SEATTLE, May 5, 2016 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the first quarter ended March 31, 2016.
For the first quarter of 2016, revenue was $28.2 million compared to $29.9 million in the previous quarter and $28.8 million in the first quarter of 2015, excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015.
"In the first quarter of 2016, we continued to make progress in turning RealNetworks around and setting the company up for growth and a return to profitability in the quarters ahead," said Rob Glaser, Chairman and CEO of RealNetworks. "First, we realigned 2 of our divisions to focus our business on the best opportunities in front of us. Second, we hired Reza Rassool as CTO and helped bring in Mike Davis as CEO of our affiliate Rhapsody. Third, we continued to make progress on stabilizing the company's revenue while continuing to manage operating expenses carefully."
Pursuant to the realignment, the company re-segmented its first quarter 2016 and historical financial statements to reflect these changes and a change in the corporate expense allocation methodology reflected in the tables presented below.
The Company's operating expenses in the first quarter of 2016 were down 16% from the same period in 2015, excluding stock compensation, restructuring charges, expenses from the Slingo and social casino games business, and the impact of a non-cash warrant from Rhapsody.
GAAP net loss for the first quarter of 2016 was $(15.2) million or $(0.42) per share, compared to $(24.5) million or $(0.68) per share in the first quarter of 2015. Adjusted EBITDA for the first quarter of 2016 was a loss of $(8.1) million, compared to $(4.2) million for the previous quarter and $(10.8) million for the first quarter of 2015, excluding the results of the Slingo and social casino games business, which was sold in August 2015. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.
As of March 31, 2016, the company had $86.8 million in unrestricted cash, cash equivalents and short-term investments, compared to $99.1 million as of December 31, 2015.
Business Outlook
For the second quarter of 2016, RealNetworks expects total revenue in the range of $26 million to $29 million and an adjusted EBITDA loss for the second quarter in the range of $(6.0) million to $(9.0) million.
Webcast and Conference Call Information
The company will host a conference call today to review results and discuss the company's performance at 5 p.m. ET/2 p.m. PT. You may join the conference call by calling 888-790-3440 or +1-517-308-9350 (Passcode: First quarter Earnings). A live webcast of the call will be available at http://investor.realnetworks.com/ and an on-demand webcast will be available approximately one hour following the conclusion of the conference call. A telephonic replay will be available until 11:59 p.m. PT, May 26, 2016 by calling 800-678-8548 or +1-402-220-6449 (Passcode: 5516).
For More Information
Michael Newman, StreetConnect
Investor Relations for RealNetworks
+1-206-729-3625
IR@realnetworks.com
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About RealNetworks
RealNetworks creates innovative applications and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category in 1995 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. RealNetworks' corporate information is located at www.realnetworks.com/about-us.
RealNetworks and RealTimes are trademarks or registered trademarks of RealNetworks, Inc. or its subsidiaries. All other companies or products listed herein are trademarks or registered 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 adjusted EBITDA 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 operating income (loss) to adjusted EBITDA and to adjusted EBITDA 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 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) Quarters Ended March 31, --------- 2016 2015 ---- ---- (in thousands, except per share data) Net revenue $28,230 $30,597 Cost of revenue 15,172 16,547 Gross profit 13,058 14,050 ------ ------ Operating expenses: Research and development 9,319 12,379 Sales and marketing 9,225 12,837 General and administrative 8,077 7,283 Restructuring and other charges 385 485 Lease exit and related charges 831 78 --- --- Total operating expenses 27,837 33,062 ------ ------ Operating income (loss) (14,779) (19,012) ------- ------- Other income (expenses): Interest income, net 117 200 Gain (loss) on investments, net 3 299 Equity in net loss of Rhapsody - (6,180) Other income (expense), net (287) 443 ---- --- Total other income (expense), net (167) (5,238) ---- ------ Income (loss) before income taxes (14,946) (24,250) Income tax expense (benefit) 225 219 --- --- Net income (loss) $(15,171) $(24,469) ======== ======== Basic net income (loss) per share $(0.42) $(0.68) Diluted net income (loss) per share $(0.42) $(0.68) Shares used to compute basic net income (loss) per share 36,520 36,104 Shares used to compute diluted net income (loss) per share 36,520 36,104
