REALNETWORKS, INC. SEATTLE, May 3, 2017 /PRNewswire/ --
-- Revenue stability, with year-over-year revenue growth for first quarter;
-- Reduced year-over-year operating expenses by $6.5 million in first
quarter; and
-- Investing in key growth initiatives
RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced results for the first quarter ended March 31, 2017.
For the first quarter of 2017, revenue was $30.6 million, up from $28.2 million in the first quarter of 2016. For the first quarter of 2017, the Company reduced its operating expenses by $6.5 million or 23% from the same period in 2016.
Net loss for the first quarter of 2017 was $(9.4) million or $(0.25) per share, compared to $(15.2) million or $(0.42) per share in the first quarter of 2016. Adjusted EBITDA for the first quarter of 2017 was a loss of $(4.4) million, compared to a loss of $(8.1) million in the first quarter of 2016. A reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
"In Q1, we achieved our financial objectives while also investing in our key growth initiatives," said Rob Glaser, Chairman and CEO of RealNetworks. "We achieved stable revenue while also reducing our operating expenses by 23% from a year ago. At the same time, we're growing our mobile games business, developing new Mobile Service offerings, and continuing to build partnerships and seed the ecosystem for our new RealMedia HD codec."
As of March 31, 2017, the Company had $66.3 million in unrestricted cash, cash equivalents and short-term investments, compared to $77.1 million as of December 31, 2016.
Business Outlook
For the second quarter of 2017, RealNetworks expects total revenue in the range of $28 million to $31 million and an adjusted EBITDA loss for the second quarter in the range of $(3.0) million to $(5.0) 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 888-831-6080 or +1-210-234-0017 (Passcode: 1ST QUARTER). 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 24, 2017 by calling 866-453-2318 or +1-203-369-1226 (Passcode: 532017).
For More Information
Investor Relations for RealNetworks
+1-206-674-2700
IR@realnetworks.com
RNWK-F
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 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) 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 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
March 31,
---------
2017 2016
---- ----
(in thousands, except per
share data)
Net
revenue $30,576 $28,230
Cost of
revenue 17,293 15,172
Gross
profit 13,283 13,058
------ ------
Operating
expenses:
Research
and
development 7,349 9,319
Sales and
marketing 7,155 9,225
General
and
administrative 5,303 8,077
Restructuring
and
other
charges 1,564 385
Lease
exit and
related
charges - 831
--- ---
Total
operating
expenses 21,371 27,837
------ ------
Operating
income
(loss) (8,088) (14,779)
------ -------
Other
income
(expenses):
Interest
income,
net 128 117
Gain
(loss)
on
investments,
net - 3
Equity in
net loss
of
Rhapsody (748) -
Other
income
(expense),
net (226) (287)
---- ----
Total
other
income
(expense),
net (846) (167)
---- ----
Income
(loss)
before
income
taxes (8,934) (14,946)
Income
tax
expense
(benefit) 490 225
--- ---
Net
income
(loss) $(9,424) $(15,171)
======= ========
Basic net
income
(loss)
per
share $(0.25) $(0.42)
Diluted
net
income
(loss)
per
share $(0.25) $(0.42)
Shares
used to
compute
basic
net
income
(loss)
per
share 37,030 36,520
Shares
used to
compute
diluted
net
income
(loss)
per
share 37,030 36,520
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2017 2016
---- ----
(in thousands)
ASSETS
Current assets:
Cash and
cash
