SEATTLE, Oct. 30, 2019 /PRNewswire/ -- RealNetworks,
Inc. (Nasdaq: RNWK), a leader in digital media software and
services, today announced its financial results for the third
quarter ended September 30, 2019.
- Third quarter revenue of $45.0
million compared to $44.2
million in the prior quarter; significant adjusted EBITDA
loss improvement over the prior quarter
- Expanded reach of SAFRTM through broadening
network of partners, including NVIDIA
- Games revenue up 30% year-over-year with a return to
positive operating income driven by success of free-to-play casual
mobile games, particularly Delicious World
Management Commentary
"In the third quarter, we continued to make solid progress with
two key growth initiatives: our SAFR facial and object recognition
platform and free-to-play casual mobile games," said Rob Glaser, Chairman and CEO of RealNetworks.
"For SAFR, we entered into new verticals through partnerships with
systems integrators and GPU market leader, NVIDIA. We also gained
traction in our commercialization efforts through collaborations
with leading Video Management Systems."
Mr. Glaser added, "In Games, our free-to-play casual mobile
games continued to perform well and scale up. This is particularly
true with Delicious World, which is on track to become our most
successful casual game ever in terms of revenue and engagement even
though it's only been in global release for six months. These
successes, along with our ongoing commitment to carefully manage
our costs, have resulted in a significant improvement on the bottom
line."
Third Quarter 2019 Financial Highlights
- Revenue was $45.0 million
(inclusive of $27.3 million from
Napster) compared to $44.2 million
(inclusive of $28.6 million from
Napster) in the prior quarter and $17.6
million in the prior year period.
- Games revenue was $7.2 million,
up 18% compared to $6.0 million in
the prior quarter and up 30% compared to $5.5 million in the prior year period.
- Gross profit margin was 42%, up from 38% in the prior quarter
and down from 76% in the prior year period. Napster's gross profit
margin for the third quarter of 2019 was 19%, while RealNetworks'
gross profit margin without Napster was 76%.
- Operating expenses decreased $1.4
million, or 5%, from the prior quarter and increased
$6.7 million, or 37%, from the prior
year period. Napster's operating expenses were $6.5 million for the third quarter of 2019.
- Net loss attributable to RealNetworks was $(6.0) million, or $(0.16) per share, compared to net loss of
$(9.2) million, or $(0.24) per share, in the prior quarter and a net
loss of $(6.0) million, or
$(0.16) per share, in the prior year
period.
- Adjusted EBITDA was a loss of $(3.2)
million compared to a loss of $(6.3)
million in the prior quarter and a loss of $(3.3) million in the prior year period. A
reconciliation of GAAP net income (loss) including noncontrolling
interests to adjusted EBITDA, a non-GAAP measure, is provided in
the financial tables that accompany this release.
- At September 30, 2019, the
Company had $18.1 million in
unrestricted cash and cash equivalents compared to $26.3 million at June 30,
2019.
- In August 2019, RealNetworks and
Napster entered into a loan agreement for a revolving line of
credit for a maximum of $10.0 million
to be used for working capital and general corporate purposes. As
of September 30, 2019, $6.1 million remained available for
borrowing.
Business Outlook
For the fourth quarter of 2019, RealNetworks expects to achieve
the following results including noncontrolling interests:
- Total revenue is expected to be in the range of $40.0 million to $43.0
million.
- Adjusted EBITDA loss is expected to be in the range of
$(2.0) million to $(5.0) million.
Conference Call and Webcast Information
The Company will host a conference call today to review results
and discuss its performance shortly after 4:30 p.m. ET / 1:30 p.m.
PT. Participants may join the conference call by dialing
1-877-451-6152 (United States) or
1-201-389-0879 (International). A telephonic replay of the call
will also be available shortly after the completion of the call,
until 11:59 pm ET on Wednesday, November 20,
2019, by dialing 1-844-512-2921 (United States) or 1-412-317-6671
(International) and entering the replay pin number: 13694934.
