Press Releases

RealNetworks Announces Fourth Quarter And Full Year 2014 Results

- Continued strong growth in RealPlayer Cloud user base, with over 10 million accounts;
- Rhapsody year over year subscriber growth above 60%;
- Continued progress in long-term strategic transition and growth strategy; and
- Cash and short-term investments of $161.7 million

SEATTLE, Feb. 4, 2015 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the fourth quarter and full year ended December 31, 2014.

For the fourth quarter of 2014, revenue was $35.5 million, compared to $34.2 million in the previous quarter and $50.6 million in the fourth quarter of 2013. For the full year 2014, revenue was $156.2 million, compared to $206.2 million in 2013.

"During 2014, we continued to make progress in our strategic transition to new mobile-centric, cloud-based products and services," said Rob Glaser, Chairman and CEO of RealNetworks. "RealPlayer Cloud now has over 10 million users worldwide, up from 500,000 a year ago. We are continuing to build on our early momentum with RealPlayer Cloud by investing to broaden and deepen the product. We are also working to bring in additional marketing and distribution partners to drive even more consumer adoption.

"We're also encouraged by the worldwide launch of our new Slingo Adventure and Emily's New Beginning games, as well as the continued subscriber and revenue growth at the Rhapsody music service in which we play a significant role and have a large stake."

GAAP net loss for the fourth quarter of 2014 was $(20.8) million or $(0.58) per diluted share, compared to GAAP net income of $2.5 million or $0.07 per diluted share in the fourth quarter of 2013. GAAP results for the fourth quarter of 2013 income included a pre-tax net gain of $21.4 million from the sale of our investment in LoEn. For the full year 2014, GAAP net loss was $(71.8) million or $(2.00) per diluted share, compared to $(59.0) million or $(1.66) per diluted share in 2013.

Adjusted EBITDA for the fourth quarter of 2014 was a loss of $(15.2) million compared to $(6.6) million for the fourth quarter of 2013. For the full year 2014, adjusted EBITDA was a loss of $(56.6) million, compared to a loss of $(23.7) million for 2013. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of December 31, 2014, the company had $161.7 million in unrestricted cash, cash equivalents and short-term investments, compared to $178.0 million as of September 30, 2014.

Business Outlook

For the first quarter of 2015, RealNetworks expects total revenue in the range of $30.0 million to $33.0 million and adjusted EBITDA for the quarter to be a loss in the range of $(18.0) million to $(21.0) 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 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, February 26, 2015 by calling 866-426-7248 or +1-203-369-0887 (Passcode: 020415).

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, RealPlayer and Slingo 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 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, strategic focus and initiatives. 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: risks associated with the implementation of RealNetworks' growth plan, strategic initiatives, and restructuring efforts; its ability to successfully introduce and monetize new products and services; competitive risks, including the growth of competing technologies, products and services, and the emergence of new entrants and competition in the market; 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
D
ecember 31,


Years Ended
December 31,






2014


2013


2014


2013



(in thousands, except per share data)










Net revenue


$

35,506



$

50,595



$

156,212



$

206,196











Cost of revenue


17,881



20,076



76,381



79,091











Extinguishment of liability






(10,580)




Gross profit


17,625



30,519



90,411



127,105











Operating expenses:










Research and development


12,655



14,929



52,765



60,880


Sales and marketing


15,904



20,181



66,926



80,011


General and administrative


8,384



8,137



34,001



36,643


Restructuring and other charges


1,187



1,690



4,992



5,765


Lease exit and related charges


177



23



880



3,089


Loss on litigation settlements








11,525











Total operating expenses


38,307



44,960



159,564



197,913











Operating income (loss)


(20,682)



(14,441)



(69,153)



(70,808)











Other income (expenses):









Interest income, net


160



141



556



1,133


Gain (loss) on sale of available for sale securities, net




21,389



2,371



21,389


Equity in net loss of Rhapsody investment


(282)



(59)



(4,452)



(6,268)


Other income (expense), net


(10)



613



143



467











Total other income (expense), net


(132)



22,084



(1,382)



16,721











Income (loss) before income taxes


(20,814)



7,643



(70,535)



(54,087)


Income tax expense (benefit)


24



5,113



1,280



4,903











Net income (loss)


$

(20,838)



$

2,530



$

(71,815)



$

(58,990)











Basic net income (loss) per share


$

(0.58)



$

0.07



$

(2.00)



$

(1.66)


Diluted net income (loss) per share


$

(0.58)



$

0.07



$

(2.00)



