Wed, 02/07/2018

RealNetworks Announces Fourth Quarter And Full Year 2017 Results

SEATTLE, Feb. 7, 2018 /PRNewswire/ --

  • Significant progress with four key growth initiatives that are expected to contribute to revenue growth in 2018
  • Exited low margin business that is now presented as discontinued operations; gross margin from continuing operations of 71% highlights scalability of go-forward business
  • Reduced 2017 operating expenses by 18% year-over-year and reduced cash resources consumed in operations
  • Delivered positive net income and sequential increase in cash and short term investments in Q4 2017, benefiting from the gain and final receipt of cash from our 2015 sale of Slingo and social casino business

RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced results for the fourth quarter and full year ended December 31, 2017.

Management Commentary

"2017 was a transformative year for RealNetworks. We advanced four key growth initiatives that are expected to contribute high margin revenue in 2018, while simultaneously improving our cost structure," said Rob Glaser, Chairman and CEO of RealNetworks. "We also exited from our low margin Korean music on demand business, increasing our gross margin to over 70%."

Glaser added, "We have set the stage for meaningful revenue growth in 2018, led by the anticipated contribution from new high margin products. We also expect to achieve adjusted EBITDA profitability during 2018."

Fourth Quarter 2017 Financial Highlights from Continuing Operations

  • Revenue was $18.9 million, up from $18.6 million in the prior quarter and down from $20.4 million in the prior year period.
  • Operating expenses increased $1.0 million, or 6%, from the prior quarter and decreased $1.8 million, or 9%, from the prior year period.
  • Net income was $0.4 million, or $0.01 per share, compared to a net loss of $(4.5) million or $(0.12) per share in the prior quarter and $(10.2) million, or $(0.28) per share in the prior year period. In the fourth quarter of 2017, net income included a one-time $4.5 million gain on the final receipt of cash from the 2015 sale of the Slingo and social casino business.
  • Adjusted EBITDA was a loss of $(3.6) million, compared to a loss of $(2.6) million in the prior quarter and $(4.5) million in the prior year period. A reconciliation of GAAP net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.

Full Year 2017 Financial Highlights from Continuing Operations

  • Revenue was $78.7 million, down from $81.5 million in the prior year.
  • Operating expenses declined by $16.5 million, or 18%, from the prior year.
  • Net loss was $(17.4) million, or $(0.47) per share, compared to $(37.8) million or $(1.02) per share in the prior year.
  • Adjusted EBITDA was a loss of $(12.0) million, compared to a loss of $(23.2) million in the prior year. A reconciliation of GAAP net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
  • At December 31, 2017, the Company had $60.0 million in unrestricted cash, cash equivalents and short-term investments, compared to $59.1 million at September 30, 2017 and $77.1 million at December 31, 2016.

Discontinued Operations

At December 31, 2017, the contract with RealNetworks' music on demand customer in Korea terminated. Operations associated with this contract are now presented as discontinued operations and prior periods have been recast to be comparable.

Revenue attributable to this contract was $12.2 million and $46.0 million for the three and twelve months ended December 31, 2017, respectively, with gross profit of $0.5 million and $1.4 million, respectively, for the same periods.

Consolidated Q4 & 2017 Financial Summary



Three Months Ended
December 31,


Twelve Months Ended
December 31,



2017


2016


2017


2016



(in millions)

Revenue from Continuing Operations


$

18.9



$

20.4



$

78.7



$

81.5


Revenue from Discontinued Operations


12.2



11.1



46.0



39.0


Revenue including Discontinued Operations


$

31.1



$

31.5



$

124.7



$

120.5











Gross Profit from Continuing Operations


$

13.9



$

13.8



$

55.6



$

53.9


Gross Profit from Discontinued Operations


0.5



0.3



1.4



1.6


Gross Profit including Discontinued Operations


$

14.4



$

14.1



$

57.0



$

55.5











Gross Margin from Continuing Operations


74

%


68

%


71

%


66

%

Gross Margin from Discontinued Operations


4

%


3

%


3

%


4

%

Gross Margin including Discontinued Operations


46

%


45

%


46

%


46

%

Business Outlook

For the first quarter of 2018, RealNetworks expects to achieve the following results:

  • Total revenue is expected to be in the range of $20 million to $22 million.
  • Adjusted EBITDA loss is expected to be in the range of $(1.0) million to $(3.0) million.