A live webcast will be available on RealNetworks' Investor
Relations site under the Events & Presentations section at
http://investor.realnetworks.com and will be archived online
upon completion of the conference call.
About RealNetworks
Building on a legacy of digital media expertise and innovation,
RealNetworks has created a new generation of products that employ
best-in-class artificial intelligence and machine learning to
enhance and secure our daily lives. SAFR (www.safr.com) is the
world's premier facial recognition platform for live video. Leading
in real-world performance and accuracy as evidenced in testing by
NIST, SAFR enables new applications for security, convenience, and
analytics. Kontxt (www.kontxt.com) is the foremost platform for
categorizing A2P messages to help mobile carriers build customer
loyalty and drive new revenue through text message classification
and antispam. For information about our other products, visit
www.realnetworks.com.
About Non-GAAP Financial Measures
To supplement RealNetworks' consolidated financial information
presented in accordance with GAAP in this press release, the
company also discloses certain non-GAAP financial measures,
including adjusted EBITDA and contribution margin by reportable
segment, which management believes provide investors with useful
information.
In the financial tables of our earnings press release,
RealNetworks has included reconciliations of GAAP net income (loss)
including noncontrolling interests to adjusted EBITDA and operating
income (loss) by reportable segment to contribution margin by
reportable segment.
The rationale for management's use of non-GAAP measures is
included in the supplementary materials presented with the
quarterly earnings materials. Please refer to Exhibit 99.2
("Information Regarding Non-GAAP Financial Measures") to the
company's report on Form 8-K, which is being submitted today
to the SEC.
Forward-Looking Statements
This press release contains forward-looking statements that
involve risks and uncertainties, including statements relating to
our current expectations regarding future revenue and adjusted
EBITDA, our future growth, profitability, and market position, our
financial condition and liquidity, our strategic focus and
initiatives, agreements with partners, and the growth and future
prospects relating to our Napster segment. All statements contained
in this press release that do not relate to matters of historical
fact should be considered forward-looking statements. These
statements reflect our expectations as of today, and actual results
may differ materially from the results predicted. Factors that
could cause actual results for RealNetworks, on a consolidated
basis, to differ from the results predicted include: our ability to
realize operating efficiencies, growth and other benefits from the
implementation of our growth initiatives and restructuring efforts;
cash usage and conservation, and the pursuit of additional funding
sources; successful monetization of our products and services;
competitive risks, including the emergence or growth of competing
technologies, products and services; potential outcomes and effects
of claims and legal proceedings; risks associated with key customer
or strategic relationships and business acquisitions; disruptions
in the global financial markets, including changes in consumer
spending and impacts to credit availability; fluctuations in
foreign currencies; and unique risk factors that relate to our
Napster segment, such as risks stemming from its streaming music
service and related music royalties. More information about
potential risk factors that could affect our business and financial
results is included in RealNetworks' annual report on Form 10-K for
the most recent year ended December
31, its quarterly reports on Form 10-Q and in other reports
and documents filed by RealNetworks from time to time with the
Securities and Exchange Commission. The preparation of our
financial statements and forward-looking financial guidance
requires us to make estimates and assumptions that affect the
reported amount of assets and liabilities, and revenues and
expenses during the reported period. Actual results may differ
materially from these estimates under different assumptions or
conditions. RealNetworks assumes no obligation to update any
forward-looking statements or information, which are in effect as
of their respective dates.
For More Information:
Investor Relations for RealNetworks
Kimberly Orlando, Addo Investor
Relations
310-829-5400
IR@realnetworks.com
RNWK-F
RealNetworks, Inc.
