Rosetta Stone 4th-quarter profit more than doubles, shares surge in late trading

Thursday, February 25, 2010

Rosetta Stone shares surge on 4Q report

ARLINGTON, Va. — Shares of Rosetta Stone Inc. surged in late trading Thursday after the maker of language-learning software reported its fourth-quarter profit more than doubled on strong demand from consumers and institutional customers.

Rosetta Stone’s profit and revenue both topped Wall Street expectations, although the company issued profit forecasts for the first quarter and full year that are short of analysts’ estimates. Its revenue forecasts, however, are above Street expectations.

The company, whose stock debuted in an April initial public offering, said net income for the three months ended Dec. 31 rose to nearly $12.2 million, or 58 cents per share. That’s up from $4.9 million, or 29 cents per share, in the same quarter a year earlier.

Excluding an income tax provision, Rosetta Stone’s per-share profit in the latest quarter was 61 cents per share.

Analysts surveyed by Thomson Reuters had been expecting a profit of 38 cents per share, on average. Analysts’ estimates typically exclude one-time items.

Rosetta Stone, based in Arlington, Va., said revenue rose 18 percent to $78.3 million — above analysts’ consensus estimate of $74.3 million — from $66.3 million a year ago. Consumer revenue was up 16 percent to $65 million, while institutional revenue jumped 29 percent to $13.2 million.

For the first quarter, Rosetta Stone estimates a profit in the range of 4 cents to 6 cents per share, or 7 cents to 9 cents per share excluding one-time items. On that basis, analysts expect a profit of 12 cents per share, on average.

For the full year, Rosetta Stone expects a profit of 78 cents to 88 cents per share, or 90 cents to $1 excluding one-time items. Analysts are expecting $1.16 per share.

However, Rosetta Stone topped Street expectations with its revenue forecast for $58 million to $60 million in the first quarter, and $286 million to $299 million for the full year. Analysts are expecting $56.2 million and $279.6 million, on average.

Rosetta Stone also said Thursday it plans to release the next generation of its language-learning software in this year’s third quarter.

Rosetta Stone reported results after its shares fell 20 cents to close at $17.34. In after-hours trading, the stock gained $2.17, or about 13 percent, to $19.51.

Since the stock’s debut in April, shares have traded as low as $16.06 and as high as $32.97, a peak hit in July. Shares haven’t traded above $28 since August, when the company canceled a secondary stock offering.

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