Conference Call and Webcast Information

The company will host a conference call today to review results and discuss the company's performance shortly after 4:30 p.m. ET/1:30 p.m. PT. You may join the conference call by calling 1-877-451-6152 or 1-201-389-0879. A telephonic replay of the call will also be available shortly after the completion of the call, until 11:59 pm ET on Wednesday, February 28, 2018, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13675526.

A live webcast will be available on RealNetworks' Investor Relations site under Events at http://investor.realnetworks.com and will be archived online upon completion of the conference call.

For More Information

Investor Relations for RealNetworks
Laura Bainbridge, Addo IR
310-829-5400
IR@realnetworks.com

RNWK-F

About RealNetworks

RealNetworks creates innovative technology products and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category and continues to connect consumers with their digital media both directly and through partners, aiming to support every network, device, media type and social network. Find RealNetworks' corporate information at www.realnetworks.com.

RealNetworks® and the company's respective logos are trademarks, registered trademarks, or service marks of RealNetworks, Inc. Other products and company names mentioned are the trademarks of their respective owners.

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) from continuing operations 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 RealNetworks' current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our strategic focus and initiatives, agreements with partners, and the growth and future prospects relating to our Rhapsody d/b/a Napster affiliate. 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 RealNetworks' expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: RealNetworks' ability to realize operating efficiencies, growth and other benefits from the implementation of its growth plan, strategic initiatives, and restructuring efforts; the emergence of new entrants and competition in the market for digital media products and services; other competitive risks, including the growth of competing technologies, products and services; the potential outcomes and effects of claims and legal proceedings on RealNetworks' business, prospects, financial condition or results of operations; risks associated with key customer or strategic relationships, business acquisitions and the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; fluctuations in foreign currencies; and changes in RealNetworks' effective tax rate. More information about potential risk factors that could affect RealNetworks' 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 RealNetworks' financial statements and forward-looking financial guidance requires the company 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. The company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)




Quarter Ended


Twelve Months Ended



December 31,


December 31,



2017


2016


2017


2016



 (in thousands, except per share data)










 Net revenue


$

18,865



$

20,395



$

78,718



$

81,479


 Cost of revenue


4,965



6,591



23,164



27,548


           Gross profit


13,900



13,804



55,554



53,931











 Operating expenses:









       Research and development


7,625



6,738



29,710



29,923


       Sales and marketing


5,419



7,451



22,953



31,608


       General and administrative


5,358



6,035



20,996



27,415


       Restructuring and other charges


255



192



2,526



1,489


       Lease exit and related charges




48





2,239











           Total operating expenses


18,657



20,464



76,185



92,674











 Operating income (loss)


(4,757)



(6,660)



(20,631)



(38,743)











 Other income (expenses):









       Interest income, net


83



133



436



449


       Gain (loss) on investments, net


4,500



2,495



4,500



8,473


       Equity in net loss of Rhapsody


(2,894)



(5,904)



(3,991)



(6,533)


       Other income (expense), net


(217)



(128)



(506)



(643)











           Total other income (expense), net


1,472



(3,404)



439



1,746











 Income (loss) from continuing operations before income taxes


(3,285)



(10,064)



(20,192)



(36,997)


 Income tax expense (benefit)


(3,732)



139



(2,778)



776











Net income (loss) from continuing operations


447



(10,203)



(17,414)



(37,773)


Net income (loss) from discontinued operations, net of tax


392



227



1,109



1,223


 Net income (loss)


$

839



$

(9,976)



$

(16,305)



$

(36,550)











Net income (loss) per share - Basic:









Continuing operations


$

0.01



$

(0.28)



$

(0.47)



$

(1.02)


Discontinued operations


0.01



0.01



0.03



0.03


Net income (loss) per share - Basic


$

0.02



$

(0.27)



$

(0.44)



$

(0.99)


Net income (loss) per share - Diluted:









Continuing operations


$

0.01



$

(0.28)



$

(0.47)



$

(1.02)


Discontinued operations


0.01



0.01




0.03




0.03


Net income (loss) per share - Diluted


$

0.02



$

(0.27)



$

(0.44)



$

(0.99)











 Shares used to compute basic net income (loss) per share


37,315



37,042



37,163



36,781


 Shares used to compute diluted net income (loss) per share


37,383



37,042



37,163



36,781


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)



December 31,
2017


December 31,
2016


 (in thousands)

ASSETS

 Current assets:




 Cash and cash equivalents

$

51,196



$

33,721


 Short-term investments

8,779



43,331


 Trade accounts receivable, net

12,689



7,956


 Deferred costs, current portion

426



760


 Prepaid expenses and other current assets

3,715



4,910


 Current assets of discontinued operations

17,456



14,206


  Total current assets

94,261



104,884






 Equipment and software

46,417



46,231


 Leasehold improvements

3,536



3,317


 Total equipment, software, and leasehold improvements

49,953



49,548


 Less accumulated depreciation and amortization

46,093



44,294


 Net equipment, software, and leasehold improvements

3,860



5,254






 Restricted cash equivalents and investments

2,400



2,700


 Other assets

5,588



1,742


 Deferred costs, non-current portion

955



1,246


 Deferred tax assets, net

1,047



816


 Other intangible assets, net

325



938


 Goodwill

13,060



12,857






 Total assets

$

121,496



$

130,437






 LIABILITIES AND SHAREHOLDERS' EQUITY





 Current liabilities:




  Accounts payable

$

3,785



$

4,727


  Accrued and other current liabilities

12,365



14,382


  Commitment to Rhapsody

2,750



1,500


  Deferred revenue, current portion

3,097



3,430


 Current liabilities of discontinued operations

17,107



14,541


 Total current liabilities

39,104



38,580






 Deferred revenue, non-current portion

443



240


 Deferred rent

982



748


 Deferred tax liabilities, net

19



87


 Other long-term liabilities

1,775



2,201






 Total liabilities

42,323



41,856










 Shareholders' equity

79,173



88,581






 Total liabilities and shareholders' equity

$

121,496



$

130,437


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Twelve Months Ended
December 31,


2017


2016


 (in thousands)


 Cash flows from operating activities:




 Net income (loss)

$

(16,305)



$

(36,550)


 Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

2,936



7,057


Stock-based compensation

3,675



5,424


Equity in net loss of Rhapsody

3,991



6,533


Deferred income taxes, net

(3,871)



130


Loss (gain) on investments, net

(4,500)



(8,473)


Realized translation loss (gain)



272


Fair value of warrants granted in 2015 and 2017, net of subsequent mark to market adjustments in 2017 and 2016

(216)



280


Net change in certain operating assets and liabilities

(7,060)



999


  Net cash provided by (used in) operating activities

(21,350)



(24,328)


 Cash flows from investing activities:




Purchases of equipment, software, and leasehold improvements

(734)



(2,438)


Proceeds from sale of equity and other investments



4,967


Purchases of short-term investments

(13,905)



(75,766)


Proceeds from sales and maturities of short-term investments

48,457



84,249


Decrease (increase) in restricted cash equivalents and investments, net

300



190


Acquisitions



(150)


Advance to Rhapsody

(1,500)



(3,500)


Proceeds from the sale of Slingo and social casino business

4,500



4,000


 Net cash provided by (used in) investing activities

37,118



11,552


 Cash flows from financing activities:




Proceeds from issuance of common stock (stock options and stock purchase plan)

239



535


Tax payments from shares withheld upon vesting of restricted stock

(356)



