PR Newswire
GREENBRAE, Calif., Aug. 17, 2015
GREENBRAE, Calif., Aug. 17, 2015 /PRNewswire/ --
Dear Fellow Shareholders,
We are pleased with Rosetta Stone's (NYSE: RST) reported results for the second quarter of 2015 and the early execution of the board's strategy regarding business simplification, a clear focus on organic growth opportunities, and setting the stage for consistent profitability with vastly improved margins. Our encouragement comes from:
We believe these significantly improved business results will help crystalize two clear paths to maximize shareholder value:
We think the most optimal path to pursue is the sale of the company, given:
Approximately two years ago, Rosetta Stone acquired LiveMocha, TellMeMore, FitBrains, and Lexia Learning for approximately $73 million in cash. Lexia was approximately a $22 million acquisition alone. We believe that in aggregate these four acquisitions are worth at least the $73 million or more of what the company paid. Additionally, we believe the remaining $175 million in revenue from Rosetta Stone's Consumer and Enterprise business is worth at least 1-1.5x revenue to either a private equity firm or a strategic buyer. We continue to see a change of control transaction resulting in a sum of the parts valuation between $13-17 per share.
In conclusion, Rosetta Stone is simplifying its business strategy and focusing on harvesting cash from the Consumer business to reinvest in the company's highest value and growth businesses. Osmium believes the action of reducing Rosetta Stone losses in its second seasonal quarter to just $300,000, while guiding for $10-15 million in operating cash flow for the rest of 2015, in addition to focusing on high growth businesses and converting money losing overseas operations into licensing agreements are all smart business decisions.
We thank all of the employees and board of directors of Rosetta Stone for taking action to make tough decisions and setting the company on a trajectory to unlock its full potential. We think the share price is radically undervalued and look forward to continued enhancements to simplify and maximize shareholder value.
Thank you.
Sincerely,
John H. Lewis
Chief Investment Officer & Managing Partner
Osmium Partners, LLC
415-785-4044
The foregoing letter contains "forward-looking" that are based on current expectations, estimates, forecasts and projections about Rosetta Stone, its future performance, liquidity and Osmium Partner's beliefs and assumptions. These "forward-looking" statements include statements relating to, among other things, financial guidance provided by Rosetta Stone for future periods, anticipated future financial performance of Rosetta Stone, the paths pursuant to which Rosetta Stone may maximize shareholder value, the value of Rosetta Stone and similar statements. These statements involve risks and uncertainties that may cause results to differ materially from the statements set forth in this letter, including as a result of general conditions in the capital markets and general global economic conditions. The forward-looking statements in this letter speak only as of the date of this letter and are subject to uncertainty and changes. Osmium Partners expressly disclaims any obligation or undertaking to provide publicly any updates or revisions to such statements to reflect any change in its expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.
In addition, this letter may contain certain factual and statistical (both historical and projected) industry and market data and other information that was obtained by Osmium Partners from independent, third-party sources that it deems to be reliable. However, Osmium has not independently verified such data or information or the reasonableness of the assumptions upon which such data and other information was based and therefore there can be no assurance as to the accuracy of such data or other information.
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SOURCE Osmium Partners, LLC
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