REALNETWORKS, INC. SEATTLE, Feb. 9, 2016 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the fourth quarter ended December 31, 2015.
For the fourth quarter of 2015, revenue was $29.9 million compared to $30.8 million in the previous quarter and $35.5 million in the fourth quarter of 2014. Excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015, revenue for the previous quarter was $29.8 million and for the fourth quarter of 2014 was $33.7 million. For the full year 2015, revenue was $125.3 million, compared to $156.2 million in 2014. Excluding the Slingo and social casino games business, revenue for the full year 2015 was $120.4 million, compared to $149.4 million in 2014.
"2015 was an important transition year for RealNetworks, with significant successes," said Rob Glaser, Chairman and CEO of RealNetworks. "Our revenue is stabilizing and we've set the stage for growth in 2016. By rationalizing our costs and cutting our losses significantly, we are also positioned for a return to profitability.
"We've signed up major new partners, such as KDDI and Verizon, and we're gaining traction with big tier 1 carriers around the world for our carrier-oriented products, such as RealTimes and Listen Ring Back Tones. At the same time, we've simplified and focused our games business, going back to our roots in Casual Games and setting it up for sustained growth.
"We are also pleased with 45% subscriber growth in 2015 at the Rhapsody music service, in which we play a significant role and have a large ownership stake.
"While it's taken longer and required more capital to achieve these results than I had hoped when I came back to run RealNetworks three and a half years ago, I'm confident that we're on a path to succeed and create value in each of our businesses and for the company as a whole."
GAAP net loss for the fourth quarter of 2015 was $(8.4) million or $(0.23) per share, compared to $(20.8) million or $(0.58) per share in the fourth quarter of 2014. GAAP net loss for 2015 was $(81.8) million or $(2.26) per share, compared to $(71.8) million or $(2.00) in 2014.
Adjusted EBITDA for the fourth quarter of 2015 was a loss of $(4.2) million, compared to $(12.2) million for the previous quarter and $(15.2) million for the fourth quarter of 2014. Adjusted EBITDA for the full year 2015 was a loss of $(45.8) million, compared to $(56.6) million for the prior year. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.
As of December 31, 2015, the company had $99.1 million in unrestricted cash, cash equivalents and short-term investments, compared to $112.2 million as of September 30, 2015.
Business Outlook
For the first quarter of 2016, RealNetworks expects total revenue in the range of $26 million to $29 million and an adjusted EBITDA loss for the first 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: Fourth 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, March 1, 2016 by calling 866-421-5931 or +1-203-369-0814 (Passcode: 2092016).
For More Information
Michael Newman, StreetConnect
Investor Relations for RealNetworks
+1-206-729-3625
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 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 Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
(in thousands, except per share data)
Net revenue $29,922 $35,506 $125,296 $156,212
Cost of revenue 15,828 17,881 70,297 76,381
Extinguishment of
liability - - - (10,580)
Gross profit 14,094 17,625 54,999 90,411
------ ------ ------ ------
Operating expenses:
Research and
development 8,945 12,655 43,626 52,765
Sales and marketing 9,409 15,904 48,231 66,926
General and
administrative 3,237 8,384 24,549 34,001
Restructuring and
other charges (284) 1,187 5,279 4,992
Lease exit and related
charges 293 177 2,501 880
--- --- ----- ---
Total operating
expenses 21,600 38,307 124,186 159,564
------ ------ ------- -------
Operating income
(loss) (7,506) (20,682) (69,187) (69,153)
------ ------- ------- -------
Other income
(expenses):
Interest income, net 83 160 680 556
Gain (loss) on