(880)


 Net cash provided by (used in) financing activities

(117)



(345)


 Effect of exchange rate changes on cash and cash equivalents

1,824



(473)


 Net increase (decrease) in cash and cash equivalents

17,475



(13,594)


 Cash and cash equivalents, beginning of year

33,721



47,315


 Cash and cash equivalents, end of year

$

51,196



$

33,721


 

RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)



2017


2016


 YTD


 Q4


 Q3


 Q2


Q1


 YTD


 Q4


 Q3


 Q2


 Q1


 (in thousands)

Net Revenue by Line of Business




















Consumer Media (A)

$

22,569



$

5,752



$

4,197



$

6,951



$

5,669



$

25,051



$

6,443



$

6,482



$

6,400



$

5,726


Mobile Services (B)

30,752



7,155



7,678



7,720



8,199



31,289



7,775



7,821



7,636



8,057


Games (C)

25,397



5,958



6,682



6,934



5,823



25,139



6,177



6,886



6,037



6,039


     Total net revenue

$

78,718



$

18,865



$

18,557



$

21,605



$

19,691



$

81,479



$

20,395



$

21,189



$

20,073



$

19,822






















Net Revenue by Product




















Consumer Media




















- License (D)

$

14,953



$

3,945



$

2,334



$

5,002



$

3,672



$

15,406



$

4,252



$

4,136



$

3,914



$

3,104


- Subscriptions (E)

5,891



1,362



1,434



1,531



1,564



7,448



1,671



1,931



1,871



1,975


- Media Properties (F)

1,725



445



429



418



433



2,197



520



415



615



647






















Mobile Services




















- SaaS (G)

30,338



7,042



7,555



7,639



8,102



30,306



7,668



7,279



7,547



7,812


- Technology License & Other (H)

414



113



123



81



97



983



107



542



89



245






















Games




















- License (I)

13,806



3,086



3,851



4,007



2,862



12,415



3,178



3,683



2,793



2,761


- Subscriptions (J)

11,024



2,707



2,708



2,781



2,828



11,894



2,836



3,005



3,024



3,029


- Media Properties (K)

567



165



123



146



133



830



163



198



220



249






















     Total net revenue

$

78,718



$

18,865



$

18,557



$

21,605



$

19,691



$

81,479



$

20,395



$

21,189



$

20,073



$

19,822






















Net Revenue by Geography




















United States

$

40,833



$

10,120



$

10,084



$

10,889



$

9,740



$

41,505



$

10,125



$

10,642



$

10,355



$

10,383


Rest of world

37,885



8,745



8,473



10,716



9,951



39,974



10,270



10,547



9,718



9,439


     Total net revenue

$

78,718



$

18,865



$

18,557



$

21,605



$

19,691



$

81,479



$

20,395



$

21,189



$

20,073



$

19,822






















Net Revenue by Line of Business









(A) The Consumer Media division primarily includes revenue from RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, and consumer subscriptions such as RealPlayer Plus and SuperPass.

(B) The Mobile Services division primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.

(C) The Games division primarily includes revenue from sales of mobile games, sales of games licenses, online games subscription services, advertising on games sites and social network sites, and microtransactions from online games.

Net Revenue by Product







(D) Licensing revenue within Consumer Media includes sales of intellectual property licenses and RealPlayer Plus software licenses to consumers.

(E) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.

(F) Media Properties revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.

(G) SaaS revenue within Mobile Services includes revenue from ringback tones, intercarrier messaging services, and RealTimes.

(H) Technology licensing and other revenue within Mobile Services includes revenue from professional services provided to mobile carriers.

(I) Licensing revenue within Games includes retail games-related revenue and sales of mobile games.

(J) Subscriptions revenue within Games includes revenue from online games subscriptions as well as microtransactions from mobile games.

(K) Media Properties revenue within Games includes advertising on games sites and social network sites.

