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Rosetta Stone Misses on the Top and Bottom Lines

By Seth Jayson – Updated Apr 10, 2017 at 1:20PM

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Just the facts, Fool.

Rosetta Stone (NYSE: RST) reported earnings on May 8. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Rosetta Stone missed slightly on revenues and missed expectations on earnings per share.

Compared to the prior-year quarter, revenue contracted. GAAP loss per share grew.

Gross margins expanded, operating margins contracted, net margins shrank.

Revenue details
Rosetta Stone booked revenue of $63.9 million. The four analysts polled by S&P Capital IQ wanted to see sales of $65.1 million on the same basis. GAAP reported sales were 8.0% lower than the prior-year quarter's $69.4 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at -$0.22. The four earnings estimates compiled by S&P Capital IQ predicted -$0.08 per share. GAAP EPS were -$0.22 for Q1 versus -$0.09 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 83.9%, 330 basis points better than the prior-year quarter. Operating margin was -6.5%, 310 basis points worse than the prior-year quarter. Net margin was -7.4%, 470 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $64.3 million. On the bottom line, the average EPS estimate is -$0.11.

Next year's average estimate for revenue is $284.4 million. The average EPS estimate is $0.03.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 684 members out of 774 rating the stock outperform, and 90 members rating it underperform. Among 172 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 154 give Rosetta Stone a green thumbs-up, and 18 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Rosetta Stone is hold, with an average price target of $14.50.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends Rosetta Stone. The Motley Fool owns shares of Rosetta Stone. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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