417 | $41,936 |
CAPITAL_LEASES_Details
CAPITAL LEASES (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jan. 09, 2014 | Jun. 30, 2013 |
In Thousands, unless otherwise specified | Tell Me More SA. | Assets Held under Capital Leases | ||
Capital Leased Assets [Line Items] | ' | ' | ' | ' |
Lease obligation acquired | ' | ' | $3,958 | ' |
Fixed assets under capital lease, acquired during the period | ' | ' | ' | 569 |
2014-remaining | 338 | ' | ' | ' |
2015 | 820 | ' | ' | ' |
2016 | 618 | ' | ' | ' |
2017 | 618 | ' | ' | ' |
2018 | 2,901 | ' | ' | ' |
Total minimum lease payments | 5,295 | ' | ' | ' |
Less amount representing interest | 873 | ' | ' | ' |
Present value of net minimum lease payments | 4,422 | ' | ' | ' |
Less current portion | 653 | 256 | ' | ' |
Obligations under capital lease, long-term | $3,769 | $217 | ' | ' |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 6 Months Ended | |||||||||
Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | |
Domestic Tax Authority | Domestic Tax Authority | Foreign Tax Authority | Foreign Tax Authority | Other Long Term Liabilities | KOREA, REPUBLIC OF | BRAZIL | JAPAN | UNITED STATES | ||
Foreign Tax Authority | Foreign Tax Authority | Foreign Tax Authority | Foreign Tax Authority | |||||||
Income Tax Examination [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized tax benefits | $140,000 | ' | ' | ' | ' | $143,000 | ' | ' | ' | ' |
Affect of unrecognized tax benefits, which if recognized | 99,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest and penalties related to uncertain tax positions | 20,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Full valuation allowance | ' | ' | ' | ' | ' | ' | 400,000 | 400,000 | 2,100,000 | 23,100,000 |
Gross deferred tax liabilities | ' | 9,700,000 | 9,600,000 | ' | ' | ' | ' | ' | ' | ' |
Net deferred tax assets | ' | ' | ' | ' | 36,000 | ' | ' | ' | ' | ' |
Net deferred tax liabilities | ' | ' | ' | $1,800,000 | ' | ' | ' | ' | ' | ' |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 6 Months Ended | 12 Months Ended | 0 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | 6 Months Ended | |||||||
Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | 28-May-08 | Dec. 31, 2008 | Jan. 04, 2006 | Jun. 30, 2014 | 20-May-14 | 23-May-12 | 26-May-11 | 23-May-13 | Jun. 30, 2014 | Feb. 27, 2009 | Jun. 30, 2014 | |
Stock options | Stock options | 2006 Plan | 2006 Plan | 2006 Plan | 2006 Plan | 2009 Plan | 2009 Plan | 2009 Plan | 2009 Plan | 2009 Plan | 2009 Plan | 2009 Plan | ||
Stock options | Stock options | Stock options | Stock options | Maximum | ||||||||||
Maximum | ||||||||||||||
Stock-based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares authorized for grant | ' | ' | ' | ' | 2,137,200 | 1,942,200 | ' | ' | ' | ' | ' | ' | 2,437,744 | ' |
Number of additional shares authorized for grant | ' | ' | ' | 195,000 | ' | ' | ' | 500,000 | 1,122,930 | 1,000,000 | 2,317,000 | ' | ' | ' |
Shares available for future grant under plan | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,460,005 | ' | ' |
Options Outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding at the beginning of the period (in shares) | ' | 1,927,552 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options granted (in shares) | ' | 608,574 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options exercised (in shares) | ' | -112,307 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options cancelled (in shares) | ' | -373,399 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding at the end of the period (in shares) | ' | 2,050,420 | 1,927,552 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Vested and expected to vest at the end of the period (in shares) | ' | 1,871,360 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable at the end of the period (in shares) | ' | 821,204 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted Average Exercise Price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding at the