Press Releases

RealNetworks Announces Third Quarter 2012 Results

SEATTLE, Oct. 30, 2012 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the third quarter ended Sept. 30, 2012.

Quarterly Summary:

  • Revenue of $59.1 million
  • Net loss of $(22.2) million or $(0.63) per share  
  • Adjusted EBITDA of $(6.0) million  
  • Cash and short term investments of $273.7 million as of Sept. 30, 2012

"We are working hard to put RealNetworks on a path to growth and profitability," said Rob Glaser, Chairman and interim CEO of RealNetworks. "We have made progress and have a strategy that we are in the process of implementing."

Third Quarter Results

For the third quarter of 2012, revenue was $59.1 million, a sequential decrease of 10% from the second quarter of 2012, and a decrease of 30% compared with the third quarter of 2011. Revenue trends in each of RealNetworks' businesses in the third quarter of 2012 compared with the year-earlier quarter were: a 6% decrease in Emerging Products revenue to $10.1 million, a 33% decrease in Core Products revenue to $34.1 million, and a 35% decrease in Games revenue to $14.9 million.  

Net loss for the third quarter of 2012 was $(22.2) million, or $(0.63) per share, compared with a net loss of $(5.2) million, or $(0.15) per share, in the third quarter of 2011. Net loss for the most-recent quarter included restructuring charges of $11.0 million primarily for employee severance costs, costs associated with the transfer of some SaaS contracts to Livewire Mobile, Inc., and a loss on excess office facilities; and $2.2 million in gains on the sale of a portion of the company's investment in LoEn Entertainment, Inc.  RealNetworks' share of Rhapsody losses increased to $(1.6) million in the third quarter of 2012 from $(1.4) million in the third quarter of 2011.  

Adjusted EBITDA loss for the third quarter was $(6.0) million, compared with adjusted EBITDA of $4.1 million for the third quarter of 2011.  A reconciliation of GAAP operating income and loss to adjusted EBITDA is provided in the financial tables that accompany this release.

As of Sept. 30, 2012, RealNetworks had $273.7 million in unrestricted cash, cash equivalents and short-term investments, of which approximately $40.8 million is held in foreign jurisdictions, compared with cash of $185.1 million at Dec. 31, 2011.  The increase in the cash balance reflects the proceeds from the sale of patent assets to Intel in the second quarter of 2012 and other asset sales in the second and third quarters of 2012, partially offset by cash used in operations and restructuring expenses over the first three quarters of the year. In addition, RealNetworks had $46.9 million in restricted cash and available-for-sale securities as of Sept. 30, 2012.

 

Segment Operating Results

 




2012


2012


2011





Q3


Q2


 Q3 





 (in thousands) 


Revenue 








Core Products

$  34,078


$   38,250


$ 50,705



Emerging Products

10,134


9,913


10,764



Games

14,876


17,363


22,945



Corporate

-


-


-




Total   

$  59,088


$   65,526


$ 84,414











Operating Income (loss)








Core Products

$    1,180


$     4,140


$   8,815



Emerging Products

(152)


1,021


(2,033)



Games

(1,708)


(1,302)


1,589



Corporate

(22,495)


100,309


(11,854)




Total   

$(23,175)


$ 104,168


$ (3,483)











Adjusted EBITDA








Core Products

$    3,736


$     6,628


$ 11,617



Emerging Products

158


1,266


(1,711)



Games

(894)


(619)


2,275



Corporate

(9,042)


(13,784)


(8,094)




Total   

$   (6,042)


$    (6,509)


$   4,087


 

Business Outlook

For the fourth quarter of 2012, RealNetworks expects revenue of $60.0 million to $63.0 million. The company expects revenue from Core Products to increase, revenue from Emerging Products to be flat and revenue from Games to decline sequentially. Year-over-year, revenue is expected to decline in all segments. RealNetworks expects to report a fourth-quarter adjusted EBITDA loss of $(4.0) million to $(7.0) million.   

The foregoing forward-looking statements reflect RealNetworks' expectations as of October 30, 2012.  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 third quarter at 5:00 p.m. ET on October 30.  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 p.m. ET / 2 p.m. PT
Dial in:
888-790-3162 Domestic
415-228-4854 International
Passcode: Third Quarter Earnings
Leader: Rob Glaser

Telephonic replay will be available until 8 p.m. ET, Nov. 13, 2012.
Replay dial in:
866-425-0182 Domestic
203-369-0874 International

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 http://www.realnetworks.com.

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' current expectations for total and segment revenue; adjusted EBITDA; the development of its business plans; and the implementation of a strategy for growth and profitability.  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 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 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.

 

 RealNetworks, Inc. and Subsidiaries 

 Condensed Consolidated Statements of Operations 

 (Unaudited) 













 Quarters Ended
September 30, 


 Nine Months Ended
September 30, 








2012


2011


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