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RealNetworks Announces First Quarter 2009 Results John Chapple Named to Board of Directors
John Chapple Named to Board of DirectorsListen to and watch the slide presentation Listen to the earnings call (audio only) RealNetworks, Inc. and Subsidiaries Condensed Consolidated Statement of Operations (PDF) SEATTLE - May 7, 2009 - Digital entertainment services company RealNetworks®, Inc. (Nasdaq: RNWK) today announced results for the the first quarter ended March 31, 2009. Quarterly Highlights
"In the midst of the deepest recession in decades, at RealNetworks we demonstrated our resiliency and delivered steady overall results," said Rob Glaser, RealNetworks' Chairman and CEO. First Quarter Results Net loss for the first quarter of 2009 was $(12.1) million, or $(0.10) per share, compared with net income of $2.4 million, or $0.02 per diluted share, in the first quarter of 2008. Adjusted EBITDA for the first quarter of 2009 was $4.8 million compared with $19.9 million in the first quarter of 2008. A reconciliation of GAAP net income to adjusted EBITDA is provided in the financial tables that accompany this release. Gross margin was 60% in the first quarter of 2009 compared with 62% in the first quarter of 2008. Operating expenses for the first quarter of 2009 were $103.3 million, compared with $103.7 million in the first quarter of 2008. Operating expenses included $7.4 million and $7.3 million of related party advertising in Rhapsody America in the first quarter of 2009 and 2008, respectively. Income tax provision was $1.5 million compared with $4.0 million in the year-earlier period. Interest income in the first quarter of 2009 was $1.2 million compared with $5.0 million in the year-earlier period. As of March 31, 2009, Real had approximately $376.5 million in unrestricted cash, cash equivalents and short-term investments, of which nearly 90% is located in the U.S. In addition, Real has approximately $33.5 million in restricted cash and equity investments at March 31, 2009. Business Outlook For the second quarter of 2009, Real expects overall revenue to decline year-over-year and to be flat to slightly down sequentially. Compared with the year-ago second quarter, the company expects second-quarter Music revenue to increase, and revenue in Games, Media Software and Services and Technology Products and Solutions to decline. Approximately 20% of Real's revenue is denominated in currencies other than the U.S. dollar, most notably the euro and Korean won. Based on current currency trends, Real expects revenues to be negatively affected by foreign currency rates in the second quarter. John Chapple Joins RealNetworks Board of Directors Mr. Chapple fills the vacancy on Real's board resulting from the resignation of Jeremy Jaech, which is also being announced today. Previously, Real had announced that Mr. Jaech would not be running for a new term on Real's board this year. Real anticipates nominating Mr. Chapple to serve a full term at Real's 2009 annual shareholders meeting later this year. "We are delighted to have John Chapple join our board," said Mr. Glaser. "John's intellect, experience, and track record of creating substantial value will serve us well in the months and years ahead. I also want to thank Jeremy Jaech for his seven years of outstanding service on our board, and wish him well as CEO of Verdiem." "It is both an honor and tremendously exciting to join the RealNetworks board," said Mr. Chapple. "Real is a fascinating company with a world-class management team and board of directors. I am looking forward to participating in the next stage of the company's growth." Mr. Chapple has served as president of Hawkeye Investments LLC, a privately owned equity firm investing primarily in telecommunications and real estate ventures, since October 2006. Prior to forming Hawkeye, Mr. Chapple served as president, chief executive officer and chairman of the board of Nextel Partners from January 1998 to June 2006, when the company was purchased by Sprint Communications for $6.5 billion. From 1995 to 1997, Mr. Chapple was the president and chief operating officer of Orca Bay Sports and Entertainment in Vancouver, B.C., a professional sports and entertainment company, which at the time owned and operated Vancouver's National Basketball Association and National Hockey League sports franchises. From 1988 to 1995, he served as executive vice president of operations for McCaw Cellular Communications and subsequently AT&T Wireless Services following the merger of those companies. Webcast Details Listeners must use RealPlayer® to listen to the conference call, which can be downloaded for free at www.real.com. The on-demand Webcast will be available approximately two hours following the conclusion of the live Webcast. Conference Call Details Telephonic replay will be available until 8:00 pm (Eastern), May 21, 2009. RNWK-F For More Information: Press: Financial: ABOUT REALNETWORKS About Non-GAAP Financial Measures In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) to adjusted EBITDA, to adjusted EBITDA excluding impairments, and to adjusted EBITDA by reporting segment; GAAP cost of revenue to adjusted cost of revenue; and GAAP operating expenses to adjusted operating expenses for the relevant periods. The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the first quarter earnings materials, available in 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 Real's current expectations for future revenue, future affects of foreign currency exchange rates, and future trends in consumer and corporate infrastructure spending and online advertising. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. Actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: fluctuations in foreign currencies, particularly changes in the US dollar relative to the euro and the Korean won; development and consumer acceptance of legal online music distribution services generally and RealNetworks' content services in particular because these are relatively new and unproven business models and markets; the potential that Real will be unable to continue to enter into commercially attractive agreements with third parties for the provision of compelling content for its subscription service offerings and the distribution of Real's carrier application services; the emergence of new entrants and competition in the market for digital media subscription offerings and online music sales; competitive risks, including competing technologies, products and services, and the competitive activities of our larger competitors, some of which have strong ties to streaming media users through other products; the potential outcomes and effects of claims and legal proceedings on our business, prospects, financial condition or results of operations; risks associated with the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; risks inherent in strategic relationships, especially with competitors, and technology and service integration efforts; and risks relating to the ability of Real's strategic partners to generate subscribers for Real's digital content services. 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 the reported amounts of 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, Rhapsody, RealPlayer and RealArcade 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. |