beginning of the period (in dollars per share) | ' | $13.61 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options granted (in dollars per share) | ' | $11.64 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options exercised (in dollars per share) | ' | $5.72 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options cancelled (in dollars per share) | ' | $14.72 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding at the end of the period (in dollars per share) | ' | $13.34 | $13.61 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Vested and expected to vest at the end of the period (in dollars per share) | ' | $13.43 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable at the end of the period (in dollars per share) | ' | $14.54 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted Average Contractual Life | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding at balance sheet date | ' | '7 years 9 months 28 days | '7 years 6 months 15 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Vested and expected to vest at the end of the period | ' | '7 years 8 months 13 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable at the end of the period | ' | '6 years 3 months 10 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate Intrinsic Value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding at balance sheet date | ' | $724,525 | $2,829,380 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Vested and expected to vest at the end of the period | ' | 715,585 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable at the end of the period | ' | 582,808 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Additional information | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized stock-based compensation expense related to non-vested stock option awards | ' | $7,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted-average period over which unrecognized stock-based compensation cost expected to be recognized | '2 years 10 months 3 days | '2 years 8 months 23 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expiration period | '10 years | ' | ' | ' | ' | ' | '10 years | ' | ' | ' | ' | ' | ' | '10 years |
Vesting period | ' | '4 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
STOCKBASED_COMPENSATION_Detail1
STOCK-BASED COMPENSATION (Details 2) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Dec. 31, 2013 | |
Additional information | ' | ' |
Future compensation cost related to the nonvested portion of the restricted stock awards not yet recognized | $6,300,000 | ' |
Period over which future compensation cost expected to be recognized | '2 years 10 months 3 days | ' |
Restricted stock awards | ' | ' |
Nonvested Outstanding | ' | ' |
Nonvested Awards at the beginning of the period (in shares) | 634,031 | ' |
Awards granted (in shares) | 223,923 | ' |
Awards vested (in shares) | -220,409 | ' |
Awards cancelled (in shares) | -97,414 | ' |
Nonvested Awards at the end of the period (in shares) | 540,131 | ' |
Weighted Average Grant Date Fair Value | ' | ' |
Nonvested Awards at the beginning of the period (in dollars per share) | $12.28 | ' |
Awards granted (in dollars per share) | $11.83 | ' |
Awards vested (in dollars per share) | $10.33 | ' |
Awards cancelled (in dollars per share) | $13.45 | ' |
Nonvested Awards at the end of the period (in dollars per share) | $12.71 | ' |
Aggregate Intrinsic Value | ' | ' |
Nonvested Awards at the end of the period | 6,864,579 | 7,785,901 |
Restricted stock units | ' | ' |
Nonvested Outstanding | ' | ' |
Awards granted (in shares) | 34,498 | ' |
Performance shares | LTIP | ' | ' |
Additional information | ' | ' |
Vesting percentage | 100.00% | ' |
Performance shares | LTIP | Minimum | ' | ' |
Additional information | ' | ' |
Payout level based on incentive target | 0.00% | ' |
Number of shares to be issued as performance stock awards | 0 | ' |
Cash payout | 0 | ' |
Performance shares | LTIP | Maximum | ' | ' |
Additional information | ' | ' |