 

RealNetworks, Inc. and Subsidiaries

Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin

(Unaudited)



2017


2016


2017


2016


Q4


Q3


Q4


YTD


YTD


 (in thousands)

Consumer Media




















Net revenue

$

5,752



$

4,197



$

6,443



$

22,569



$

25,051


Cost of revenue

915



981



1,589



4,460



7,074


   Gross profit

4,837



3,216



4,854



18,109



17,977












   Gross margin

84

%


77

%


75

%


80

%


72

%











Operating expenses

3,573



3,217



4,459



14,530



18,399


Operating income (loss), a GAAP measure

$

1,264



$

(1)



$

395



$

3,579



$

(422)


Depreciation and amortization

42



42



239



410



2,212












  Contribution margin, a non-GAAP measure

$

1,306



$

41



$

634



$

3,989



$

1,790












Mobile Services




















Net revenue

$

7,155



$

7,678



$

7,775



$

30,752



$

31,289


Cost of revenue

2,271



2,134



2,912



10,021



12,606


   Gross profit

4,884



5,544



4,863



20,731



18,683












   Gross margin

68

%


72

%


63

%


67

%


60

%











Operating expenses

6,709



6,437



7,786



27,970



34,439


Operating income (loss), a GAAP measure

$

(1,825)



$

(893)



$

(2,923)



$

(7,239)



$

(15,756)


Acquisitions related intangible asset amortization

89



88



198



574



923


Depreciation and amortization

174



180



290



732



1,723












Contribution margin, a non-GAAP measure

$

(1,562)



$

(625)



$

(2,435)



$

(5,933)



$

(13,110)












Games




















Net revenue

$

5,958



$

6,682



$

6,177



$

25,397



$

25,139


Cost of revenue

1,868



2,226



2,054



8,710



7,919


   Gross profit

4,090



4,456



4,123



16,687



17,220












   Gross margin

69

%


67

%


67

%


66

%


68

%











Operating expenses

5,293



5,071



4,975



20,401



19,644


Operating income (loss), a GAAP measure

$

(1,203)



$

(615)



$

(852)



$

(3,714)



$

(2,424)


Acquisitions related intangible asset amortization

18



27



27



97



115


Depreciation and amortization

163



169



146



630



583












   Contribution margin, a non-GAAP measure

$

(1,022)



$

(419)



$

(679)



$

(2,987)



$

(1,726)












Corporate




















Cost of revenue

$

(89)



$

2



$

36



$

(27)



$

(51)


   Gross profit

89



(2)



(36)



27



51












   Gross margin

N/A



N/A



N/A



N/A



N/A












Operating expenses

3,082



2,948



3,244



13,284



20,192


Operating income (loss), a GAAP measure

$

(2,993)



$

(2,950)



$

(3,280)



$

(13,257)



$

(20,141)


Other income (expense), net

(217)



(50)



(128)



(506)



(643)


Depreciation and amortization

48



139



260



493



1,501


Restructuring and other charges

255



557



192



2,526



1,489


Stock-based compensation

630



748



867



3,675



5,424


Lease exit and related charges





48





2,239












   Contribution margin, a non-GAAP measure

$

(2,277)



$

(1,556)



$

(2,041)



$

(7,069)



$

(10,131)


 

RealNetworks, Inc. and Subsidiaries

Reconciliation of Net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure

(Unaudited)




2017


2016


2017


2016



 Q4


 Q3


 Q4


 YTD


 YTD



 (in thousands)












Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA:












Net income (loss) from continuing operations


$

447



$

(4,532)



$

(10,203)



$

(17,414)



$

(37,773)


Income tax expense (benefit)


(3,732)



139



139



(2,778)



776


Interest income, net


(83)



(116)



(133)



(436)



(449)


(Gain) loss on investments, net


(4,500)





(2,495)



(4,500)



(8,473)


