SEATTLE, Aug. 3, 2016 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the second quarter ended June 30, 2016.
For the second quarter of 2016, revenue was $29.7 million, compared to $28.2 million in the previous quarter and $31.8 million in the second quarter of 2015, excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015.
GAAP net loss for the second quarter of 2016 was $(8.3) million or $(0.23) per share, improved by 70% compared to $(27.8) million or $(0.77) per share in the second quarter of 2015. Adjusted EBITDA for the second quarter of 2016 was a loss of $(4.8) million, which improved by 61% compared to $(12.5) million for the second quarter of 2015, excluding the results of the Slingo and social casino games business, which was sold in August 2015. A reconciliation of GAAP net income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.
"In the second quarter of 2016, we continued to make progress in stabilizing revenue, reducing costs and positioning the company for growth and a return to profitability by the end of 2016," said Rob Glaser, Chairman and CEO of RealNetworks. "We are also excited that Telefonica Vivo, Brazil's largest carrier, has chosen to launch products based on both our Ringback Tone and RealTimes platforms. These two new design wins complement other recent progress we've made in our Mobile Services business with carriers such as Vodafone, KDDI, and Verizon."
The Company's GameHouse unit launched two new, first-party titles in the second quarter: Heart's Medicine - Time to Heal, and Fabulous - Angela's Fashion Fever. Both titles are off to strong starts, demonstrating that Real has been able to maintain high games quality while ramping up title production.
In addition to its progress with new product roll-outs, Real also made significant strides in lowering its operating costs. The Company's operating expenses in the second quarter of 2016 were down 25% from the same period in 2015, excluding stock compensation, restructuring charges, and expenses from the Slingo and social casino games business.
As of June 30, 2016, the Company had $78.8 million in unrestricted cash, cash equivalents and short-term investments, compared to $86.8 million as of March 31, 2016.
Business Outlook
For the third quarter of 2016, RealNetworks expects total revenue in the range of $28 million to $30 million and an adjusted EBITDA loss for the third quarter in the range of $(5.0) million to $(7.0) 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: Second 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, August 24, 2016 by calling 866-441-1045 or +1-203-369-1053 (Passcode: 832016).
For More Information
Investor Relations for RealNetworks
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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 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) Quarters Ended Six Months Ended June 30, June 30, -------- -------- 2016 2015 2016 2015 ---- ---- ---- ---- (in thousands, except per share data) Net revenue $29,734 $33,954 $57,964 $64,551 Cost of revenue 15,698 19,832 30,870 36,379 Gross profit 14,036 14,122 27,094 28,172 ------ ------ ------ ------ Operating expenses: Research and development 7,167 11,801 16,486 24,180 Sales and marketing 7,749 14,047 16,974 26,884 General and administrative 6,217 7,008 14,294 14,291 Restructuring and other charges 413 1,964 798 2,449 Lease exit and related charges 127 9 958 87 --- --- --- --- Total operating expenses 21,673 34,829 49,510 67,891 ------ ------ ------ ------ Operating income (loss) (7,637) (20,707) (22,416) (39,719) ------ ------- ------- ------- Other income (expenses): Interest income, net 80 250 197 450 Gain (loss) on investments, net (46) 94 (43) 393 Equity in net loss of Rhapsody (396) (6,916) (396) (13,096) Other income (expense), net 15 (112) (272) 331 --- ---- ---- --- Total other income (expense), net (347) (6,684) (514) (11,922) ---- ------ ---- ------- Income (loss) before income taxes (7,984) (27,391) (22,930) (51,641) Income tax expense (benefit) 363 390 588 609 --- --- --- --- Net income (loss) $(8,347) $(27,781) $(23,518) $(52,250) ======= ======== ======== ======== Basic net income (loss) per share $(0.23) $(0.77) $(0.64) $(1.45) Diluted net income (loss) per share $(0.23) $(0.77) $(0.64) $(1.45) Shares used to compute basic net income (loss) per share 36,755 36,106 36,637 36,105 Shares used to compute diluted net income (loss) per share 36,755 36,106 36,637 36,105