Number of shares allocated to plan | 482,629 | ' |
Payout level based on incentive target | 200.00% | ' |
Cash payout | $2,500,000 | ' |
STOCKHOLDERS_EQUITY_Details
STOCKHOLDERS' EQUITY (Details) (USD $) | 0 Months Ended | 12 Months Ended | |||
Aug. 22, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 11, 2013 | 8-May-13 | |
Stockholders' Equity Note [Abstract] | ' | ' | ' | ' | ' |
Number of shares authorized to be issued | ' | ' | 200,000,000 | ' | ' |
Common stock | ' | ' | ' | ' | ' |
Common stock, shares authorized | ' | 190,000,000 | 190,000,000 | ' | ' |
Common stock, par value (in dollars per share) | ' | $0.00 | $0.00 | ' | ' |
Common stock, shares issued | ' | 22,588,484 | 22,831,674 | ' | ' |
Common stock, shares outstanding | ' | 21,588,484 | 21,831,674 | ' | ' |
Preferred stock | ' | ' | ' | ' | ' |
Preferred stock, shares authorized | ' | 10,000,000 | 10,000,000 | ' | ' |
Preferred stock, par value (in dollars per share) | ' | $0.00 | $0.00 | ' | ' |
Shelf Registration Statement, number of shares sold | ' | ' | ' | 3,490,000 | ' |
Shelf Registration Statement, additional number of shares issued and sold | ' | ' | ' | 10,000 | ' |
Shelf Registration Statement, offering price | ' | ' | ' | $16 | ' |
Shelf Registration Statement, amount | ' | ' | ' | ' | $150,000,000 |
Share repurchase program | ' | ' | ' | ' | ' |
Share repurchase program, number of shares authorized to repurchase | 25,000,000 | ' | ' | ' | ' |
Stock repurchased during the year, value | ' | $11,435,000 | ' | ' | ' |
Shares repurchased under the share repurchase program | ' | 1,000,000 | ' | ' | ' |
Stock repurchased during the year, cost per share | ' | $11.44 | ' | ' | ' |
LEASE_ABANDONMENT_Details
LEASE ABANDONMENT (Details) (Facility Closing, USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Restructuring Reserve [Roll Forward] | ' | ' |
Accrued lease abandonment costs, beginning of period | $413 | $0 |
Costs incurred and charged to expense | 3,688 | 828 |
Principal reductions | -1,993 | -211 |
Accrued lease abandonment costs, end of period | 2,108 | 617 |
Short-term | 743 | 377 |
Long-term | 1,365 | 240 |
Accrued lease abandonment costs liability | 2,108 | 617 |
VIRGINIA | ' | ' |
Restructuring Reserve [Roll Forward] | ' | ' |
Costs incurred and charged to expense | 3,200 | ' |
JAPAN | ' | ' |
Restructuring Reserve [Roll Forward] | ' | ' |
Principal reductions | ($400) | ' |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Future minimum operating lease payments | ' | ' | ' | ' |
2014-remaining | $2,906,000 | ' | $2,906,000 | ' |
2015 | 4,233,000 | ' | 4,233,000 | ' |
2016 | 3,428,000 | ' | 3,428,000 | ' |
2017 | 2,857,000 | ' | 2,857,000 | ' |
2018 | 2,547,000 | ' | 2,547,000 | ' |
Total | 15,971,000 | ' | 15,971,000 | ' |
Rent | ' | ' | ' | ' |
Rent expense | 1,400,000 | 2,200,000 | 2,900,000 | 5,000,000 |
Deferred rent liability | 500,000 | ' | 500,000 | ' |
Building, warehouse and office space | Minimum | ' | ' | ' | ' |
Commitments and contingencies | ' | ' | ' | ' |
Lease period | ' | ' | '12 months | ' |
Building, warehouse and office space | Maximum | ' | ' | ' | ' |
Commitments and contingencies | ' | ' | ' | ' |
Lease period | ' | ' | '72 months | ' |
Prepaid other assets | ' | ' | ' | ' |
Rent | ' | ' | ' | ' |
Deferred rent asset | $27,000 | ' | $27,000 | ' |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
segment | ||||||
Segment Reporting [Abstract] | ' | ' | ' | ' | ||
Number of operating segments | ' | ' | 3 | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Total Revenue | $57,315 | $62,139 | [1] | $118,080 | $126,062 | [1] |
Total segment contribution | -14,966 | -3,634 | [1] | -36,065 | -7,986 | [1] |
Unallocated cost of sales | 11,960 | 10,224 | [1] | 24,131 | 20,488 | [1] |
Unallocated sales and marketing | 37,833 | 32,787 | [1] | 76,930 | 70,059 | [1] |
Unallocated research and development | 8,368 | 9,093 | [1] | 17,142 | 16,451 | [1] |
Unallocated general and administrative | 14,002 | 13,634 | [1] | 30,055 | 26,222 | [1] |