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, 2016 2015 ---- ---- (in thousands) ASSETS Current assets: Cash and cash equivalents $40,539 $47,315 Short-term investments 46,289 51,814 Trade accounts receivable, net 23,527 22,511 Deferred costs, current portion 452 460 Prepaid expenses and other current assets 5,563 7,140 ----- ----- Total current assets 116,370 129,240 ------- ------- Equipment and software 61,330 66,702 Leasehold improvements 3,190 3,122 ----- ----- Total equipment, software, and leasehold improvements 64,520 69,824 Less accumulated depreciation and amortization 56,983 61,024 ------ ------ Net equipment, software, and leasehold improvements 7,537 8,800 Restricted cash equivalents and investments 3,100 2,890 Available for sale securities 1,910 1,721 Other assets 2,273 2,307 Deferred costs, non- current portion 660 212 Deferred tax assets, net 996 957 Other intangible assets, net 1,753 2,136 Goodwill 13,099 13,080 ------ ------ Total assets $147,698 $161,343 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $15,368 $17,050 Accrued and other current liabilities 17,110 17,320 Deferred revenue, current portion 3,537 3,497 ----- ----- Total current liabilities 36,015 37,867 Deferred revenue, non-current portion 583 105 Deferred rent 579 620 Deferred tax liabilities, net 90 88 Other long- term liabilities 1,668 1,980 ----- ----- Total liabilities 38,935 40,660 ------ ------ Shareholders' equity 108,763 120,683 ------- ------- Total liabilities and shareholders' equity $147,698 $161,343 ======== ========
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Quarters Ended March 31, --------- 2016 2015 ---- ---- (in thousands) Cash flows from operating activities: Net income (loss) $(15,171) $(24,469) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 2,598 2,503 Stock-based compensation 3,171 1,329 Equity in net loss of Rhapsody - 6,180 Deferred income taxes, net (128) (77) Loss (gain) on investments, net (3) (299) Fair value of warrants granted in 2015, net of subsequent mark to market adjustments in 2016 and 2015 44 (1,155) Net change in certain operating assets and liabilities (1,722) (4,106) ------ Net cash provided by (used in) operating activities (11,211) (20,094) ------- ------- Cash flows from investing activities: Purchases of equipment, software, and leasehold improvements (828) (306) Proceeds from sale of available for sale securities - 352 Purchases of short-term investments (17,876) (6,018) Proceeds from sales and maturities of short- term investments 23,401 33,077 Decrease (increase) in restricted cash equivalents and investments, net (210) - Advance to Rhapsody - (5,000) Net cash provided by (used in) investing activities 4,487 22,105 ----- ------ Cash flows from financing activities: Proceeds from issuance of common stock (stock options and stock purchase plan) 16 6 Tax payments from shares withheld upon vesting of restricted stock (787) (7) Net cash provided by (used in) financing activities (771) (1) ---- --- Effect of exchange rate changes on cash and cash equivalents 719 (2,269) --- ------ Net increase (decrease) in cash and cash equivalents (6,776) (259) Cash and cash equivalents, beginning of period 47,315 103,253 ------ ------- Cash and cash equivalents, end of period $40,539 $102,994 ======= ========
RealNetworks, Inc. and Subsidiaries Supplemental Financial Information (Unaudited) 2016 2015 ---- ---- Q1 Q4 Q3 Q2 Q1 --- --- --- --- --- (in thousands) Net Revenue by Line of Business Consumer Media (A) $5,726 $6,848 $6,495 $7,281 $7,989 Mobile Services (B) 16,465 16,369 16,484 18,578 14,504 Games (C) 6,039 6,705 7,844 8,095 8,104 Total net revenue $28,230 $29,922 $30,823 $33,954 $30,597 ======= ======= ======= ======= ======= Net Revenue by Product Consumer Media -------------- - License (D) $3,104 $3,967 $3,628 $4,208 $4,672 - Subscriptions (E) 1,975 2,054 2,147 2,372 2,384 -Media Properties (F) 647 827 720 701 933 Mobile Services --------------- - SaaS (G) 16,220 16,157 16,217 18,218 13,322 -Technology License & Other (H) 245 212 267 360 1,182 Games ----- - License (I) 2,761 3,268 4,128 3,943 3,835 - Subscriptions (J) 3,029 3,126 3,231 3,373 3,570 -Media Properties (K) 249 311 485 779 699 --- --- --- --- --- Total net revenue $28,230 $29,922 $30,823 $33,954 $30,597 ======= ======= ======= ======= ======= Net Revenue by Geography United States $10,383 $10,781 $11,460 $12,303 $12,349 Rest of world 17,847 19,141 19,363 21,651 18,248 ------ ------ ------ ------ ------ Total net revenue $28,230 $29,922 $30,823 $33,954 $30,597 ======= ======= ======= ======= =======
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 games licenses, online games subscription services, advertising on games sites and social network sites, microtransactions from online and social games, and sales of mobile 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 music on demand, 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 and social games. (K) Media Properties revenue within Games includes advertising on games sites and social network sites.