investments, net 63 - (159) 2,371
Equity in net loss of
Rhapsody (690) (282) (14,521) (4,452)
Other income
(expense), net (122) (10) 506 143
---- --- --- ---
Total other income
(expense), net (666) (132) (13,494) (1,382)
---- ---- ------- ------
Income (loss) before
income taxes (8,172) (20,814) (82,681) (70,535)
Income tax expense
(benefit) 241 24 (834) 1,280
--- --- ---- -----
Net income (loss) $(8,413) $(20,838) $(81,847) $(71,815)
======= ======== ======== ========
Basic net income
(loss) per share $(0.23) $(0.58) $(2.26) $(2.00)
Diluted net income
(loss) per share $(0.23) $(0.58) $(2.26) $(2.00)
Shares used to compute
basic net income
(loss) per share 36,257 36,052 36,165 35,947
Shares used to compute
diluted net income
(loss) per share 36,257 36,052 36,165 35,947
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, December 31,
2015 2014
---- ----
(in thousands)
ASSETS
Current assets:
Cash and
cash
equivalents $47,315 $103,253
Short-term
investments 51,814 58,453
Trade
accounts
receivable,
net 22,511 15,257
Deferred
costs,
current
portion 460 702
Deferred
tax
assets,
current - 652
Prepaid
expenses
and other
current
assets 7,140 8,980
----- -----
Total
current
assets 129,240 187,297
------- -------
Equipment, software, and
leasehold improvements, at
cost:
Equipment
and
software 66,702 74,100
Leasehold
improvements 3,122 3,590
----- -----
Total
equipment,
software,
and
leasehold
improvements 69,824 77,690
Less
accumulated
depreciation
and
amortization 61,024 61,442
------ ------
Net
equipment,
software,
and
leasehold
improvements 8,800 16,248
Restricted
cash
equivalents
and
investments 2,890 3,000
Investment
in and
advances
to
Rhapsody - 10,000
Available
for sale
securities 1,721 2,676
Other
assets 2,307 2,299
Deferred
costs,
non-
current
portion 212 316
Deferred
tax
assets,
net, non-
current
portion 957 999
Other
intangible
assets,
net 2,136 10,109
Goodwill 13,080 17,355
------ ------
Total
assets $161,343 $250,299
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts
payable $17,050 $18,653
Accrued and
other
current
liabilities 17,320 25,286
Deferred
tax
liabilities,
net,
current
portion - 1,628
Deferred
revenue,
current
portion 3,497 5,301
----- -----
Total
current
liabilities 37,867 50,868
Deferred
revenue,
non-
current
portion 105 235
Deferred
rent 620 1,215
Deferred
tax
liabilities,
net, non-
current
portion 88 702
Other long-
term
liabilities 1,980 81
----- ---
Total
liabilities 40,660 53,101
------ ------
Shareholders'
equity 120,683 197,198
------- -------
Total
liabilities
and
shareholders'
equity $161,343 $250,299
======== ========
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Year Ended
December 31,
-------------------------
2015 2014
---- ----
(in thousands)
Cash flows from operating activities:
Net income (loss) $(81,847) $(71,815)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and
amortization 10,410 11,959
Stock-based compensation 4,698 5,204
Extinguishment of
liability - (10,580)
Equity in net loss of
Rhapsody 14,521 4,452
Accrued loss (gain) on
excess office facilities 2,501 668
Deferred income taxes, net (1,558) (237)
Loss (gain) on
investments, net 159 (2,371)
Realized translation gain (264) (48)
Fair value of warrants,
net of mark to market
adjustments (1,053) -
Net change in certain
operating assets and
liabilities (16,549) 2,524
-------
Net cash provided by (used
in) operating activities (68,982) (60,244)
------- -------
Cash flows from investing activities:
Purchases of equipment,
software, and leasehold
improvements (1,319) (2,460)
Proceeds from sale of
available for sale
securities 459 2,754
Purchases of short-term
investments (72,136) (81,216)
Proceeds from sales and
maturities of short-term
investments 78,775 97,683
Decrease (increase) in
restricted cash
equivalents and
investments, net 110 -
Acquisitions, net of cash
acquired (161) (733)
Advance to Rhapsody (5,000) -
Receipt of payment from
Rhapsody 5,000 -
Proceeds from the sale of
Slingo and Social Casino
business 10,000 -
Other - (467)
--- ----
Net cash provided by (used