Equity in net loss of Rhapsody


2,894





5,904



3,991



6,533


Acquisitions related intangible asset amortization


107



115



225



671



1,038


Depreciation and amortization


427



530



935



2,265



6,019


Restructuring and other charges


255



557



192



2,526



1,489


Stock-based compensation


630



748



867



3,675



5,424


Lease exit and related charges






48





2,239


   Adjusted EBITDA, a non-GAAP measure


$

(3,555)



$

(2,559)



$

(4,521)



$

(12,000)



$

(23,177)


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited) (Recast)




2017



Q4


Q3


Q2


Q1



 (in thousands, except per share data)










 Net revenue


$

18,865



$

18,557



$

21,605



$

19,691


 Cost of revenue


4,965



5,343



6,287



6,569


           Gross profit


13,900



13,214



15,318



13,122











 Operating expenses:









       Research and development


7,625



7,152



7,584



7,349


       Sales and marketing


5,419



4,883



5,496



7,155


       General and administrative


5,358



5,081



5,254



5,303


       Restructuring and other charges


255



557



150



1,564











           Total operating expenses


18,657



17,673



18,484



21,371











 Operating income (loss)


(4,757)



(4,459)



(3,166)



(8,249)











 Other income (expenses):









       Interest income, net


83



116



109



128


       Gain (loss) on investments, net


4,500








       Equity in net loss of Rhapsody


(2,894)





(349)



(748)


       Other income (expense), net


(217)



(50)



(13)



(226)











           Total other income (expense), net


1,472



66



(253)



(846)











 Income (loss) from continuing operations before income taxes


(3,285)



(4,393)



(3,419)



(9,095)


 Income tax expense (benefit)


(3,732)



139



360



455











Net income (loss) from continuing operations


447



(4,532)



(3,779)



(9,550)


Net income (loss) from discontinued operations, net of tax


392



198



393



126


 Net income (loss)


$

839



$

(4,334)



$

(3,386)



$

(9,424)











Net income (loss) per share - Basic:









Continuing operations


$

0.01



$

(0.12)



$

(0.10)



$

(0.26)


Discontinued operations


0.01





0.01



0.01


Net income (loss) per share - Basic


$

0.02



$

(0.12)



$

(0.09)



$

(0.25)


Net income (loss) per share - Diluted:









Continuing operations


$

0.01



$

(0.12)



$

(0.10)



$

(0.26)


Discontinued operations


0.01





0.01



0.01


Net income (loss) per share - Diluted


$

0.02



$

(0.12)



$

(0.09)



$

(0.25)











 Shares used to compute basic net income (loss) per share


37,315



37,200



37,103



37,030


 Shares used to compute diluted net income (loss) per share


37,383



37,200



37,103



37,030


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited) (Recast)




2016



Q4


Q3


Q2


Q1



 (in thousands, except per share data)










 Net revenue


$

20,395



$

21,189



$

20,073



$

19,822


 Cost of revenue


6,591



7,235



6,651



7,071


           Gross profit


13,804



13,954



13,422



12,751











 Operating expenses:









       Research and development


6,738



6,699



7,167



9,319


       Sales and marketing


7,451



7,183



7,749



9,225


       General and administrative


6,035



7,086



6,217



8,077


       Restructuring and other charges


192



499



413



385


       Lease exit and related charges


48



1,233



127



831











           Total operating expenses


20,464



22,700



21,673



27,837











 Operating income (loss)


(6,660)



(8,746)



(8,251)



(15,086)











 Other income (expenses):









       Interest income, net


133



119



80



117


       Gain (loss) on investments, net


2,495



6,021



(46)



3


       Equity in net loss of Rhapsody


(5,904)



(233)



(396)




       Other income (expense), net


(128)



(243)



15



(287)











           Total other income (expense), net


(3,404)



5,664



(347)



(167)











 Income (loss) from continuing operations before income taxes


(10,064)



(3,082)



(8,598)



(15,253)


 Income tax expense (benefit)


139



252



228



157











Net income (loss) from continuing operations


(10,203)



(3,334)



(8,826)



(15,410)


Net income (loss) from discontinued operations, net of tax


227



278



479



239


 Net income (loss)