equivalents $38,498 $33,721
Short-term
investments 27,778 43,331
Trade
accounts
receivable,
net 26,833 22,162
Deferred
costs,
current
portion 541 760
Prepaid
expenses
and other
current
assets 4,843 4,910
----- -----
Total
current
assets 98,493 104,884
------ -------
Equipment
and
software 44,640 46,231
Leasehold
improvements 3,330 3,317
----- -----
Total
equipment,
software,
and
leasehold
improvements 47,970 49,548
Less
accumulated
depreciation
and
amortization 43,181 44,294
------ ------
Net
equipment,
software,
and
leasehold
improvements 4,789 5,254
Restricted
cash
equivalents
and
investments 2,700 2,700
Other
assets 2,412 1,742
Deferred
costs,
non-
current
portion 1,071 1,246
Deferred
tax
assets,
net 836 816
Other
intangible
assets,
net 729 938
Goodwill 12,915 12,857
------ ------
Total
assets $123,945 $130,437
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts
payable $19,432 $18,225
Accrued and
other
current
liabilities 15,425 15,425
Commitment
to
Rhapsody - 1,500
Deferred
revenue,
current
portion 3,918 3,430
----- -----
Total
current
liabilities 38,775 38,580
Deferred
revenue,
non-
current
portion 724 240
Deferred
rent 679 748
Deferred
tax
liabilities,
net 87 87
Other long-
term
liabilities 1,890 2,201
----- -----
Total
liabilities 42,155 41,856
------ ------
Shareholders'
equity 81,790 88,581
------ ------
Total
liabilities
and
shareholders'
equity $123,945 $130,437
======== ========
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Quarter ended March 31,
2017 2016
---- ----
(in thousands)
Cash flows from operating activities:
Net income (loss) $(9,424) $(15,171)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and
amortization 921 2,598
Stock-based compensation 1,434 3,171
Equity in net loss of
Rhapsody 748 -
Deferred income taxes,
net (20) (128)
Loss (gain) on
investments, net - (3)
Fair value of warrants
granted in 2015 and
2017, net of subsequent
mark to market
adjustments in 2017 and
2016 (471) 44
Net change in certain
operating assets and
liabilities (2,598) (1,722)
------
Net cash provided by
(used in) operating
activities (9,410) (11,211)
------ -------
Cash flows from investing activities:
Purchases of equipment,
software, and leasehold
improvements (207) (828)
Purchases of short-term
investments (6,142) (17,876)
Proceeds from sales and
maturities of short-
term investments 21,695 23,401
Decrease (increase) in
restricted cash
equivalents and
investments, net - (210)
Advance to Rhapsody (1,500) -
Net cash provided by
(used in) investing
activities 13,846 4,487
------ -----
Cash flows from financing activities:
Proceeds from issuance of
common stock (stock
options and stock
purchase plan) 34 16
Tax payments from shares
withheld upon vesting of
restricted stock (181) (787)
Net cash provided by
(used in) financing
activities (147) (771)
---- ----
Effect of exchange rate
changes on cash and cash
equivalents 488 719
--- ---
Net increase (decrease)
in cash and cash
equivalents 4,777 (6,776)
Cash and cash
equivalents, beginning
of year 33,721 47,315
------ ------
Cash and cash
equivalents, end of year $38,498 $40,539
======= =======
RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
2017 2016
Q1 Q4 Q3 Q2 Q1
--- --- --- --- ---
(in thousands)
Net Revenue by Line of Business
Consumer Media (A) $5,669 $6,443 $6,482 $6,400 $5,726
Mobile Services (B) 19,084 18,833 17,683 17,297 16,465
Games (C) 5,823 6,177 6,886 6,037 6,039
Total net revenue $30,576 $31,453 $31,051 $29,734 $28,230
======= ======= ======= ======= =======
Net Revenue by Product
Consumer Media
--------------
- License (D) $3,672 $4,252 $4,136 $3,914 $3,104