RealNetworks, Inc. and Subsidiaries Segment Results of Operations (Unaudited) 2016 2015 ---- ---- Q1 Q4 Q1 --- --- --- (in thousands) Consumer Media -------------- Net revenue $5,726 $6,848 $7,989 Cost of revenue 2,417 3,084 3,464 Gross profit 3,309 3,764 4,525 Gross margin 58% 55% 57% Operating expenses 5,376 6,644 6,594 Operating income (loss) $(2,067) $(2,880) $(2,069) Adjusted EBITDA $(764) $(1,842) $(1,558) Mobile Services --------------- Net revenue $16,465 $16,369 $14,504 Cost of revenue 10,917 11,032 10,308 Gross profit 5,548 5,337 4,196 Gross margin 34% 33% 29% Operating expenses 9,794 9,158 11,961 Operating income (loss) $(4,246) $(3,821) $(7,765) Adjusted EBITDA $(3,516) $(2,958) $(6,793) Games ----- Net revenue $6,039 $6,705 $8,104 Cost of revenue 1,845 1,698 2,794 Gross profit 4,194 5,007 5,310 Gross margin 69% 75% 66% Operating expenses 5,295 5,253 8,683 Operating income (loss) $(1,101) $(246) $(3,373) Adjusted EBITDA $(897) $(25) $(2,783) Corporate --------- Cost of revenue $(7) $14 $(19) Gross profit 7 (14) 19 Gross margin N/A N/A N/A Operating expenses 7,372 545 5,824 Operating income (loss) $(7,365) $(559) $(5,805) Adjusted EBITDA $(2,904) $601 $(3,040) Total ----- Net revenue $28,230 $29,922 $30,597 Cost of revenue 15,172 15,828 16,547 Gross profit 13,058 14,094 14,050 Gross margin 46% 47% 46% Operating expenses 27,837 21,600 33,062 Operating income (loss) $(14,779) $(7,506) $(19,012) Adjusted EBITDA $(8,081) $(4,224) $(14,174)
RealNetworks, Inc. and Subsidiaries Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment (Unaudited) 2016 2015 ---- ---- Q1 Q4 Q1 --- --- --- (in thousands) Consumer Media -------------- Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: Operating income (loss) $(2,067) $(2,880) $(2,069) Depreciation and amortization 1,303 1,038 511 Adjusted EBITDA $(764) $(1,842) $(1,558) Mobile Services --------------- Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: Operating income (loss) $(4,246) $(3,821) $(7,765) Acquisitions related intangible asset amortization 308 379 392 Depreciation and amortization 422 484 580 Adjusted EBITDA $(3,516) $(2,958) $(6,793) Games ----- Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: Operating income (loss) $(1,101) $(246) $(3,373) Acquisitions related intangible asset amortization 25 24 293 Depreciation and amortization 179 197 297 --- --- --- Adjusted EBITDA $(897) $(25) $(2,783) Corporate --------- Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: Operating income (loss) $(7,365) $(559) $(5,805) Other income (expense), net (287) (122) 443 Depreciation and amortization 361 336 430 Restructuring and other charges 385 (284) 485 Stock-based compensation 3,171 937 1,329 Lease exit and related charges 831 293 78 Adjusted EBITDA $(2,904) $601 $(3,040) Total ----- Reconciliation of GAAP operating income (loss) to adjusted EBITDA: Operating income (loss) $(14,779) $(7,506) $(19,012) Other income (expense), net (287) (122) 443 Acquisitions related intangible asset amortization 333 403 685 Depreciation and amortization 2,265 2,055 1,818 Restructuring and other charges 385 (284) 485 Stock-based compensation 3,171 937 1,329 Lease exit and related charges 831 293 78 Adjusted EBITDA $(8,081) $(4,224) $(14,174)
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SOURCE RealNetworks, Inc.