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, 2016 2015 ---- ---- (in thousands) ASSETS Current assets: Cash and cash equivalents $36,133 $47,315 Short-term investments 42,656 51,814 Trade accounts receivable, net 24,617 22,511 Deferred costs, current portion 889 460 Prepaid expenses and other current assets 4,716 7,140 ----- ----- Total current assets 109,011 129,240 ------- ------- Equipment and software 60,383 66,702 Leasehold improvements 3,607 3,122 ----- ----- Total equipment, software, and leasehold improvements 63,990 69,824 Less accumulated depreciation and amortization 56,887 61,024 ------ ------ Net equipment, software, and leasehold improvements 7,103 8,800 Restricted cash equivalents and investments 3,000 2,890 Available for sale securities 1,920 1,721 Other assets 2,243 2,307 Deferred costs, non- current portion 1,136 212 Deferred tax assets, net 1,006 957 Other intangible assets, net 1,545 2,136 Goodwill 12,973 13,080 ------ ------ Total assets $139,937 $161,343 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $17,442 $17,050 Accrued and other current liabilities 15,566 17,320 Deferred revenue, current portion 3,278 3,497 ----- ----- Total current liabilities 36,286 37,867 Deferred revenue, non- current portion 466 105 Deferred rent 665 620 Deferred tax liabilities, net 89 88 Other long- term liabilities 1,511 1,980 ----- ----- Total liabilities 39,017 40,660 ------ ------ Shareholders' equity 100,920 120,683 ------- ------- Total liabilities and shareholders' equity $139,937 $161,343 ======== ========
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, -------- 2016 2015 ---- ---- (in thousands) Cash flows from operating activities: Net income (loss) $(23,518) $(52,250) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 4,224 4,894 Stock- based compensation 3,779 2,583 Equity in net loss of Rhapsody 396 13,096 Deferred income taxes, net (148) (23) Loss (gain) on investments, net 43 (393) Fair value to of market warrants adjustments granted in in 2016 2015, and net 2015 of subsequent mark 82 (1,128) Interest receivable on advance to Rhapsody - (121) Net change in certain operating assets and liabilities (3,209) (10,230) ------ Net cash provided by (used in) operating activities (18,351) (43,572) ------- ------- Cash flows from investing activities: Purchases of equipment, software, and leasehold improvements (1,512) (859) Proceeds from sale of available for sale securities - 459 Purchases of short- term investments (33,359) (8,514) Proceeds from sales and maturities of short- term investments 42,517 48,630 Decrease (increase) in restricted cash equivalents and investments, net (110) - Acquisitions (150) (161) Advance to Rhapsody - (5,000) Net cash provided by (used in) investing activities 7,386 34,555 ----- ------ Cash flows from financing activities: Proceeds from plan) issuance of common stock (stock options and stock purchase 166 276 Tax payments from shares withheld upon vesting of restricted stock (808) (10) Net cash provided by (used in) financing activities (642) 266 ---- --- Effect of exchange rate changes on cash and cash equivalents 425 (1,839) --- ------ Net increase (decrease) in cash and cash equivalents (11,182) (10,590) Cash and cash equivalents, beginning of period 47,315 103,253 ------ ------- Cash and cash equivalents, end of period $36,133 $92,663 ======= =======
RealNetworks, Inc. and Subsidiaries Supplemental Financial Information (Unaudited) 2016 2015 ---- ---- Q2 Q1 Q4 Q3 Q2 Q1 --- --- --- --- --- --- (in thousands) Net Revenue by Line of Business Consumer Media (A) $6,400 $5,726 $6,848 $6,495 $7,281 $7,989 Mobile Services (B) 17,297 16,465 16,369 16,484 18,578 14,504 Games (C) 6,037 6,039 6,705 7,844 8,095 8,104 Total net revenue $29,734 $28,230 $29,922 $30,823 $33,954 $30,597 ======= ======= ======= ======= ======= ======= Net Revenue by Product Consumer Media -------------- - License (D) $3,914 $3,104 $3,967 $3,628 $4,208 $4,672 -Subscriptions (E) 1,871 1,975 2,054 2,147 2,372 2,384 - Media Properties (F) 