and Subsidiaries
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
44,993
|
|
|
$
|
17,579
|
|
|
$
|
128,713
|
|
|
$
|
52,953
|
|
Cost of
revenue
|
26,278
|
|
|
4,239
|
|
|
78,430
|
|
|
14,000
|
|
Gross profit
|
18,715
|
|
|
13,340
|
|
|
50,283
|
|
|
38,953
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
8,687
|
|
|
8,052
|
|
|
26,396
|
|
|
23,398
|
|
Sales and
marketing
|
8,470
|
|
|
4,998
|
|
|
24,972
|
|
|
15,878
|
|
General and
administrative
|
7,132
|
|
|
4,586
|
|
|
23,888
|
|
|
15,526
|
|
Restructuring
and other charges
|
691
|
|
|
632
|
|
|
1,587
|
|
|
1,320
|
|
Lease exit and
related benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
(454)
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
24,980
|
|
|
18,268
|
|
|
76,843
|
|
|
55,668
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
(6,265)
|
|
|
(4,928)
|
|
|
(26,560)
|
|
|
(16,715)
|
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
Interest
expense
|
(220)
|
|
|
—
|
|
|
(429)
|
|
|
—
|
|
Interest
income
|
—
|
|
|
72
|
|
|
117
|
|
|
270
|
|
Gain (loss) on
equity investment, net
|
—
|
|
|
—
|
|
|
12,338
|
|
|
—
|
|
Equity in net
loss of Napster
|
—
|
|
|
(737)
|
|
|
—
|
|
|
(737)
|
|
Other income
(expenses), net
|
541
|
|
|
(112)
|
|
|
851
|
|
|
(195)
|
|
|
|
|
|
|
|
|
|
Total other income (expenses), net
|
321
|
|
|
(777)
|
|
|
12,877
|
|
|
(662)
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
(5,944)
|
|
|
(5,705)
|
|
|
(13,683)
|
|
|
(17,377)
|
|
Income tax
expense
|
310
|
|
|
272
|
|
|
812
|
|
|
708
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
(6,254)
|
|
|
(5,977)
|
|
|
(14,495)
|
|
|
(18,085)
|
|
Net income (loss)
attributable to noncontrolling interests
|
(286)
|
|
|
—
|
|
|
(858)
|
|
|
—
|
|
Net income (loss)
attributable to RealNetworks
|
$
|
(5,968)
|
|
|
$
|
(5,977)
|
|
|
$
|
(13,637)
|
|
|
$
|
(18,085)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to RealNetworks- Basic:
|
$
|
(0.16)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.36)
|
|
|
$
|
(0.48)
|
|
Net income (loss) per
share attributable to RealNetworks- Diluted:
|
$
|
(0.16)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.36)
|
|
|
$
|
(0.48)
|
|
|
|
|
|
|
|
|
|
Shares used to
compute basic net income (loss) per share
|
38,062
|
|
|
37,618
|
|
|
37,944
|
|
|
37,549
|
|
Shares used to
compute diluted net income (loss) per share
|
38,062
|
|
|
37,618
|
|
|
37,944
|
|
|
37,549
|
|
RealNetworks, Inc.
and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
(in
thousands)
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
18,101
|
|
|
$
|
35,561
|
|
Short-term
investments
|
—
|
|
|
24
|
|
Trade accounts
receivable, net
|
27,947
|
|
|
11,751
|
|
Deferred costs,
current portion
|
950
|
|
|
331
|
|
Prepaid
expenses and other current assets
|
18,931
|
|
|
5,911
|
|
Total current
assets
|
65,929
|
|
|
53,578
|
|
|
|
|
|
Equipment and
software
|
31,853
|
|
|
37,458
|
|
Leasehold
improvements
|
3,255
|
|
|
3,292
|
|
Total
equipment, software, and leasehold improvements
|
35,108
|
|
|
40,750
|
|
Less
accumulated depreciation and amortization
|
32,171
|
|
|
37,996
|
|
Net equipment,
software, and leasehold improvements
|
2,937
|
|
|
2,754
|
|
|
|
|
|
Operating lease
assets
|
12,499
|
|
|
—
|
|
Restricted cash
equivalents
|
5,374
|
|
|
1,630
|
|
Other
assets
|
2,842
|
|
|
3,997
|
|
Deferred costs,
non-current portion
