Wed, 02/05/2020

    RealNetworks Announces Fourth Quarter And Full Year 2019 Financial Results

    RealNetworks Announces Fourth Quarter And Full Year 2019 Financial Results

    Wednesday, Feb 5, 2020

    SEATTLE, Feb. 5, 2020 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced its financial results for the fourth quarter and full year ended December 31, 2019.

    • 2019 revenue of $172.1 million
    • 2019 Games revenue up 18% year-over-year driven by success of free-to-play strategy
    • Continued traction with SAFR with new customers and partners around the world

    Management Commentary

    "Strategically, I consider 2019 to be a very successful year," said Rob Glaser, Chairman and CEO of RealNetworks. "We achieved significant traction on two of our key growth initiatives: free-to-play casual mobile games and SAFR. Our free-to-play strategy drove significant topline growth in our Games business. Delicious World is already our highest revenue generating game ever despite having launched globally in mid-2019. SAFR also remains a top growth focus of the Company. We continue to get good initial traction with customers and partners around the world."

    Mr. Glaser added, "Our focus for 2020 will be to continue to drive these key initiatives forward while also running our operations efficiently. While we will make ongoing investments to support our key growth initiatives, we are committed to thoughtfully managing costs along the way as we did during 2019. Our progress in this regard can be seen in our significant improvement in adjusted EBITDA loss in the second half of 2019 as compared to the first half of 2019."

    Full Year 2019 Financial Highlights

    • Revenue was $172.1 million (inclusive of $106.3 million from Napster) compared to $69.5 million in 2018.
    • Games revenue was $25.5 million, up 18% compared to $21.7 million in 2018.
    • Operating expenses increased by $27.4 million, or 37%, from 2018. Napster's operating expenses were $25.8 million in 2019.
    • Net loss attributable to RealNetworks was $(20.0) million, or $(0.53) per diluted share, compared to net loss of $(25.0) million, or $(0.66) per diluted share in 2018. Included in net income attributable to RealNetworks was a gain of $12.3 million in the first quarter of 2019 related to the acquisition of Napster.
    • Adjusted EBITDA was a loss of $(20.1) million compared to a loss of $(16.2) million in 2018. 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 December 31, 2019, the Company had $16.8 million in unrestricted cash and cash equivalents compared to $18.1 million at September 30, 2019.

    Fourth Quarter 2019 Financial Highlights

    • Revenue was $43.4 million (inclusive of $26.1 million from Napster) compared to $45.0 million (inclusive of $27.3 million from Napster) in the prior quarter and $16.6 million in the prior year period.
    • Games revenue was $6.6 million, down 8% compared to $7.2 million in the prior quarter and up 17% compared to $5.6 million in the prior year period.
    • Gross profit margin was 43%, up from 42% in the prior quarter and down from 77% in the prior year period. Napster's gross profit margin for the fourth quarter of 2019 was 21%, while RealNetworks' gross profit margin without Napster was 76%.
    • Operating expenses decreased $0.4 million, or 2%, from the prior quarter and increased $6.2 million, or 34%, from the prior year period. Napster's operating expenses were $7.1 million for the fourth quarter of 2019.
    • Net loss attributable to RealNetworks was $(6.4) million, or $(0.17) per diluted share, compared to net loss of $(6.0) million, or $(0.16) per diluted share, in the prior quarter and a net loss of $(6.9) million, or $(0.18) per diluted share, in the prior year period.
    • Adjusted EBITDA was a loss of $(2.7) million compared to a loss of $(3.2) million in the prior quarter and a loss of $(4.1) million in the prior year period.