$

(1.66)











Shares used to compute basic net income (loss) per share


36,052



35,738



35,947



35,553


Shares used to compute diluted net income (loss) per share


36,052



35,906



35,947



35,553




















 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)










December 31,
2014


December 31,
2013


(in thousands)

ASSETS

Current assets:




Cash and cash equivalents

$

103,253



$

151,235


Short-term investments

58,453



74,920


Trade accounts receivable, net

15,257



24,613


Deferred costs, current portion

702



1,601


Deferred tax assets, current

652



306


Prepaid expenses and other current assets

8,980



9,124


   Total current assets

187,297



261,799






Equipment, software, and leasehold improvements, at cost:




Equipment and software

74,100



86,721


Leasehold improvements

3,590



3,482


   Total equipment, software, and leasehold improvements

77,690



90,203


Less accumulated depreciation and amortization

61,442



67,031


   Net equipment, software, and leasehold improvements

16,248



23,172






Restricted cash equivalents and investments

3,000



3,000


Equity method investment

10,000



12,473


Available for sale securities

2,676



7,181


Other assets

2,299



2,332


Deferred costs, non-current portion

316



946


Deferred tax assets, net, non-current portion

999



1,409


Other intangible assets, net

10,109



12,993


Goodwill

17,355



17,476






   Total assets

$

250,299



$

342,781






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:




Accounts payable

$

18,653



$

19,987


Accrued and other current liabilities

25,286



41,893


Deferred tax liabilities, net, current portion

1,628



899


Deferred revenue, current portion

5,301



7,498


      Total current liabilities

50,868



70,277






Deferred revenue, non-current portion

235



166


Deferred rent

1,215



1,318


Deferred tax liabilities, net, non-current portion

702



1,556


Other long-term liabilities

81



483






   Total liabilities

53,101



73,800










Shareholders' equity

197,198



268,981






Total liabilities and shareholders' equity

$

250,299



$

342,781


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)










Years ended December 31,


2014


2013


(in thousands)


Cash flows from operating activities:




Net income (loss)

$

(71,815)



$

(58,990)


Adjustments to reconcile net income (loss) to net cash used in operating activities:

   Depreciation and amortization

11,959



18,748


   Stock-based compensation

5,204



7,468


   Extinguishment of liability

(10,580)




   Equity in net loss of Rhapsody

4,452



6,268


   Lease exit and related charges

668



1,421


   Deferred income taxes, net

(237)



676


   Gain on sale of available for sale securities

(2,371)



(21,389)


   Realized translation gain

(48)



(571)


  Other



51


   Net change in certain operating assets and liabilities

2,524



(3,561)


   Net cash provided by (used in) operating activities

(60,244)



(49,879)


Cash flows from investing activities:




   Purchases of equipment, software, and leasehold improvements

(2,460)



(7,727)


   Proceeds from sale of available for sale securities

2,754



29,153


   Purchases of short-term investments

(81,216)



(131,690)


   Proceeds from sales and maturities of short-term investments

97,683



164,986


   Decrease in restricted cash equivalents and investments



10,000


   Increase in restricted cash equivalents and investments



(3,000)


   Acquisitions of businesses, net of cash acquired

(733)



(22,480)


   Other

(467)




      Net cash provided by (used in) investing activities

15,561



39,242


Cash flows from financing activities:




   Proceeds from issuance of common stock (stock options and stock purchase plan)

812



594


   Tax payments from shares withheld upon vesting of restricted stock

(407)



(1,201)


   Payment of contingent consideration

(1,042)



(828)


      Net cash provided by (used in) financing activities

(637)



(1,435)


Effect of exchange rate changes on cash and cash equivalents

(2,662)



109


      Net increase (decrease) in cash and cash equivalents

(47,982)



(11,963)


Cash and cash equivalents, beginning of period

151,235



163,198


Cash and cash equivalents, end of period

$

103,253



$

151,235


 

RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)












































2014




2013


YTD


Q4


Q3


Q2


Q1


YTD


Q4


Q3


Q2


Q1


(in thousands)

Net Revenue by Line of Business




















RealPlayer Group (A)

$

39,201



$

8,865



$

6,565



$

8,556



$

15,215



$

75,206



$

16,799



$

17,641



$

18,383



$

22,383


Mobile Entertainment (B)

79,901



17,616



19,190



23,182



19,913



81,181



22,146



19,948



18,592



20,495


Games (C)