|
957
|
|
|
528
|
|
Deferred tax
assets, net
|
831
|
|
|
851
|
|
Other
intangible assets, net
|
20,309
|
|
|
26
|
|
Goodwill
|
65,154
|
|
|
16,955
|
|
|
|
|
|
Total
assets
|
$
|
176,832
|
|
|
$
|
80,319
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
4,692
|
|
|
$
|
3,910
|
|
Accrued
royalties, fulfillment and other current liabilities
|
92,529
|
|
|
11,312
|
|
Commitment to
Napster
|
—
|
|
|
2,750
|
|
Deferred
revenue, current portion
|
6,134
|
|
|
2,125
|
|
Notes
payable
|
3,599
|
|
|
—
|
|
Total current
liabilities
|
106,954
|
|
|
20,097
|
|
|
|
|
|
Deferred
revenue, non-current portion
|
139
|
|
|
268
|
|
Deferred
rent
|
—
|
|
|
986
|
|
Deferred tax
liabilities, net
|
1,225
|
|
|
1,168
|
|
Long-term lease
liabilities
|
9,486
|
|
|
—
|
|
Long-term
debt
|
3,900
|
|
|
—
|
|
Other long-term
liabilities
|
11,195
|
|
|
960
|
|
|
|
|
|
Total
liabilities
|
132,899
|
|
|
23,479
|
|
|
|
|
|
Total
shareholders' equity
|
44,036
|
|
|
56,840
|
|
|
|
|
|
Noncontrolling
interests
|
(103)
|
|
|
—
|
|
|
|
|
|
Total
equity
|
43,933
|
|
|
56,840
|
|
|
|
|
|
Total
liabilities and equity
|
$
|
176,832
|
|
|
$
|
80,319
|
|
RealNetworks, Inc.
and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Nine Months
Ended
September 30,
|
|
2019
|
|
2018
|
|
(in
thousands)
|
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss) including noncontrolling interests
|
$
|
(14,495)
|
|
|
$
|
(18,085)
|
|
Adjustments to
reconcile net income (loss) including noncontrolling interests to
net cash used in operating activities:
|
|
|
|
Depreciation and
amortization
|
4,397
|
|
|
1,738
|
|
Stock-based
compensation
|
2,420
|
|
|
2,113
|
|
Equity in net loss of
Napster
|
—
|
|
|
737
|
|
Deferred income
taxes, net
|
—
|
|
|
5
|
|
(Gain) loss on equity
investment, net
|
(12,338)
|
|
|
—
|
|
Foreign currency
(gain) loss
|
(804)
|
|
|
—
|
|
Fair value
adjustments to contingent consideration liability
|
700
|
|
|
—
|
|
Mark to market
adjustment of warrants
|
—
|
|
|
78
|
|
Net change in certain
operating assets and liabilities
|
(177)
|
|
|
(2,214)
|
|
Net cash used
in operating activities
|
(20,297)
|
|
|
(15,628)
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
equipment, software, and leasehold improvements
|
(1,068)
|
|
|
(698)
|
|
Proceeds from sales
and maturities of short-term investments
|
24
|
|
|
7,607
|
|
Acquisition, net of
cash acquired
|
12,260
|
|
|
(4,192)
|
|
Net cash
provided by investing activities
|
11,216
|
|
|
2,717
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
issuance of common stock (stock options and stock purchase
plan)
|
144
|
|
|
114
|
|
Tax payments from
shares withheld upon vesting of restricted stock
|
(289)
|
|
|
(243)
|
|
Proceeds from notes
payable and revolving credit facility
|
31,337
|
|
|
—
|
|
Repayments of notes
payable and revolving credit facility
|
(35,768)
|
|
|
—
|
|
Payment of financing
fees
|
(569)
|
|
|
—
|
|
Other financing
activities
|
900
|
|
|
—
|
|
Net cash used
in financing activities
|
(4,245)
|
|
|
(129)
|
|
Effect of
exchange rate changes on cash, cash equivalents and restricted
cash
|
(390)
|
|
|
(962)
|
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
(13,716)
|
|
|
(14,002)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
37,191
|
|
|
53,596
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
23,475
|
|
|
$
|
39,594
|
|
RealNetworks, Inc.
