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 Twelve Months Ended
December 31, 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, December 31,
2017 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 market
of adjustments
warrants in 2017
granted and
in 2015 2016
and
2017,
net of
subsequent
mark to (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 plan)
issuance
of
common
stock
(stock
options
and
stock
purchase 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.