$

(9,976)



$

(3,056)



$

(8,347)



$

(15,171)











Net income (loss) per share - Basic:









Continuing operations


$

(0.28)



$

(0.09)



$

(0.24)



$

(0.42)


Discontinued operations


0.01



0.01



0.01




Net income (loss) per share - Basic


$

(0.27)



$

(0.08)



$

(0.23)



$

(0.42)


Net income (loss) per share - Diluted:









Continuing operations


$

(0.28)



$

(0.09)



$

(0.24)



$

(0.42)


Discontinued operations


0.01



0.01



0.01




Net income (loss) per share - Diluted


$

(0.27)



$

(0.08)



$

(0.23)



$

(0.42)











 Shares used to compute basic net income (loss) per share


37,042



36,805



36,755



36,520


 Shares used to compute diluted net income (loss) per share


37,042



36,805



36,755



36,520


 

RealNetworks, Inc. and Subsidiaries

Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin

(Unaudited)




2017


2016



 Q1


 Q2


 Q3


 Q4


 YTD


 Q1


 Q2


 Q3


 Q4


 YTD



 (in thousands)


 (in thousands)

Consumer Media










































Net revenue


$

5,669



$

6,951



$

4,197



$

5,752



$

22,569



$

5,726



$

6,400



$

6,482



$

6,443



$

25,051


Cost of revenue


1,405



1,159



981



915



4,460



2,417



1,561



1,507



1,589



7,074


   Gross profit


4,264



5,792



3,216



4,837



18,109



3,309



4,839



4,975



4,854



17,977























   Gross margin


75

%


83

%


77

%


84

%


80

%


58

%


76

%


77

%


75

%


72

%






















Operating expenses


4,010



3,730



3,217



3,573



14,530



5,376



4,293



4,271



4,459



18,399


Operating income (loss), a GAAP measure


$

254



$

2,062



$

(1)



$

1,264



$

3,579



$

(2,067)



$

546



$

704



$

395



$

(422)


Depreciation and amortization


167



159



42



42



410



1,303



375



295



239



2,212























    Contribution margin, a non-GAAP measure


$

421



$

2,221



$

41



$

1,306



$

3,989



$

(764)



$

921



$

999



$

634



$

1,790























Mobile Services










































Net revenue


$

8,199



$

7,720



$

7,678



$

7,155



$

30,752



$

8,057



$

7,636



$

7,821



$

7,775



$

31,289


Cost of revenue


3,190



2,426



2,134



2,271



10,021



2,816



3,357



3,521



2,912



12,606


   Gross profit


5,009



5,294



5,544



4,884



20,731



5,241



4,279



4,300



4,863



18,683























   Gross margin


61

%


69

%


72

%


68

%


67

%


65

%


56

%


55

%


63

%


60

%






















Operating expenses


8,119



6,705



6,437



6,709



27,970



9,794



8,784



8,075



7,786



34,439


Operating income (loss), a GAAP measure


$

(3,110)



$

(1,411)



$

(893)



$

(1,825)



$

(7,239)



$

(4,553)



$

(4,505)



$

(3,775)



$

(2,923)



$

(15,756)


Acquisitions related intangible asset amortization


196



201



88



89



574



308



209



208



198



923


Depreciation and amortization


203



175



180



174



732



422



608



403



290



1,723























    Contribution margin, a non-GAAP measure


$

(2,711)



$

(1,035)



$

(625)



$

(1,562)



$

(5,933)



$

(3,823)



$

(3,688)



$

(3,164)



$

(2,435)



$

(13,110)























Games










































Net revenue


$

5,823



$

6,934



$

6,682



$

5,958



$

25,397



$

6,039



$

6,037



$

6,886



$

6,177



$

25,139


Cost of revenue


1,937



2,679



2,226



1,868



8,710



1,845



1,817



2,203



2,054



7,919


   Gross profit


3,886



4,255



4,456



4,090



16,687



4,194



4,220



4,683



4,123



17,220























   Gross margin


67

%


61

%


67

%


69

%


66

%


69

%


70

%


68

%


67

%


68

%






















Operating expenses


4,947



5,090



5,071



5,293



20,401



5,295



4,725



4,649



4,975



19,644


Operating income (loss), a GAAP measure


$

(1,061)