37,110



9,025



8,402



9,087



10,596



49,809



11,650



11,369



12,875



13,915


Total net revenue

$

156,212



$

35,506



$

34,157



$

40,825



$

45,724



$

206,196



$

50,595



$

48,958



$

49,850



$

56,793






















Net Revenue by Product




















RealPlayer Group




















- License (D)

$

16,042



$

4,496



$

3,255



$

3,273



$

5,018



$

29,507



$

7,128



$

7,281



$

6,766



$

8,332


- Subscriptions (E)

10,717



2,691



2,680



2,569



2,777



15,850



3,118



3,615



4,193



4,924


- Media Properties (F)

12,442



1,678



630



2,714



7,420



29,849



6,553



6,745



7,424



9,127






















Mobile Entertainment




















- SaaS (G)

73,284



16,727



17,919



20,175



18,463



74,238



20,406



18,156



17,002



18,674


- Technology License & Other (H)

6,617



889



1,271



3,007



1,450



6,943



1,740



1,792



1,590



1,821






















Games




















- License (I)

14,090



3,854



2,988



3,399



3,849



16,270



3,511



3,421



4,089



5,249


- Subscriptions (J)

17,948



3,947



4,320



4,440



5,241



23,713



5,688



5,733



5,980



6,312


- Media Properties (K)

5,072



1,224



1,094



1,248



1,506



9,826



2,451



2,215



2,806



2,354






















Total net revenue

$

156,212



$

35,506



$

34,157



$

40,825



$

45,724



$

206,196



$

50,595



$

48,958



$

49,850



$

56,793






















Net Revenue by Geography




















United States

$

61,660



$

13,860



$

12,280



$

15,092



$

20,428



$

90,250



$

19,724



$

21,039



$

21,463



$

28,024


Rest of world

94,552



21,646



21,877



25,733



25,296



115,946



30,871



27,919



28,387



28,769


Total net revenue

$

156,212



$

35,506



$

34,157



$

40,825



$

45,724



$

206,196



$

50,595



$

48,958



$

49,850



$

56,793






















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 our RealPlayer Cloud service and SuperPass.

(B) The Mobile Entertainment division primarily includes revenue from SaaS services, system integration, and professional services to mobile carriers, and sales of technology licenses of our software products such as Helix.

(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 RealPlayer Plus software licenses to consumers and sales of intellectual property licenses.

(E) Subscriptions revenue within the RealPlayer Group includes revenue from subscriptions such as our RealPlayer Cloud service and SuperPass.

(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, and our LISTEN product.

(H) Licensing and other revenue within Mobile Entertainment includes revenue from Helix-related products and professional services provided to mobile carriers.

(I) Licensing revenue within Games includes retail games-related revenue, microtransactions from online and social games and sales of mobile games.

(J) Subscriptions revenue within Games includes revenue from online games subscriptions.

(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)
























2014


2013


2014


2013



Q4


Q3


Q4


YTD


YTD



(in thousands)

RealPlayer Group






















Net revenue


$

8,865



$

6,565



$

16,799



$

39,201



$

75,206


Cost of revenue


3,804



3,566



3,236



14,508



16,220


Gross profit


5,061



2,999



13,563



24,693



58,986













Gross margin


57

%


46

%


81

%


63

%


78

%












Operating expenses


13,074



12,392



15,828



55,742



60,484


Operating income (loss)


$

(8,013)



$

(9,393)



$

(2,265)



$

(31,049)



$

(1,498)













Adjusted EBITDA


$

(7,320)



$

(8,770)



$

(1,474)



$

(28,474)



$

951













Mobile Entertainment






















Net revenue


$

17,616



$

19,190



$

22,146



$

79,901



$

81,181


Cost of revenue


11,525



12,626



13,634



50,399



47,608


Gross profit


6,091



6,564



8,512



29,502



33,573













Gross margin


35

%


34

%


38

%


37

%


41

%












Operating expenses


7,199



7,086



8,863



33,325



35,839


Operating income (loss)


$

(1,108)



$

(522)



$

(351)



$

(3,823)



$

(2,266)













Adjusted EBITDA


$

24



$

447



$

1,251



$

940



$

5,830













Games






















Net revenue


$

9,025



$

8,402



$

11,650



$

37,110



$

49,809


Cost of revenue


2,655



2,573



2,962



11,074



13,359


Gross profit


6,370



5,829



8,688



26,036



36,450













Gross margin


71

%


69

%


75

%


70

%


73

%












Operating expenses


9,977



8,658



12,057



37,170



47,177


Operating income (loss)


$

(3,607)



