Rosetta Stone, Inc. (NYSE:RST) Q3 2019 Earnings Conference Call Transcript

Nov 06, 2019 • 05:00 pm ET

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Rosetta Stone, Inc. (NYSE:RST) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Greetings, ladies and gentlemen, and welcome to the Rosetta Stone Third Quarter 2019 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions]

It is now my pleasure to introduce your host Mr. Jason Terry. Thank you. You may begin.

Executive
John Hass

Thank you, and welcome, everyone. We have a lot to cover so please turn to slide two. We have shared this slide with you a few times in the past. Let me be clear as to why this background is critical to our future. We have the experience and expertise to be the leader in helping people build the communication skills necessary to improve their lives. Whether it is a child learning to read in a classroom or an adult learning a second language in retirement, we build equity and deliver positive societal change.Please turn to slide three for a review of our consolidated results. Consolidated bookings in the third quarter grew 21% to $81.5 million with contributions from every segment of the business. largest year over year increase in organic bookings in the history of the company. And it's indicative of what we are capable of doing during the season only important third quarter, but it is now All we're capable of. We expected more and we'll talk today about what it will take to deliver that.

Consolidated revenues grew 6% in the quarter to $45.5 million, our largest quarter-over-quarter dollar increase in 2019. Importantly, with over $80 million in bookings and $45 million in revenues, we added $36 million to deferred revenue in the quarter. Net income in Q3 was a loss of $2.9 million, an improvement in $3.6 million over the same period in 2018. This was driven by higher revenues and lower variable incentive compensation expense, partially offset by increased sales and marketing expense during our peak selling season.Adjusted EBITDA in the quarter improved to $2.5 million, versus a loss of $700,000 in 2018. We ended the quarter with $36.2 million of cash and no debt. A $25 million increase in our net cash position since the end of Q2 on $29 million of operating cash flow and $4 million of capex. When we utilized our seasonal borrowing facility we said it would be repaid by the end of the year. We are pleased that we repaid the line fully in Q3 and we will not use it again this year.

Let's move to performance of our business units beginning with Literacy on slide four and I will turn the call over to Nick.

Executive
Nick Gaehde

Thank you, John, and good afternoon, everyone. Literacy bookings in the third quarter were a record $41 million, an increase of 21% versus the third quarter of 2018. To put this in context, this represents more than 85% of the total bookings we recorded in all of 2017 and more than double the full year Lexia joined the Rosetta Stone family. But as John said, we expected more in Q3.

Revenue in Q3 in the Literacy segment was