$

(835)



$

(615)



$

(1,203)



$

(3,714)



$

(1,101)



$

(505)



$

34



$

(852)



$

(2,424)


Acquisitions related intangible asset amortization


27



25



27



18



97



25



34



29



27



115


Depreciation and amortization


141



157



169



163



630



179



154



104



146



583























    Contribution margin, a non-GAAP measure


$

(893)



$

(653)



$

(419)



$

(1,022)



$

(2,987)



$

(897)



$

(317)



$

167



$

(679)



$

(1,726)























Corporate










































Cost of revenue


37



23



2



(89)



(27)



(7)



(84)



4



36



(51)


   Gross profit


(37)



(23)



(2)



89



27



7



84



(4)



(36)



51























   Gross margin


 N/A



 N/A



 N/A



 N/A



 N/A



 N/A



 N/A



 N/A



 N/A



 N/A























Operating expenses


4,295



2,959



2,948



3,082



13,284



7,372



3,871



5,705



3,244



20,192


Operating income (loss), a GAAP measure


$

(4,332)



$

(2,982)



$

(2,950)



$

(2,993)



$

(13,257)



$

(7,365)



$

(3,787)



$

(5,709)



$

(3,280)



$

(20,141)


Other income (expense), net


(226)



(13)



(50)



(217)



(506)



(287)



15



(243)



(128)



(643)


Depreciation and amortization


187



119



139



48



493



361



246



634



260



1,501


Restructuring and other charges


1,564



150



557



255



2,526



385



413



499



192



1,489


Stock-based compensation


1,434



863



748



630



3,675



3,171



608



778



867



5,424


Lease exit and related charges












831



127



1,233



48



2,239























    Contribution margin, a non-GAAP measure


$

(1,373)



$

(1,863)



$

(1,556)



$

(2,277)



$

(7,069)



$

(2,904)



$

(2,378)



$

(2,808)



$

(2,041)



$

(10,131)


 



RealNetworks, Inc. and Subsidiaries

Reconciliation of Net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure

(Unaudited)




2017


2016



 Q1


 Q2


 Q3


 Q4


 YTD


 Q1


 Q2


 Q3


 Q4


 YTD



 (in thousands)


 (in thousands)






















Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA:
































Net income (loss) from continuing operations


$

(9,550)



$

(3,779)



$

(4,532)



$

447



$

(17,414)



$

(15,410)



$

(8,826)



$

(3,334)



$

(10,203)



$

(37,773)


Income tax expense (benefit)


455



360



139



(3,732)



(2,778)



157



228



252



139



776


Interest income, net


(128)



(109)



(116)



(83)



(436)



(117)



(80)



(119)



(133)



(449)


(Gain) loss on investments, net








(4,500)



(4,500)



(3)



46



(6,021)



(2,495)



(8,473)


Equity in net loss of Rhapsody


748



349





2,894



3,991





396



233



5,904



6,533


Acquisitions related intangible asset amortization


223



226



115



107



671



333



243



237



225



1,038


Depreciation and amortization


698



610



530



427



2,265



2,265



1,383



1,436



935



6,019


Restructuring and other charges


1,564



150



557



255



2,526



385



413



499



192



1,489


Stock-based compensation


1,434



863



748



630



3,675



3,171



608



778



867



5,424


Lease exit and related charges, net of sublease income












831



127



1,233



48



2,239


 Adjusted EBITDA, a non-GAAP measure


$

(4,556)



$

(1,330)



$

(2,559)



$

(3,555)



$

(12,000)



$

(8,388)



$

(5,462)



$

(4,806)



$

(4,521)



$

(23,177)


 

 

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SOURCE RealNetworks, Inc.