- Subscriptions (E) 1,564 1,671 1,931 1,871 1,975
-Media Properties
(F) 433 520 415 615 647
Mobile Services
---------------
- SaaS (G) 18,987 18,726 17,141 17,208 16,220
-Technology
License & Other
(H) 97 107 542 89 245
Games
-----
- License (I) 2,862 3,178 3,683 2,793 2,761
- Subscriptions (J) 2,828 2,836 3,005 3,024 3,029
-Media Properties
(K) 133 163 198 220 249
--- --- --- --- ---
Total net revenue $30,576 $31,453 $31,051 $29,734 $28,230
======= ======= ======= ======= =======
Net Revenue by Geography
United States $9,740 $10,125 $10,642 $10,355 $10,383
Rest of world 20,836 21,328 20,409 19,379 17,847
------ ------ ------ ------ ------
Total net revenue $30,576 $31,453 $31,051 $29,734 $28,230
======= ======= ======= ======= =======
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 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 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
----
Q1 Q4 Q1
--- --- ---
(in thousands)
Consumer Media
--------------
Net revenue $5,669 $6,443 $5,726
Cost of revenue 1,405 1,589 2,417
Gross profit 4,264 4,854 3,309
Gross margin 75% 75% 58%
Operating expenses 4,010 4,459 5,376
Operating income (loss), a
GAAP measure $254 $395 $(2,067)
Depreciation and
amortization 167 239 1,303
---
Contribution margin, a non-
GAAP measure $421 $634 $(764)
---- ---- -----
Mobile Services
---------------
Net revenue $19,084 $18,833 $16,465
Cost of revenue 13,914 13,679 10,917
Gross profit 5,170 5,154 5,548
Gross margin 27% 27% 34%
Operating expenses 8,119 7,786 9,794
Operating income (loss), a
GAAP measure $(2,949) $(2,632) $(4,246)
Acquisitions related
intangible asset
amortization 196 198 308
Depreciation and
amortization 203 290 422
--- --- ---
Contribution margin, a non-
GAAP measure $(2,550) $(2,144) $(3,516)
------- ------- -------
Games
-----
Net revenue $5,823 $6,177 $6,039
Cost of revenue 1,937 2,054 1,845
Gross profit 3,886 4,123 4,194
Gross margin 67% 67% 69%
Operating expenses 4,947 4,975 5,295
Operating income (loss), a
GAAP measure $(1,061) $(852) $(1,101)
Acquisitions related
intangible asset
amortization 27 27 25
Depreciation and
amortization 141 146 179
--- --- ---
Contribution margin, a non-
GAAP measure $(893) $(679) $(897)
----- ----- -----
Corporate
---------
Cost of revenue $37 $36 $(7)
Gross profit (37) (36) 7
Gross margin N/A N/A N/A
Operating expenses 4,295 3,244 7,372
Operating income (loss), a
GAAP measure $(4,332) $(3,280) $(7,365)
Other income (expense), net (226) (128) (287)
Depreciation and
amortization 187 260 361
Restructuring and other
charges 1,564 192 385
Stock-based compensation 1,434 867 3,171
Lease exit and related
charges - 48 831
--- --- ---
Contribution margin, a non-
GAAP measure $(1,373) $(2,041) $(2,904)
------- ------- -------
RealNetworks, Inc. and Subsidiaries
Reconciliation of Net income (loss) to adjusted EBITDA, a non-GAAP measure
(Unaudited)
2017 2016
----
Q1 Q4 Q1
--- --- ---
(in thousands)
Reconciliation of GAAP Net income (loss) to adjusted EBITDA:
Net income (loss) $(9,424) $(9,976) $(15,171)
Income tax expense (benefit) 490 203 225
Interest income, net (128) (133) (117)
Gain (loss) on investments,
net - (2,495) (3)
Equity in net loss of
Rhapsody 748 5,904 -
Acquisitions related
intangible asset
amortization 223 225 333
Depreciation and
amortization 698 935 2,265
Restructuring and other
charges 1,564 192 385
Stock-based compensation 1,434 867 3,171
Lease exit and related
charges - 48 831
Adjusted EBITDA, a non-GAAP
measure $(4,395) $(4,230) $(8,081)
------- ------- -------
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SOURCE RealNetworks, Inc.