615 647 827 720 701 933 Mobile Services --------------- - SaaS (G) 17,208 16,220 16,157 16,217 18,218 13,322 - Technology License & Other (H) 89 245 212 267 360 1,182 Games ----- - License (I) 2,793 2,761 3,268 4,128 3,943 3,835 - Subscriptions (J) 3,024 3,029 3,126 3,231 3,373 3,570 - Media Properties (K) 220 249 311 485 779 699 --- --- --- --- --- --- Total net revenue $29,734 $28,230 $29,922 $30,823 $33,954 $30,597 ======= ======= ======= ======= ======= ======= Net Revenue by Geography United States $10,355 $10,383 $10,781 $11,460 $12,303 $12,349 Rest of world 19,379 17,847 19,141 19,363 21,651 18,248 ------ ------ ------ ------ ------ ------ Total net revenue $29,734 $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 and Reconciliation to non-GAAP Contribution Margin (Unaudited) 2016 2015 2016 2015 ---- ---- ---- ---- Q2 Q1 Q2 YTD YTD --- --- --- --- --- (in thousands) Consumer Media -------------- Net revenue $6,400 $5,726 $7,281 $12,126 $15,270 Cost of revenue 1,561 2,417 3,567 3,978 7,031 Gross profit 4,839 3,309 3,714 8,148 8,239 Gross margin 76% 58% 51% 67% 54% Operating expenses 4,293 5,376 6,867 9,669 13,461 ------ Operating income (loss), a GAAP measure $546 $(2,067) $(3,153) $(1,521) $(5,222) Depreciation and amortization 375 1,303 478 1,678 989 --- ----- --- ----- --- Contribution margin, a non-GAAP measure $921 $(764) $(2,675) $157 $(4,233) ---- ----- ------- ---- ------- Mobile Services --------------- Net revenue $17,297 $16,465 $18,578 $33,762 $33,082 Cost of revenue 12,404 10,917 13,982 23,321 24,290 Gross profit 4,893 5,548 4,596 10,441 8,792 Gross margin 28% 34% 25% 31% 27% Operating expenses 8,784 9,794 12,099 18,578 24,060 ------ Operating income (loss), a GAAP measure $(3,891) $(4,246) $(7,503) $(8,137) $(15,268) Acquisitions related intangible asset amortization 209 308 384 517 776 Depreciation and amortization 608 422 579 1,030 1,159 --- --- --- ----- ----- Contribution margin, a non-GAAP measure $(3,074) $(3,516) $(6,540) $(6,590) $(13,333) ------- ------- ------- ------- -------- Games ----- Net revenue $6,037 $6,039 $8,095 $12,076 $16,199 Cost of revenue 1,817 1,845 2,286 3,662 5,080 Gross profit 4,220 4,194 5,809 8,414 11,119 Gross margin 70% 69% 72% 70% 69% Operating expenses 4,725 5,295 8,719 10,020 17,402 ------ Operating income (loss), a GAAP measure $(505) $(1,101) $(2,910) $(1,606) $(6,283) Acquisitions related intangible asset amortization 34 25 312 59 605 Depreciation and amortization 154 179 244 333 541 --- --- --- --- --- Contribution margin, a non-GAAP measure $(317) $(897) $(2,354) $(1,214) $(5,137) ----- ----- ------- ------- ------- Corporate --------- Cost of revenue $(84) $(7) $(3) $(91) $(22) Gross profit 84 7 3 91 22 Gross margin N/A N/A N/A N/A N/A Operating expenses 3,871 7,372 7,144 11,243 12,968 Operating income (loss), a GAAP measure $(3,787) $(7,365) $(7,141) $(11,152) $(12,946) Other income (expense), net 15 (287) (112) (272) 331 Depreciation and amortization 246 361 394 607 824 Restructuring and other charges 413 385 1,964 798 2,449 Stock-based compensation 608 3,171 1,254 3,779 2,583 Lease exit and related charges 127 831 9 958 87 Contribution margin, a non-GAAP measure $(2,378) $(2,904) $(3,632) $(5,282) $(6,672) ------- ------- ------- ------- -------
RealNetworks, Inc. and Subsidiaries Reconciliation of Net income (loss) to adjusted EBITDA, a non-GAAP measure (Unaudited) 2016 2015 2016 2015 ---- ---- ---- ---- Q2 Q1 Q2 YTD YTD --- --- --- --- --- (in thousands) Net income (loss) $(8,347) $(15,171) $(27,781) $(23,518) $(52,250) Income tax expense (benefit) 363 225 390 588 609 Interest income, net (80) (117) (250) (197) (450) Gain (loss) on investments, net 46 (3) (94) 43 (393) Equity in net loss of Rhapsody 396 - 6,916 396 13,096 Acquisitions related intangible asset amortization 243 333 696 576 1,381 Depreciation and amortization 1,383 2,265 1,695 3,648 3,513 Restructuring and other charges 413 385 1,964 798 2,449 Stock-based compensation 608 3,171 1,254 3,779 2,583 Lease exit and related charges 127 831 9 958 87 Adjusted EBITDA, a non-GAAP measure $(4,848) $(8,081) $(15,201) $(12,929) $(29,375) ------- ------- -------- -------- --------
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SOURCE RealNetworks, Inc.