    Corporate Developments

    • On January 9, 2020, the Company announced the hiring of Mike Ensing as interim Chief Financial Officer following Cary Baker's resignation to pursue a new opportunity. Mr. Ensing joined RealNetworks as a full-time strategic advisor on January 10, 2020 and will succeed Mr. Baker as interim CFO on February 15, 2020. The Company has retained an executive search firm and has commenced a formal search for a permanent CFO.
    • On December 3, 2019, the Company strengthened its Board of Directors with the appointment of two new directors, Tim Wan and Erik Prusch. Mr. Wan has 20 years of financial and business experience, including 15 years with RealNetworks, and is currently the Chief Financial Officer at Asana, Inc., a privately held company that develops and offers a SaaS-based work management platform. Mr. Prusch has over 25 years of executive experience, having successfully led several technology and consumer-facing businesses through periods of innovation and adaptation.

    Business Outlook

    For the first quarter ending March 31, 2020, 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 $(4.0) million to $(1.0) million.

    Conference Call and Webcast Information

    The Company will host a conference call today to review its results and discuss its performance at approximately 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, February 26, 2020, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13697915.

    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

     

    Twelve Months Ended

     

    December 31,

     

    December 31,

     

    2019

     

    2018

     

    2019

     

    2018

     

     (in thousands, except per share data)

                   

     Net revenue

    $

    43,400

       

    $

    16,557

       

    $

    172,113

       

    $

    69,510

     

     Cost of revenue

    24,697

       

    3,727

       

    103,127

       

    17,727

     

               Gross profit

    18,703

       

    12,830

       

    68,986

       

    51,783

     
                   

     Operating expenses:

                 

           Research and development

    8,452

       

    7,391

       

    34,848

       

    30,789

     

           Sales and marketing

    7,806

       

    5,262

       

    32,778

       

    21,140

     

           General and administrative

    7,417

       

    5,180

       

    31,305

       

    20,706

     

           Restructuring and other charges

    911

       

    553

       

    2,498

       

    1,873

     

           Lease exit and related benefit

       

       

       

    (454)

     
                   

               Total operating expenses

    24,586

       

    18,386

       

    101,429

       

    74,054

     
                   

     Operating loss

    (5,883)

       

    (5,556)

       

    (32,443)

       

    (22,271)

     
                   

     Other income (expenses):

                 

           Interest expense

    (207)

       

       

    (636)

       

     

           Interest income

    14

       

    74

       

    131

       

    344

     

           Gain (loss) on equity investment, net

       

       

    12,338

       

     

           Equity in net loss of Napster

       

    (20)

       

       

    (757)

     

           Other income (expenses), net

    (431)

       

    92

       

    420

       

    (103)

     
                   

               Total other income (expenses), net

    (624)

       

    146

       

    12,253

       

    (516)

     
                   

     Income (loss) before income taxes

    (6,507)

       

    (5,410)

       

    (20,190)

       

    (22,787)

     

     Income tax expense

    256

       

    1,494

       

    1,068

       

    2,202

     
                   

    Net income (loss) including noncontrolling interests

    (6,763)

       

    (6,904)

       

    (21,258)

       

    (24,989)

     

    Net income (loss) attributable to noncontrolling interests

    (399)

       

       

    (1,257)

       

     

    Net income (loss) attributable to RealNetworks

    $

    (6,364)

       

    $

    (6,904)

       

    $

    (20,001)

       

    $

    (24,989)

     
                   

    Net income (loss) per share attributable to RealNetworks- Basic:

    $

    (0.17)

       

    $

    (0.18)

       

    $

    (0.53)

       

    $

    (0.66)

     

    Net income (loss) per share attributable to RealNetworks- Diluted:

    $

    (0.17)

       

    $

    (0.18)

       

    $

    (0.53)

       

    $

    (0.66)

     
                   

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

    38,142

       

    37,680

       

    37,994

       

    37,582

     

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

    38,142

       

    37,680

       

    37,994

       

    37,582

     

     

    RealNetworks, Inc. and Subsidiaries

    Condensed Consolidated Balance Sheets

    (Unaudited)

     
     

    December 31,

    2019

     

    December 31,

    2018

     

     (in thousands)

    ASSETS

     Current assets:

         

     Cash and cash equivalents

    $

    16,805

       

