Rosetta Stone Inc. today announced that it has agreed to acquire Vivity Labs Inc., creator of the successful Fit Brains product portfolio, for $12 million in cash.
Rosetta Stone is the popular computer-assisted language learning platform, founded in 1992 as “Fairfield Language Technologies”. According to the company, the new acquisition is a reflection of the close connection between language learning and brain training, making Vivity Labs a” natural strategic fit” for Rosetta Stone. Rosetta Stone is rapidly expanding beyond language learning other areas of technology-driven education.
“There is a remarkable overlap between language learners and people who are looking to boost their cognitive abilities,” said Rosetta Stone CEO Steve Swad. “Indeed, our research suggests that a significant percentage of people who purchased a language-learning product in the past year also considered a computer-based brain training solution. By acquiring Vivity Labs, we’re capitalizing on this natural affinity between our products, seizing an opportunity to own a significant share of the brain fitness market, and accelerating the growth of our Consumer business.”
Vancouver-based Vivity’s flagship product, “Fit Brains Trainer,” is one of the highest grossing brain-training apps available through Apple’s iTunes App Store. It generated close to five million downloads in the past 12 months. Vivity Labs has emerged as a leader in the burgeoning field of brain training with several popular apps for adults and children. Founded in 2007, the company is lead by a team of neuroscientists, researchers, programmers and game designers, including Dr. Paul Nussbaum, a clinical neuropsychologist widely recognized as a modern thought-leader in the area of brain health.
“All over the world, people are seeking new ways to improve their everyday mental focus and performance” said Vivity Labs CEO Michael Cole. “Research shows that online training is an effective way to build cognitive reserve and increase brain performance, and the growth of Vivity Labs and the industry overall is testament to the skyrocketing demand for brain fitness solutions.”
Fit Brains apps are available in several languages around the world, and Swad said Rosetta Stone wants to be the “overall leader in online learning”.
The market for brain health software grew from $295 million in annual revenues in 2009 to more than $480 million at the end of last year. Experts estimate that the market will exceed $3 billion by 2020. In 2014, Rosetta Stone expects that the acquisition of Vivity Labs will contribute about $3 million to $5 million. Adjusted Operating EBITDA is expected to be in a range of $1 million to $2 million. After 2015 and beyond, Rosetta Stone expects double-digit percentage bookings growth and Adjusted Operating EBITDA margins of 20-30%.