and Subsidiaries
|
Supplemental
Financial Information
|
(Unaudited)
|
|
|
2019
|
|
2018
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
(in
thousands)
|
Net Revenue by
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Media
(A)
|
$
|
3,632
|
|
|
$
|
2,620
|
|
|
$
|
2,486
|
|
|
$
|
4,068
|
|
|
$
|
4,733
|
|
|
$
|
3,884
|
|
|
$
|
5,483
|
|
Mobile Services
(B)
|
6,895
|
|
|
6,997
|
|
|
6,939
|
|
|
6,899
|
|
|
7,348
|
|
|
6,719
|
|
|
8,704
|
|
Games (C)
|
7,164
|
|
|
6,048
|
|
|
5,710
|
|
|
5,590
|
|
|
5,498
|
|
|
5,121
|
|
|
5,463
|
|
Napster
(D)
|
27,302
|
|
|
28,583
|
|
|
24,337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total net
revenue
|
$
|
44,993
|
|
|
$
|
44,248
|
|
|
$
|
39,472
|
|
|
$
|
16,557
|
|
|
$
|
17,579
|
|
|
$
|
15,724
|
|
|
$
|
19,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Software License
(E)
|
$
|
1,987
|
|
|
$
|
944
|
|
|
$
|
735
|
|
|
$
|
2,049
|
|
|
$
|
2,746
|
|
|
$
|
1,808
|
|
|
$
|
3,337
|
|
- Subscription
Services (F)
|
1,028
|
|
|
1,040
|
|
|
1,088
|
|
|
1,153
|
|
|
1,232
|
|
|
1,225
|
|
|
1,285
|
|
- Product Sales
(G)
|
207
|
|
|
206
|
|
|
219
|
|
|
257
|
|
|
281
|
|
|
299
|
|
|
340
|
|
- Advertising &
Other (H)
|
410
|
|
|
430
|
|
|
444
|
|
|
609
|
|
|
474
|
|
|
552
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Software License
(I)
|
888
|
|
|
957
|
|
|
599
|
|
|
514
|
|
|
520
|
|
|
469
|
|
|
1,335
|
|
- Subscription
Services (J)
|
6,007
|
|
|
6,040
|
|
|
6,340
|
|
|
6,385
|
|
|
6,828
|
|
|
6,250
|
|
|
7,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Games
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Subscription
Services (K)
|
3,056
|
|
|
3,073
|
|
|
2,985
|
|
|
3,014
|
|
|
2,745
|
|
|
2,689
|
|
|
2,693
|
|
- Product Sales
(L)
|
3,078
|
|
|
2,177
|
|
|
1,988
|
|
|
2,013
|
|
|
2,279
|
|
|
1,953
|
|
|
2,402
|
|
- Advertising &
Other (M)
|
1,030
|
|
|
798
|
|
|
737
|
|
|
563
|
|
|
474
|
|
|
479
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Napster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Subscription
Services (N)
|
27,302
|
|
|
28,583
|
|
|
24,337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
revenue
|
$
|
44,993
|
|
|
$
|
44,248
|
|
|
$
|
39,472
|
|
|
$
|
16,557
|
|
|
$
|
17,579
|
|
|
$
|
15,724
|
|
|
$
|
19,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$
|
22,015
|
|
|
$
|
21,322
|
|
|
$
|
18,970
|
|
|
$
|
7,697
|
|
|
$
|
9,026
|
|
|
$
|
7,646
|
|
|
$
|
11,434
|
|
Rest of
world
|
22,978
|
|
|
22,926
|
|
|
20,502
|
|
|
8,860
|
|
|
8,553
|
|
|
8,078
|
|
|
8,216
|
|
Total net
revenue
|
$
|
44,993
|
|
|
$
|
44,248
|
|
|
$
|
39,472
|
|
|
$
|
16,557
|
|
|
$
|
17,579
|
|
|
$
|
15,724
|
|
|
$
|
19,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Segment
|
(A) The Consumer
Media segment primarily includes revenue from the licensing of our
portfolio of video codec technologies. Also included is RealPlayer
and related products, such as the distribution of third-party
software products, advertising on RealPlayer websites, sales of
RealPlayer Plus software to consumers, and consumer subscriptions
such as RealPlayer Plus and SuperPass.
