Acquisition of Tell Me More. Investor Presentation December 11, 2013

Transcription

1 Acquisition of Tell Me More Investor Presentation December 11, 2013

2 Transaction Summary Agreement to acquire leading international language-learning software company, Tell Me More ( TMM ) 20.75MM ($28MM) purchase price, including assumed net debt for 100% of Tell Me More S.A. stock Expected to close in early January 2014 Average annual bookings of ~ 20MM over last 3 years A leader in the B2B market 2

3 Company Profile Tell Me More is a ~ 20MM ($27MM) language-learning software provider with 7 offices worldwide in 6 countries Based outside Paris, France ~250 worldwide employees Core product is an online, SaaS language learning platform covering 9 languages sold to the B2B market 19 Interface languages Extensive content and activities 8,000+ hours of total content and over 35 different activity types Offers training services: Tutoring, Coaching, Virtual Classrooms, and Telephone lessons to complement software Bookings 1 B2C 6% B2B 94% Corporate 54% 46% Education B2B Bookings 1 1. Bookings represent executed sales contracts received by the Company that are either recorded immediately as revenue or as deferred revenue. 3

4 Strategic Rationale: Tell Me More Is A Natural & Complementary Fit 1 Bolsters Rosetta Stone s position in the Global B2B language market Creates leading player in several markets Serve more customers and deliver more complete solutions around the world 3 Delivers Intermediate & Advanced Language Solutions for E&E and Consumer 2 4 Expands Geographic footprint for our European business and adds China Leverages Rosetta Stone Brand, Scale and Infrastructure Combined capabilities will create global opportunities for growth Significant synergy potential Captures significant EBITDA and cash flow benefits 4

5 Combination Creates a More Global Footprint and Expands B2B Presence RST Markets TMM Markets Shared Markets 5

6 Complementary Suite of Products and Services: Delivering A Full Spectrum of Learner Solutions TMM has Advanced & Intermediate content for 9 languages with Placement, Assessment and Certification that aligns with standards English Spanish French German Italian Dutch Japanese Mandarin Arabic Beginner thru Advanced Content Up to 2,000 hours per language, 8,000 total content hours 16,000 Words 5,000 Phrases Sources: U.S. Consumer Segmentation Study by Rosetta Stone (June 2013); TopTenReviews.com ESL Software Category (Accessed August 29 th 2013); Rosetta Stone Research & Analysis. 6

7 Leverage & Scale Opportunities Scale Advantage from Sales & Marketing Infrastructure Unify Direct Sales Forces Cross-selling and Up-selling Opportunities Leverage Rosetta Stone Brand Drive Growth & Cash Flow Introduce New Products into Consumer Markets 7

8 Financials & Outlook

9 Tell Me More Historical Financials Overview Historical B2B and B2C Bookings TMM has had modest B2B bookings 1 growth De-emphasized B2C business resulted in declining B2C metrics Flat to slightly-positive Adjusted Operating EBITDA 2 and margin Key Historical Financial Metrics Historical Bookings & EBITDA ($ in millions) Bookings B2B $22.6 $24.8 $24.5 B2C $5.7 $4.5 $2.6 Total Bookings $28.4 $29.3 $27.1 Book ings Growth 2% 3% -8% Adj. Operating EBITDA ($0.7) $1.3 $0.5 Margin % (2%) 4% 2% 1.Bookings represent executed sales contracts received by the Company that are either recorded immediately as revenue or as deferred revenue. 2.Adjusted Operating EBITDA is GAAP net income or loss plus interest income and expense, income tax benefit and expense, depreciation, amortization and stock-based compensation expenses, plus the change in deferred revenue. Adjusted EBITDA excludes any items related to the litigation with Google Inc., restructuring costs and transaction and other costs, including integration expenses, associated with mergers and acquisitions. 9

10 Financial Outlook General Commentary Expected closing is early January 2014 Fully integrate into Rosetta Stone Quickly move to operate under RS brand Expect significant synergies Unify sales forces Leverage sales and marketing infrastructure Leverage combined customer database to cross-sell and up-sell 2014 Impact/Contribution 2015 & Beyond Bookings 1 of $25MM to $27MM Adjusted Operating EBITDA 2 of $3MM to $4MM Neutral to cash from operations due to integration expenses Modest top line growth expectations 25%+ Adjusted Operating EBITDA margin contribution 1.Bookings represent executed sales contracts received by the Company that are either recorded immediately as revenue or as deferred revenue. 2.Adjusted Operating EBITDA is GAAP net income or loss plus interest income and expense, income tax benefit and expense, depreciation, amortization and stock-based compensation expenses, plus the change in deferred revenue. Adjusted EBITDA excludes any items related to the litigation with Google Inc., restructuring costs and transaction and other costs, including integration expenses, associated with mergers and acquisitions. 10