$

(2,829)



$

(3,369)



$

(11,134)



$

(10,727)













Adjusted EBITDA


$

(3,024)



$

(2,246)



$

(2,724)



$

(8,742)



$

(7,897)













Corporate






















Net revenue


$



$



$



$



$


Cost of revenue


(103)



163



244



400



1,904


Extinguishment of liability








(10,580)




Gross profit


103



(163)



(244)



10,180



(1,904)













Gross margin


N/A



N/A



N/A



N/A



N/A













Operating expenses


8,057



7,856



8,212



33,327



54,413


Operating income (loss)


$

(7,954)



$

(8,019)



$

(8,456)



$

(23,147)



$

(56,317)













Adjusted EBITDA


$

(4,879)



$

(3,788)



$

(3,668)



$

(20,279)



$

(22,630)













Total






















Net revenue


$

35,506



$

34,157



$

50,595



$

156,212



$

206,196


Cost of revenue


17,881



18,928



20,076



76,381



79,091


Extinguishment of liability








(10,580)




Gross profit


17,625



15,229



30,519



90,411



127,105













Gross margin


50

%


45

%


60

%


58

%


62

%












Operating expenses


38,307



35,992



44,960



159,564



197,913


Operating income (loss)


$

(20,682)



$

(20,763)



$

(14,441)



$

(69,153)



$

(70,808)













Adjusted EBITDA


$

(15,199)



$

(14,357)



$

(6,615)



$

(56,555)



$

(23,746)


 

RealNetworks, Inc. and Subsidiaries

Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment

(Unaudited)
























2014


2013


2014


2013



Q4


Q3


Q4


YTD


YTD



(in thousands)

RealPlayer Group






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:














Operating income (loss)


$

(8,013)



$

(9,393)



$

(2,265)



$

(31,049)



$

(1,498)


Acquisitions related intangible asset amortization


96



103



60



384



249


Depreciation and amortization


597



520



731



2,191



2,200


Adjusted EBITDA


$

(7,320)



$

(8,770)



$

(1,474)



$

(28,474)



$

951













Mobile Entertainment






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:














Operating income (loss)


$

(1,108)



$

(522)



$

(351)



$

(3,823)



$

(2,266)


Acquisitions related intangible asset amortization


271



287



781



1,793



3,287


Depreciation and amortization


861



682



821



2,970



4,809


Adjusted EBITDA


$

24



$

447



$

1,251



$

940



$

5,830













Games






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:














Operating income (loss)


$

(3,607)



$

(2,829)



$

(3,369)



$

(11,134)



$

(10,727)


Acquisitions related intangible asset amortization


314



314



314



1,256



879


Depreciation and amortization


269



269



331



1,136



1,951


Adjusted EBITDA


$

(3,024)



$

(2,246)



$

(2,724)



$

(8,742)



$

(7,897)













Corporate






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:














Operating income (loss)


$

(7,954)



$

(8,019)



$

(8,456)



$

(23,147)



$

(56,317)


Other income (expense), net


(10)



325



613



143



467


Depreciation and amortization


675



556



665



2,229



5,373


Lease exit and related charges


177



154



23



880



3,089


Loss (gain) on litigation settlements










11,525


Restructuring and other charges


1,187



2,048



1,690



4,992



5,765


Stock-based compensation


1,046



1,148



1,797



5,204



7,468


Extinguishment of liability








(10,580)




Adjusted EBITDA


$

(4,879)



$

(3,788)



$

(3,668)



$

(20,279)



$

(22,630)













Total






















Reconciliation of GAAP operating income (loss) to adjusted EBITDA:
















Operating income (loss)


$

(20,682)



$

(20,763)



$

(14,441)



$

(69,153)



$

(70,808)


Other income (expense), net


(10)



325



613



143



467


Acquisitions related intangible asset amortization


681



704



1,155



3,433



4,415


Depreciation and amortization


2,402



2,027



2,548



8,526



14,333


Lease exit and related charges


177



154



23



880



3,089


Loss (gain) on litigation settlements










11,525


Restructuring and other charges


1,187



2,048



1,690



4,992



5,765


Stock-based compensation


1,046



1,148



1,797



5,204



7,468


Extinguishment of liability








(10,580)




Adjusted EBITDA


$

(15,199)



$

(14,357)



$

(6,615)



$

(56,555)



$

(23,746)


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-fourth-quarter-and-full-year-2014-results-300030931.html

SOURCE RealNetworks, Inc.

News Provided by Acquire Media

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