|
(B) The Mobile
Services segment primarily includes revenue from SaaS services and
sales of professional services provided to mobile
carriers.
|
(C) The Games segment
primarily includes revenue from sales of mobile and PC games,
online games subscription services, player purchases of in-game
virtual goods, and advertising on games sites and social network
sites.
|
(D) The Napster
segment primarily includes revenue from subscription music
offerings from on-demand streaming services and conditional
downloads. Napster revenues are included in our consolidated
results from the January 18, 2019 acquisition date
forward.
|
Net Revenue by
Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(E) Software
licensing revenue within Consumer Media includes revenues from
licenses of our video codec technologies.
|
(F) Subscriptions
revenue within Consumer Media includes revenue from subscriptions
such as our RealPlayer Plus and SuperPass offerings.
|
(G) Product sales
within Consumer Media includes sales of RealPlayer Plus software to
consumers.
|
(H) Advertising &
other revenue within Consumer Media includes distribution of
third-party software products and advertising on RealPlayer
websites.
|
(I) Software license
revenue within Mobile Services includes revenue from our integrated
RealTimes platform and our facial recognition platform,
SAFR.
|
(J) Subscription
services revenue within Mobile Services includes revenue from
ringback tones and our messaging platform services, as well as from
related professional services provided to mobile
carriers.
|
(K) Subscription
services revenue within Games includes revenue from online games
subscriptions.
|
(L) Product sales
revenue within Games includes revenue from retail and wholesale
games-related revenue, sales of mobile games, and player purchases
of in-game virtual goods.
|
(M) Advertising &
other revenue within Games includes advertising on games sites and
social network sites.
|
(N) Subscription
services revenue within Napster includes music tracks by way of
on-demand streaming and conditional downloads offered directly to
end consumers and distribution partners.
|
RealNetworks, Inc.
and Subsidiaries
|
Segment Results of
Operations and Reconciliation to non-GAAP Contribution
Margin
|
(Unaudited)
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Q3
|
|
Q2
|
|
Q3
|
|
YTD
|
|
YTD
|
|
(in
thousands)
|
Consumer
Media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
3,632
|
|
|
$
|
2,620
|
|
|
$
|
4,733
|
|
|
$
|
8,738
|
|
|
$
|
14,100
|
|
Cost of
revenue
|
705
|
|
|
803
|
|
|
955
|
|
|
2,341
|
|
|
2,976
|
|
Gross
profit
|
2,927
|
|
|
1,817
|
|
|
3,778
|
|
|
6,397
|
|
|
11,124
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
81
|
%
|
|
69
|
%
|
|
80
|
%
|
|
73
|
%
|
|
79
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
2,692
|
|
|
2,877
|
|
|
3,448
|
|
|
8,688
|
|
|
10,805
|
|
Operating income
(loss), a GAAP measure
|
$
|
235
|
|
|
$
|
(1,060)
|
|
|
$
|
330
|
|
|
$
|
(2,291)
|
|
|
$
|
319
|
|
Depreciation and
amortization
|
34
|
|
|
56
|
|
|
49
|
|
|
144
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin,
a non-GAAP measure
|
$
|
269
|
|
|
$
|
(1,004)
|
|
|