    $

    35,561

     

     Short-term investments

       

    24

     

     Trade accounts receivable, net

    29,507

       

    11,751

     

     Deferred costs, current portion

    823

       

    331

     

     Prepaid expenses and other current assets

    7,445

       

    5,911

     

     Total current assets

    54,580

       

    53,578

     
           

     Equipment and software

    32,167

       

    37,458

     

     Leasehold improvements

    3,311

       

    3,292

     

     Total equipment, software, and leasehold improvements

    35,478

       

    40,750

     

     Less accumulated depreciation and amortization

    32,657

       

    37,996

     

     Net equipment, software, and leasehold improvements

    2,821

       

    2,754

     
           

     Operating lease assets

    11,592

       

     

     Restricted cash equivalents

    5,374

       

    1,630

     

     Other assets

    1,891

       

    3,997

     

     Deferred costs, non-current portion

    1,021

       

    528

     

     Deferred tax assets, net

    761

       

    851

     

     Other intangible assets, net

    19,286

       

    26

     

     Goodwill

    62,428

       

    16,955

     
           

     Total assets

    $

    159,754

       

    $

    80,319

     
           

     LIABILITIES AND SHAREHOLDERS' EQUITY

           

     Current liabilities:

         

     Accounts payable

    $

    4,927

       

    $

    3,910

     

     Accrued royalties, fulfillment and other current liabilities

    77,303

       

    11,312

     

     Commitment to Napster

       

    2,750

     

     Deferred revenue, current portion

    6,620

       

    2,125

     

     Notes payable

    7,331

       

     

     Total current liabilities

    96,181

       

    20,097

     
           

     Deferred revenue, non-current portion

    96

       

    268

     

     Deferred rent

       

    986

     

     Deferred tax liabilities, net

    1,172

       

    1,168

     

     Long-term lease liabilities

    8,466

       

     

     Long-term debt

    3,900

       

     

     Other long-term liabilities

    11,666

       

    960

     
           

     Total liabilities

    121,481

       

    23,479

     
           

     Total shareholders' equity

    38,775

       

    56,840

     
           

    Noncontrolling interests

    (502)

       

     
           

     Total equity

    38,273

       

    56,840

     
           

     Total liabilities and equity

    $

    159,754

       

    $

    80,319

     

     

    RealNetworks, Inc. and Subsidiaries

    Condensed Consolidated Statements of Cash Flows

    (Unaudited)

     
     

    Twelve Months Ended

    December 31,

     

    2019

     

    2018

     

     (in thousands)

     

     Cash flows from operating activities:

         

    Net income (loss) including noncontrolling interests

    $

    (21,258)

       

    $

    (24,989)

     

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

         

    Depreciation and amortization

    5,834

       

    2,135

     

    Stock-based compensation

    2,881

       

    2,508

     

    Equity in net loss of Napster

       

    757

     

    Deferred income taxes, net

    (6)

       

    1,170

     

    (Gain) loss on equity investment, net

    (12,338)

       

     

    Foreign currency (gain) loss

    (310)

       

     

    Fair value adjustments to contingent consideration liability

    1,000

       

     

    Mark to market adjustment of warrants

       

    124

     

    Net change in certain operating assets and liabilities

    (1,149)

       

    (926)

     

      Net cash used in operating activities

    (25,346)

       

    (19,221)

     

     Cash flows from investing activities:

         

    Purchases of equipment, software, and leasehold improvements

    (1,192)

       

    (765)

     

    Proceeds from sales and maturities of short-term investments

    24

       

    8,755

     

    Acquisition, net of cash acquired

    12,249

       

    (4,192)

     

     Net cash provided by investing activities

    11,081

       

    3,798

     

     Cash flows from financing activities:

         

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

    199

       

    199

     

    Tax payments from shares withheld upon vesting of restricted stock

    (309)

       

    (261)

     

    Proceeds from notes payable and revolving credit facility

    41,201

       