in) investing activities 15,728 15,561
------ ------
Cash flows from financing activities:
Proceeds from issuance of
common stock (stock
options and stock
purchase plan) 426 812
Tax payments from shares
withheld upon vesting of
restricted stock (85) (407)
Payment of contingent
consideration - (1,042)
Net cash provided by (used
in) financing activities 341 (637)
--- ----
Effect of exchange rate
changes on cash and cash
equivalents (3,025) (2,662)
------ ------
Net increase (decrease) in
cash and cash equivalents (55,938) (47,982)
Cash and cash equivalents,
beginning of period 103,253 151,235
------- -------
Cash and cash equivalents,
end of period $47,315 $103,253
======= ========
RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
2015 2014
---- ----
YTD Q4 Q3 Q2 Q1 YTD Q4 Q3 Q2 Q1
--- --- --- --- --- --- --- --- --- ---
(in thousands)
Net Revenue by Line of Business
RealPlayer Group
(A) $29,141 $7,219 $6,565 $7,344 $8,013 $39,201 $8,865 $6,565 $8,556 $15,215
Mobile
Entertainment (B) 65,407 15,998 16,414 18,515 14,480 79,901 17,616 19,190 23,182 19,913
Games (C) 30,748 6,705 7,844 8,095 8,104 37,110 9,025 8,402 9,087 10,596
Total net revenue $125,296 $29,922 $30,823 $33,954 $30,597 $156,212 $35,506 $34,157 $40,825 $45,724
======== ======= ======= ======= ======= ======== ======= ======= ======= =======
Net Revenue by Product
RealPlayer Group
----------------
- License (D) $16,475 $3,967 $3,628 $4,208 $4,672 $16,042 $4,496 $3,255 $3,273 $5,018
- Subscriptions (E) 9,485 2,425 2,217 2,435 2,408 10,717 2,691 2,680 2,569 2,777
-Media Properties
(F) 3,181 827 720 701 933 12,442 1,678 630 2,714 7,420
Mobile Entertainment
--------------------
- SaaS (G) 63,386 15,786 16,147 18,155 13,298 73,284 16,727 17,919 20,175 18,463
-Technology
License & Other
(H) 2,021 212 267 360 1,182 6,617 889 1,271 3,007 1,450
Games
-----
- License (I) 15,174 3,268 4,128 3,943 3,835 14,090 3,854 2,988 3,399 3,849
- Subscriptions (J) 13,300 3,126 3,231 3,373 3,570 17,948 3,947 4,320 4,440 5,241
-Media Properties
(K) 2,274 311 485 779 699 5,072 1,224 1,094 1,248 1,506
----- --- --- --- --- ----- ----- ----- ----- -----
Total net revenue $125,296 $29,922 $30,823 $33,954 $30,597 $156,212 $35,506 $34,157 $40,825 $45,724
======== ======= ======= ======= ======= ======== ======= ======= ======= =======
Net Revenue by Geography
United States $46,893 $10,781 $11,460 $12,303 $12,349 $61,660 $13,860 $12,280 $15,092 $20,428
Rest of world 78,403 19,141 19,363 21,651 18,248 94,552 21,646 21,877 25,733 25,296
Total net revenue $125,296 $29,922 $30,823 $33,954 $30,597 $156,212 $35,506 $34,157 $40,825 $45,724
======== ======= ======= ======= ======= ======== ======= ======= ======= =======
Net Revenue by Line of Business
(A) The RealPlayer
Group primarily
includes revenue
from RealPlayer
and related
products, such
as the
distribution of
third-party
software
products,
advertising on
RealPlayer
websites, and
sales of
RealPlayer Plus
software
licenses to
consumers, sales
of intellectual
property
licenses, and
consumer
subscriptions
such as
RealPlayer
Cloud,
RealTimesTM, and
SuperPass.
(B) The Mobile
Entertainment
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 the
RealPlayer Group
includes sales
of intellectual
property
licenses and
RealPlayer Plus
software
licenses to
consumers.
(E) Subscriptions
revenue within
the RealPlayer
Group includes
revenue from
subscriptions
such as our
RealPlayer
Cloud, RealTimes
and SuperPass
offerings.
(F) Media Properties
revenue within
the RealPlayer
Group includes
distribution of
third-party
software
products and
advertising on
RealPlayer
websites.
(G) SaaS revenue
within Mobile
Entertainment
includes revenue
from music on
demand, ringback
tones,
intercarrier
messaging
services
provided to
network services
providers who
are largely
mobile phone
networks.
(H) Technology
licensing and
other revenue
within Mobile
Entertainment
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
distribution of
third-party
software
products and
advertising on
games sites and
social network
sites.
