RealNetworks Announces Third Quarter 2011 Results
SEATTLE – November 3, 2011 – RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the second quarter ended September 30, 2011.
- Revenue of $84.4 million
- Net loss of $(5.2) million or $(0.15) per share
- Adjusted EBITDA of $4.1 million
- Cash and short term investments of $183.1 million as of September 30, 2011
- Dividend of $1.00 per share and 1-for-4 reverse stock split in third quarter
"During the quarter, we made progress on our key initiatives, including developing new products and renewing contracts for our SaaS business with mobile carriers, building our social games business and getting ready to launch a new version of RealPlayer in mid-November," said Mike Lunsford, interim CEO of RealNetworks.
"As we announced earlier this week, Thomas Nielsen will be joining us as CEO next week. I look forward to assisting him in the coming months as he implements the new strategy and vision for the company," Lunsford continued.
Third Quarter Results
For the third quarter of 2011, revenue was $84.4 million, a decrease of 2% compared with the third quarter of 2010 and a sequential increase of less than 1% from the second quarter. Foreign currency exchange rate fluctuations positively affected third quarter revenue by about $4.4 million compared with the year-earlier quarter. Revenue trends in each of RealNetworks' businesses in the third quarter of 2011 compared with the year-earlier quarter were: a 23% increase in Emerging Products revenue to $10.8 million, a 2% decrease in Core Products revenue to $50.7 million, and an 11% decrease in Games revenue to $22.9 million.
Net loss for the third quarter of 2011 was $(5.2) million, or $(0.15) per share, compared with net income of $24.5 million, or $0.72 per share, in the third quarter of 2010. Third quarter 2011 results included a $4.2 million benefit from a change in estimates in accrued royalties. Net income for the third quarter of 2010 included an income tax benefit of $33.9 million resulting primarily from a $30 million cash refund from the IRS. Adjusted EBITDA for the third quarter of 2011 was $4.1 million, compared with $5.7 million for the third quarter of 2010. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.
As of Sept 30, 2011, RealNetworks had $183.1 million in unrestricted cash, cash equivalents and short-term investments compared with $327.9 million at June 30, 2011. RealNetworks paid a special dividend of $1.00 per share, or a total of approximately $137 million, to shareholders in August of 2011. In addition, RealNetworks had $48.8 million in restricted cash and available-for-sale securities, not including its equity interest in the Rhapsody joint venture, at Sept. 30, 2011.
Segment Operating Results
For the fourth quarter of 2011, RealNetworks expects total revenue to decline sequentially and year-over-year. RealNetworks expects revenue in Emerging Products to increase sequentially and be flat year-over-year; revenue in Core Products will decline sequentially and year-over-year; revenue in Games will be flat sequentially and decline year-over-year. RealNetworks expects adjusted EBITDA for the fourth quarter to be positive but decline sequentially, which indicates a significant decline compared with year-ago fourth-quarter adjusted EBITDA.
For the full year, excluding Music, RealNetworks expects an approximate 9% decline in 2011 revenue compared with 2010, approximately one-third of which is due to the elimination or de-emphasis of products and services that generate low-profit or unprofitable revenue. RealNetworks expects 2011 adjusted EBITDA and adjusted EBITDA margin to decline compared with 2010, in spite of cost savings from restructuring efforts, due largely to the projected revenue decline.
The foregoing forward-looking statements reflect RealNetworks' expectations as of Nov. 3, 2011. It is not RealNetworks' general practice to update these forward-looking statements until its next quarterly results announcement.
Webcast and Conference Call Information
The company will host an audio Webcast conference call to review results and discuss the company's operations for the second quarter at 5:00 p.m. ET on Nov. 3. The Webcast will be available at: http://investor.realnetworks.com
Webcast participants will need RealPlayer® to hear the webcast, which can be downloaded at www.real.com.
The on-demand Webcast will be available beginning approximately two hours following the conclusion of the live Webcast.
Conference Call Details
5:00 p.m. ET / 2:00 p.m. PT
Telephonic replay will be available until 8 p.m. ET, November 17, 2011.
Replay dial in:
For More Information
Krause Taylor Associates
RealNetworks creates innovative applications and services that make it easy for people to connect with and enjoy digital media. RealNetworks invented the streaming media category 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. Find RealNetworks corporate information at http://www.realnetworks.com/about-us
About Non-GAAP Financial Measures
To supplement RealNetworks' condensed consolidated financial statements 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 reporting 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 reporting segment.
The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the third quarter 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' expectations for future revenue, adjusted EBITDA and adjusted EBITDA margin. 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: RealNetworks' ability to realize operating efficiencies, growth and other benefits from the implementation of its strategic initiatives; the emergence of new entrants and competition in the market for digital media products and services; other competitive risks, including the introduction and 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; fluctuations in foreign currencies; 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; 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 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, RealPlayer and GameHouse 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.
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