     

    Repayments of notes payable and revolving credit facility

    (41,992)

       

     

    Payment of financing fees

    (622)

       

     

    Other financing activities

    900

       

     

     Net cash used in financing activities

    (623)

       

    (62)

     

     Effect of exchange rate changes on cash, cash equivalents and restricted cash

    (124)

       

    (920)

     

     Net increase (decrease) in cash, cash equivalents and restricted cash

    (15,012)

       

    (16,405)

     

     Cash, cash equivalents and restricted cash, beginning of period

    37,191

       

    53,596

     

     Cash, cash equivalents and restricted cash, end of period

    $

    22,179

       

    $

    37,191

     

     

    RealNetworks, Inc. and Subsidiaries

    Supplemental Financial Information

    (Unaudited)

     
     

    2019

     

    2018

     

     YTD

     

     Q4

     

     Q3

     

     Q2

     

    Q1

     

     YTD

     

     Q4

     

     Q3

     

     Q2

     

     Q1

     

     (in thousands)

    Net Revenue by Segment

                                         

    Consumer Media (A)

    $

    13,170

       

    $

    4,432

       

    $

    3,632

       

    $

    2,620

       

    $

    2,486

       

    $

    18,168

       

    $

    4,068

       

    $

    4,733

       

    $

    3,884

       

    $

    5,483

     

    Mobile Services (B)

    27,143

       

    6,312

       

    6,895

       

    6,997

       

    6,939

       

    29,670

       

    6,899

       

    7,348

       

    6,719

       

    8,704

     

    Games (C)

    25,489

       

    6,567

       

    7,164

       

    6,048

       

    5,710

       

    21,672

       

    5,590

       

    5,498

       

    5,121

       

    5,463

     

    Napster (D)

    106,311

       

    26,089

       

    27,302

       

    28,583

       

    24,337

       

       

       

       

       

     

         Total net revenue

    $

    172,113

       

    $

    43,400

       

    $

    44,993

       

    $

    44,248

       

    $

    39,472

       

    $

    69,510

       

    $

    16,557

       

    $

    17,579

       

    $

    15,724

       

    $

    19,650

     
                                           

    Net Revenue by Product

                                         

    Consumer Media

                                         

    - Software License (E)

    $

    6,522

       

    $

    2,856

       

    $

    1,987

       

    $

    944

       

    $

    735

       

    $

    9,940

       

    $

    2,049

       

    $

    2,746

       

    $

    1,808

       

    $

    3,337

     

    - Subscription Services (F)

    4,148

       

    992

       

    1,028

       

    1,040

       

    1,088

       

    4,895

       

    1,153

       

    1,232

       

    1,225

       

    1,285

     

    - Product Sales (G)

    825

       

    193

       

    207

       

    206

       

    219

       

    1,177

       

    257

       

    281

       

    299

       

    340

     

    - Advertising & Other (H)

    1,675

       

    391

       

    410

       

    430

       

    444

       

    2,156

       

    609

       

    474

       

    552

       

    521

     
                                           

    Mobile Services

                                         

    - Software License (I)

    3,101

       

    657

       

    888

       

    957

       

    599

       

    2,838

       

    514

       

    520

       

    469

       

    1,335

     

    - Subscription Services (J)

    24,042

       

    5,655

       

    6,007

       

    6,040

       

    6,340

       

    26,832

       

    6,385

       

    6,828

       

    6,250

       

    7,369

     
                                           

    Games

                                         

    - Subscription Services (K)

    12,121

       

    3,007

       

    3,056

       

    3,073

       

    2,985

       

    11,141

       

    3,014

       

    2,745

       

    2,689

       

    2,693

     

    - Product Sales (L)

    9,823

       

    2,580

       

    3,078

       

    2,177

       

    1,988

       

    8,647

       

    2,013

       

    2,279

       

    1,953

       

    2,402

     

    - Advertising & Other (M)

    3,545

       

    980

       