RealNetworks, Inc. and Subsidiaries
Segment Results of Operations
(Unaudited)
2015 2014 2015 2014
---- ---- ---- ----
Q4 Q3 Q4 YTD YTD
--- --- --- --- ---
(in thousands)
RealPlayer Group
----------------
Net revenue $7,219 $6,565 $8,865 $29,141 $39,201
Cost of revenue 3,840 3,902 3,804 16,171 14,508
Gross profit 3,379 2,663 5,061 12,970 24,693
Gross margin 47% 41% 57% 45% 63%
Operating expenses 10,281 11,492 13,074 47,149 55,742
------
Operating income (loss) $(6,902) $(8,829) $(8,013) $(34,179) $(31,049)
Adjusted EBITDA $(5,780) $(8,224) $(7,320) $(31,290) $(28,474)
Mobile Entertainment
--------------------
Net revenue $15,998 $16,414 $17,616 $65,407 $79,901
Cost of revenue 10,109 11,518 11,525 44,212 50,399
Gross profit 5,889 4,896 6,091 21,195 29,502
Gross margin 37% 30% 35% 32% 37%
Operating expenses 4,103 5,219 7,199 20,256 33,325
------
Operating income (loss) $1,786 $(323) $(1,108) $939 $(3,823)
Adjusted EBITDA $2,565 $473 $24 $4,276 $940
Games
-----
Net revenue $6,705 $7,844 $9,025 $30,748 $37,110
Cost of revenue 1,698 2,513 2,655 9,291 11,074
Gross profit 5,007 5,331 6,370 21,457 26,036
Gross margin 75% 68% 71% 70% 70%
Operating expenses 5,253 6,431 9,977 29,086 37,170
------
Operating income (loss) $(246) $(1,100) $(3,607) $(7,629) $(11,134)
Adjusted EBITDA $(25) $(716) $(3,024) $(5,878) $(8,742)
Corporate
---------
Net revenue $ - $ - $ - $ - $ -
Cost of revenue 181 157 (103) 623 400
Extinguishment of
liability - - - - (10,580)
--- --- --- -------
Gross profit (181) (157) 103 (623) 10,180
Gross margin N/A N/A N/A N/A N/A
Operating expenses 1,963 11,553 8,057 27,695 33,327
Operating income (loss) $(2,144) $(11,710) $(7,954) $(28,318) $(23,147)
Adjusted EBITDA $(984) $(3,727) $(4,879) $(12,901) $(20,279)
Total
-----
Net revenue $29,922 $30,823 $35,506 $125,296 $156,212
Cost of revenue 15,828 18,090 17,881 70,297 76,381
Extinguishment of
liability - - - - (10,580)
Gross profit 14,094 12,733 17,625 54,999 90,411
Gross margin 47% 41% 50% 44% 58%
Operating expenses 21,600 34,695 38,307 124,186 159,564
------
Operating income (loss) $(7,506) $(21,962) $(20,682) $(69,187) $(69,153)
Adjusted EBITDA $(4,224) $(12,194) $(15,199) $(45,793) $(56,555)
RealNetworks, Inc. and Subsidiaries
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment
(Unaudited)
2015 2014 2015 2014
---- ---- ---- ----
Q4 Q3 Q4 YTD YTD
--- --- --- --- ---
(in thousands)
RealPlayer Group
----------------
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
Operating income (loss) $(6,902) $(8,829) $(8,013) $(34,179) $(31,049)
Acquisitions related
intangible asset
amortization 84 86 96 343 384
Depreciation and
amortization 1,038 519 597 2,546 2,191
Adjusted EBITDA $(5,780) $(8,224) $(7,320) $(31,290) $(28,474)
Mobile Entertainment
--------------------
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
Operating income (loss) $1,786 $(323) $(1,108) $939 $(3,823)
Acquisitions related
intangible asset
amortization 295 303 271 1,201 1,793
Depreciation and
amortization 484 493 861 2,136 2,970
Adjusted EBITDA $2,565 $473 $24 $4,276 $940
Games
-----
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
Operating income (loss) $(246) $(1,100) $(3,607) $(7,629) $(11,134)
Acquisitions related
intangible asset
amortization 24 170 314 799 1,256
Depreciation and
amortization 197 214 269 952 1,136
--- --- --- --- -----
Adjusted EBITDA $(25) $(716) $(3,024) $(5,878) $(8,742)
Corporate
---------
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
Operating income (loss) $(2,144) $(11,710) $(7,954) $(28,318) $(23,147)
Other income (expense),
net (122) 297 (10) 506 143
Depreciation and
amortization 336 1,273 675 2,433 2,229
Lease exit and related
charges 293 2,121 177 2,501 880
Restructuring and other
charges (284) 3,114 1,187 5,279 4,992
Stock-based compensation 937 1,178 1,046 4,698 5,204
Extinguishment of
liability - - - - (10,580)
Adjusted EBITDA $(984) $(3,727) $(4,879) $(12,901) $(20,279)
Total
-----
Reconciliation of GAAP operating income (loss) to adjusted EBITDA:
Operating income (loss) $(7,506) $(21,962) $(20,682) $(69,187) $(69,153)
Other income (expense),
net (122) 297 (10) 506 143
Acquisitions related
intangible asset
amortization 403 559 681 2,343 3,433
Depreciation and
amortization 2,055 2,499 2,402 8,067 8,526
Lease exit and related
charges 293 2,121 177 2,501 880
Restructuring and other
charges (284) 3,114 1,187 5,279 4,992
Stock-based compensation 937 1,178 1,046 4,698 5,204
Extinguishment of
liability - - - - (10,580)
Adjusted EBITDA $(4,224) $(12,194) $(15,199) $(45,793) $(56,555)
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SOURCE RealNetworks, Inc.