$
|
379
|
|
|
$
|
(2,147)
|
|
|
$
|
465
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
6,895
|
|
|
$
|
6,997
|
|
|
$
|
7,348
|
|
|
$
|
20,831
|
|
|
$
|
22,771
|
|
Cost of
revenue
|
1,721
|
|
|
1,865
|
|
|
2,052
|
|
|
5,634
|
|
|
6,502
|
|
Gross
profit
|
5,174
|
|
|
5,132
|
|
|
5,296
|
|
|
15,197
|
|
|
16,269
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
75
|
%
|
|
73
|
%
|
|
72
|
%
|
|
73
|
%
|
|
71
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
7,143
|
|
|
7,438
|
|
|
6,825
|
|
|
22,142
|
|
|
21,160
|
|
Operating income
(loss), a GAAP measure
|
$
|
(1,969)
|
|
|
$
|
(2,306)
|
|
|
$
|
(1,529)
|
|
|
$
|
(6,945)
|
|
|
$
|
(4,891)
|
|
Acquisitions related
intangible asset amortization
|
—
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
253
|
|
Depreciation and
amortization
|
81
|
|
|
106
|
|
|
165
|
|
|
418
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin,
a non-GAAP measure
|
$
|
(1,888)
|
|
|
$
|
(2,200)
|
|
|
$
|
(1,294)
|
|
|
$
|
(6,527)
|
|
|
$
|
(4,138)
|
|
|
|
|
|
|
|
|
|
|
|
Games
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
7,164
|
|
|
$
|
6,048
|
|
|
$
|
5,498
|
|
|
$
|
18,922
|
|
|
$
|
16,082
|
|
Cost of
revenue
|
1,934
|
|
|
1,655
|
|
|
1,228
|
|
|
5,259
|
|
|
4,501
|
|
Gross
profit
|
5,230
|
|
|
4,393
|
|
|
4,270
|
|
|
13,663
|
|
|
11,581
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
73
|
%
|
|
73
|
%
|
|
78
|
%
|
|
72
|
%
|
|
72
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
5,151
|
|
|
5,288
|
|
|
5,447
|
|
|
15,476
|
|
|
15,459
|
|
Operating income
(loss), a GAAP measure
|
$
|
79
|
|
|
$
|
(895)
|
|
|
$
|
(1,177)
|
|
|
$
|
(1,813)
|
|
|
$
|
(3,878)
|
|
Acquisitions related
intangible asset amortization
|
4
|
|
|
—
|
|
|
23
|
|
|
27
|
|
|
43
|
|
Depreciation and
amortization
|
89
|
|
|
84
|
|
|
91
|
|
|
256
|
|
|
402
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin,
a non-GAAP measure
|
$
|
172
|
|
|
$
|
(811)
|
|
|
$
|
(1,063)
|
|
|
$
|
(1,530)
|
|
|
$
|
(3,433)
|
|
|
|
|
|
|
|
|
|
|
|
Napster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
27,302
|
|
|
$
|
28,583
|
|
|
$
|
—
|
|
|
$
|
80,222
|
|
|
$
|
—
|
|
Cost of
revenue
|
21,986
|
|
|
23,026
|
|
|
—
|
|
|
65,408
|
|
|
—
|
|
Gross
profit
|
5,316
|
|
|
5,557
|
|
|
—
|
|
|
14,814
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
19
|
%
|
|
19
|
%
|
|
—
|
%
|
|
18
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
6,472
|
|
|
6,638
|
|
|
—
|
|
|
18,642
|
|
|
—
|
|
Operating income
(loss), a GAAP measure
|
$
|
(1,156)
|
|
|
$
|
(1,081)
|
|
|
$
|
—
|
|
|
$
|
(3,828)
|
|
|
$
|
—
|
|
Acquisitions related
intangible asset amortization
|
1,126
|
|
|
1,129
|
|
|
—
|
|
|
3,198
|
|
|
—
|
|
Depreciation and
amortization
|
72
|
|
|
69
|
|
|
—
|
|
|
256
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin,
a non-GAAP measure
|
$
|
42
|
|
|
$
|
117
|
|
|
$
|
—
|
|
|
$
|
(374)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
$
|
(68)
|
|
|
$
|
(67)
|
|
|
$
|
4
|
|
|
$
|
(212)
|
|
|
$
|
21
|
|
Gross
profit
|
68
|
|
|
67
|
|
|
(4)
|
|
|
212
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
3,522
|
|
|
4,116
|
|
|
2,548
|
|
|
11,895
|
|
|
8,244
|
|
Operating income