    1,030

       

    798

       

    737

       

    1,884

       

    563

       

    474

       

    479

       

    368

     
                                           

    Napster

                                         

    - Subscription Services (N)

    106,311

       

    26,089

       

    27,302

       

    28,583

       

    24,337

       

       

       

       

       

     
                                           

         Total net revenue

    $

    172,113

       

    $

    43,400

       

    $

    44,993

       

    $

    44,248

       

    $

    39,472

       

    $

    69,510

       

    $

    16,557

       

    $

    17,579

       

    $

    15,724

       

    $

    19,650

     
                                           

    Net Revenue by Geography

                                         

    United States

    $

    83,360

       

    $

    21,053

       

    $

    22,015

       

    $

    21,322

       

    $

    18,970

       

    $

    35,803

       

    $

    7,697

       

    $

    9,026

       

    $

    7,646

       

    $

    11,434

     

    Rest of world

    88,753

       

    22,347

       

    22,978

       

    22,926

       

    20,502

       

    33,707

       

    8,860

       

    8,553

       

    8,078

       

    8,216

     

         Total net revenue

    $

    172,113

       

    $

    43,400

       

    $

    44,993

       

    $

    44,248

       

    $

    39,472

       

    $

    69,510

       

    $

    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

     

    Q4

     

    Q3

     

    Q4

     

    YTD

     

    YTD

     

     (in thousands)

    Consumer Media

                     
                       

    Net revenue

    $

    4,432

       

    $

    3,632

       

    $

    4,068

       

    $

    13,170

       

    $

    18,168

     

    Cost of revenue

    690

       

    705

       

    882

       

    3,031

       

    3,858

     

    Gross profit

    3,742

       

    2,927

       

    3,186

       

    10,139

       

    14,310

     
                       

    Gross margin

    84

    %

     

    81

    %

     

    78

    %

     

    77

    %

     

    79

    %

                       

    Operating expenses

    2,498

       

    2,692

       

    3,614

       

    11,186

       

    14,419

     

    Operating income (loss), a GAAP measure

    $

    1,244

       

    $

    235

       

    $

    (428)

       

    $

    (1,047)

       

    $

    (109)

     

    Depreciation and amortization

    34

       

    34

       

    49

       

    178

       

    195

     
                       

    Contribution margin, a non-GAAP measure

    $

    1,278

       

    $

    269

       

    $

    (379)

       

    $

    (869)

       

    $

    86

     
                       

    Mobile Services

                     
                       

    Net revenue

    $

    6,312

       

    $

    6,895

       

    $

    6,899

       

    $

    27,143

       

    $

    29,670

     

    Cost of revenue

    1,866

       

    1,721

       

    2,121

       

    7,500

       

    8,623

     

    Gross profit

    4,446

       

    5,174

       

    4,778

       

    19,643

       

    21,047

     
                       

    Gross margin

    70

    %

     

    75

    %

     

    69

    %

     

    72

    %

     

    71

    %

                       

    Operating expenses

    7,198

       

    7,143

       

    6,906

       

    29,340

       

    28,066

     

    Operating income (loss), a GAAP measure

    $

    (2,752)

       

    $

    (1,969)

       

    $

    (2,128)

       

    $

    (9,697)

       

    $

    (7,019)

     

    Acquisitions related intangible asset amortization

       

       

    69

       

       

    322

     

    Depreciation and amortization

    100

       

    81

       

    116

       

    518

       

    616

     
                       

    Contribution margin, a non-GAAP measure

    $

    (2,652)

       

    $

    (1,888)

       

    $

    (1,943)

       

    $

    (9,179)

       

    $

    (6,081)

     
                       

    Games

                     
                       

    Net revenue

    $

    6,567

       

    $

    7,164

       

    $

    5,590

       

    $

    25,489

       

    $

    21,672

     

    Cost of revenue

    1,716

       

    1,934

       

    1,622

       

    6,975

       

    6,123

     