Unallocated non-operating income/(expense) | 293 | -34 | [1] | 118 | -449 | [1] |
Unallocated goodwill impairment | 0 | 0 | [1] | 2,199 | 0 | [1] |
Unallocated lease abandonment | 118 | 35 | [1] | 3,688 | 828 | [1] |
Total unallocated expenses | -14,966 | -3,634 | [1] | -36,065 | -7,986 | [1] |
Loss before income taxes | -15,259 | -3,600 | [1] | -36,183 | -7,537 | [1] |
North America Consumer | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Unallocated goodwill impairment | ' | ' | 0 | ' | ||
Rest of world consumer | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Unallocated goodwill impairment | ' | ' | 2,199 | ' | ||
Operating segments | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Total Revenue | 57,315 | 62,139 | [1] | 118,080 | 126,062 | [1] |
Total segment contribution | 12,794 | 24,161 | [1] | 29,050 | 45,216 | [1] |
Total unallocated expenses | 12,794 | 24,161 | [1] | 29,050 | 45,216 | [1] |
Operating segments | North America Consumer | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Total Revenue | 32,434 | 39,934 | [1] | 68,649 | 81,318 | [1] |
Total segment contribution | 9,805 | 19,141 | [1] | 21,513 | 35,480 | [1] |
Total unallocated expenses | 9,805 | 19,141 | [1] | 21,513 | 35,480 | [1] |
Operating segments | Rest of world consumer | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Total Revenue | 5,467 | 7,478 | [1] | 12,136 | 16,048 | [1] |
Total segment contribution | -335 | -174 | [1] | 11 | -552 | [1] |
Total unallocated expenses | -335 | -174 | [1] | 11 | -552 | [1] |
Operating segments | Global Enterprise & Education | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Total Revenue | 19,414 | 14,727 | [1] | 37,295 | 28,696 | [1] |
Total segment contribution | 3,324 | 5,194 | [1] | 7,526 | 10,288 | [1] |
Total unallocated expenses | 3,324 | 5,194 | [1] | 7,526 | 10,288 | [1] |
Segment Reconciling Items | ' | ' | ' | ' | ||
Segment reporting | ' | ' | ' | ' | ||
Total segment contribution | 28,053 | 27,761 | [1] | 65,233 | 52,753 | [1] |
Unallocated cost of sales | 2,264 | 971 | [1] | 4,776 | 1,501 | [1] |
Unallocated sales and marketing | 4,159 | 4,711 | [1] | 9,384 | 8,771 | [1] |
Unallocated research and development | 8,368 | 9,092 | [1] | 17,141 | 16,449 | [1] |
Unallocated general and administrative | 13,437 | 12,986 | [1] | 28,513 | 25,653 | [1] |
Unallocated non-operating income/(expense) | 293 | -34 | [1] | -468 | -449 | [1] |
Unallocated goodwill impairment | 0 | 0 | [1] | 2,199 | 0 | [1] |
Unallocated lease abandonment | 118 | 35 | [1] | 3,688 | 828 | [1] |
Total unallocated expenses | $28,053 | $27,761 | [1] | $65,233 | $52,753 | [1] |
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |
SEGMENT_INFORMATION_Details_2
SEGMENT INFORMATION (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | |||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | ||
Geographic Information | ' | ' | ' | ' | ' | ||
Total Revenue | $57,315 | $62,139 | [1] | $118,080 | $126,062 | [1] | ' |
Long-lived assets | 24,651 | ' | 24,651 | ' | 17,766 | ||
United States | ' | ' | ' | ' | ' | ||
Geographic Information | ' | ' | ' | ' | ' | ||
Total Revenue | 46,637 | 52,163 | 96,047 | 104,953 | ' | ||
Long-lived assets | 18,986 | ' | 18,986 | ' | 17,205 | ||
International | ' | ' | ' | ' | ' | ||
Geographic Information | ' | ' | ' | ' | ' | ||
Total Revenue | 10,678 | 9,976 | 22,033 | 21,109 | ' | ||
Long-lived assets | 5,665 | ' | 5,665 | ' | 561 | ||
Language learning | ' | ' | ' | ' | ' | ||
Geographic Information | ' | ' | ' | ' | ' | ||
Total Revenue | 54,852 | 62,139 | 113,964 | 126,062 | ' | ||
Literacy | ' | ' | ' | ' | ' | ||
Geographic Information | ' | ' | ' | ' | ' | ||
Total Revenue | 1,923 | 0 | 3,334 | 0 | ' | ||
Brain fitness | ' | ' | ' | ' | ' | ||
Geographic Information | ' | ' | ' | ' | ' | ||
Total Revenue | $540 | $0 | $782 | $0 | ' | ||
[1] | Certain amounts have been adjusted for the retrospective change in accounting principle for sales commissions (See Note 2) |