(loss), a GAAP measure
|
$
|
(3,454)
|
|
|
$
|
(4,049)
|
|
|
$
|
(2,552)
|
|
|
$
|
(11,683)
|
|
|
$
|
(8,265)
|
|
Other income
(expense), net
|
541
|
|
|
183
|
|
|
(112)
|
|
|
851
|
|
|
(195)
|
|
Foreign currency
(gain) loss
|
(489)
|
|
|
(164)
|
|
|
78
|
|
|
(804)
|
|
|
98
|
|
Depreciation and
amortization
|
32
|
|
|
33
|
|
|
109
|
|
|
98
|
|
|
394
|
|
Fair value
adjustments to contingent consideration liability
|
400
|
|
|
300
|
|
|
—
|
|
|
700
|
|
|
—
|
|
Restructuring and
other charges
|
691
|
|
|
729
|
|
|
632
|
|
|
1,587
|
|
|
1,320
|
|
Stock-based
compensation
|
503
|
|
|
533
|
|
|
499
|
|
|
2,420
|
|
|
2,113
|
|
Lease exit and
related benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(454)
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin,
a non-GAAP measure (1)
|
$
|
(1,776)
|
|
|
$
|
(2,435)
|
|
|
$
|
(1,346)
|
|
|
$
|
(6,831)
|
|
|
$
|
(4,989)
|
|
|
(1)2018
Corporate contribution margin was revised to exclude the impact of
realized and unrealized foreign currency (gain) loss incurred in
each respective period. Foreign currency (gain) loss is reported in
Other income (expense), net, in our consolidated statement of
operations.
|
RealNetworks, Inc.
and Subsidiaries
|
Reconciliation of
Net income (loss) including noncontrolling interests to adjusted
EBITDA, a non-GAAP measure
|
(Unaudited)
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Q3
|
|
Q2
|
|
Q3
|
|
YTD
|
|
YTD
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Net income (loss) including noncontrolling interests to
adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
$
|
(6,254)
|
|
|
$
|
(9,455)
|
|
|
$
|
(5,977)
|
|
|
$
|
(14,495)
|
|
|
$
|
(18,085)
|
|
Income tax expense
(benefit)
|
310
|
|
|
244
|
|
|
272
|
|
|
812
|
|
|
708
|
|
Interest
expense
|
220
|
|
|
43
|
|
|
—
|
|
|
429
|
|
|
—
|
|
Interest
income
|
—
|
|
|
(40)
|
|
|
(72)
|
|
|
(117)
|
|
|
(270)
|
|
(Gain) loss on equity
investment, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,338)
|
|
|
—
|
|
Foreign currency
(gain) loss
|
(489)
|
|
|
(164)
|
|
|
78
|
|
|
(804)
|
|
|
98
|
|
Equity in net loss of
Napster
|
—
|
|
|
—
|
|
|
737
|
|
|
—
|
|
|
737
|
|
Acquisitions related
intangible asset amortization
|
1,130
|
|
|
1,129
|
|
|
93
|
|
|
3,225
|
|
|
296
|
|
Depreciation and
amortization
|
308
|
|
|
348
|
|
|
414
|
|
|
1,172
|
|
|
1,442
|
|
Fair value
adjustments to contingent consideration liability
|
400
|
|
|
300
|
|
|
—
|
|
|
700
|
|
|
—
|
|
Restructuring and
other charges
|
691
|
|
|
729
|
|
|
632
|
|
|
1,587
|
|
|
1,320
|
|
Stock-based
compensation
|
503
|
|
|
533
|
|
|
499
|
|
|
2,420
|
|
|
2,113
|
|
Lease exit and
related benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(454)
|
|
Adjusted
EBITDA, a non-GAAP measure (1)
|
$
|
(3,181)
|
|
|
$
|
(6,333)
|
|
|
$
|
(3,324)
|
|
|
$
|
(17,409)
|
|
|
$
|
(12,095)
|
|
|
(1)2018
adjusted EBITDA was revised to exclude the impact of realized and
unrealized foreign currency (gain) loss incurred in each respective
period. Foreign currency (gain) loss is reported in Other income
(expense), net, in our consolidated statement of
operations.
|
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SOURCE RealNetworks, Inc.