    Gross profit

    4,851

       

    5,230

       

    3,968

       

    18,514

       

    15,549

     
                       

    Gross margin

    74

    %

     

    73

    %

     

    71

    %

     

    73

    %

     

    72

    %

                       

    Operating expenses

    4,744

       

    5,151

       

    4,865

       

    20,220

       

    20,324

     

    Operating income (loss), a GAAP measure

    $

    107

       

    $

    79

       

    $

    (897)

       

    $

    (1,706)

       

    $

    (4,775)

     

    Acquisitions related intangible asset amortization

       

    4

       

    23

       

    27

       

    66

     

    Depreciation and amortization

    85

       

    89

       

    82

       

    341

       

    484

     
                       

    Contribution margin, a non-GAAP measure

    $

    192

       

    $

    172

       

    $

    (792)

       

    $

    (1,338)

       

    $

    (4,225)

     
                       

    Napster

                     
                       

    Net revenue

    $

    26,089

       

    $

    27,302

       

    $

       

    $

    106,311

       

    $

     

    Cost of revenue

    20,493

       

    21,986

       

       

    85,901

       

     

    Gross profit

    5,596

       

    5,316

       

       

    20,410

       

     
                       

    Gross margin

    21

    %

     

    19

    %

     

    %

     

    19

    %

     

    %

                       

    Operating expenses

    7,147

       

    6,472

       

       

    25,789

       

     

    Operating income (loss), a GAAP measure

    $

    (1,551)

       

    $

    (1,156)

       

    $

       

    $

    (5,379)

       

    $

     

    Acquisitions related intangible asset amortization

    1,126

       

    1,126

       

       

    4,324

       

     

    Depreciation and amortization

    60

       

    72

       

       

    316

       

     

    Restructuring and other charges

    544

       

       

       

    544

       

     
                       

    Contribution margin, a non-GAAP measure

    $

    179

       

    $

    42

       

    $

       

    $

    (195)

       

    $

     
                       

    Corporate

                     
                       

    Cost of revenue

    $

    (68)

       

    $

    (68)

       

    $

    (898)

       

    $

    (280)

       

    $

    (877)

     

    Gross profit

    68

       

    68

       

    898

       

    280

       

    877

     
                       

    Gross margin

    N/A

       

    N/A

       

    N/A

       

    N/A

       

    N/A

     
                       

    Operating expenses

    2,999

       

    3,522

       

    3,001

       

    14,894

       

    11,245

     

    Operating income (loss), a GAAP measure

    $

    (2,931)

       

    $

    (3,454)

       

    $

    (2,103)

       

    $

    (14,614)

       

    $

    (10,368)

     

    Other income (expense), net

    (431)

       

    541

       

    92

       

    420

       

    (103)

     

    Foreign currency (gain) loss

    494

       

    (489)

       

    (26)

       

    (310)

       

    72

     

    Depreciation and amortization

    32

       

    32

       

    58

       

    130

       

    452

     

    Fair value adjustments to contingent consideration liability

    300

       

    400

       

       

    1,000

       

     

    Restructuring and other charges

    367

       

    691

       

    553

       

    1,954

       

    1,873

     

    Stock-based compensation

    461

       

    503

       

    395

       

    2,881

       

    2,508

     

    Lease exit and related benefit

       

       

       

       

    (454)

     
                       

    Contribution margin, a non-GAAP measure (1)

    $

    (1,708)

       

    $

    (1,776)

       

    $

    (1,031)

       

    $

    (8,539)

       

    $

    (6,020)

     
     

    (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

     

     Q4

     

    Q3

     

     Q4

     

     YTD

     

     YTD

         

    (in thousands)

                       

    Reconciliation of GAAP Net income (loss) including noncontrolling interests to adjusted EBITDA:

                       

    Net income (loss) including noncontrolling interests

    $

    (6,763)

       

    $

    (6,254)

       

    $

    (6,904)

       

    $

    (21,258)