Press Releases

RealNetworks Announces First Quarter 2015 Results

- Continued growth in RealPlayer Cloud user base, with over 11.5 million accounts
- Continued subscriber and revenue growth for Rhapsody, with over 2.5 million paying subscribers
- Cash and short-term investments of $134.4 million

SEATTLE, May 6, 2015 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the first quarter ended March 31, 2015.

For the first quarter of 2015, revenue was $30.6 million, compared to $35.5 million in the previous quarter and $45.7 million in the first quarter of 2014.

"RealPlayer Cloud's user base has grown to over 11.5 million users, up from just 2 million a year ago," said Rob Glaser, Chairman and CEO of RealNetworks. "We believe that by combining RealPlayer Cloud's growing popularity with some exciting innovations we are getting ready to bring to market, we're setting Real up for the next great chapter in our history."

"We also continue to be encouraged by the subscriber and revenue growth at the Rhapsody music service, in which we play a significant role and have a large ownership stake."

GAAP net loss for the first quarter of 2015 was $(24.5) million or $(0.68) per diluted share, compared to $(7.8) million or $(0.22) per diluted share in the first quarter of 2014. Adjusted EBITDA for the first quarter of 2015 was a loss of $(14.2) million, compared to $(13.9) million for the first quarter of 2014. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of March 31, 2015, the company had $134.4 million in unrestricted cash, cash equivalents and short-term investments, compared to $161.7 million as of December 31, 2014.

Business Outlook

For the second quarter of 2015, RealNetworks expects total revenue in the range of $30.0 million to $33.0 million. We expect 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. You may join the conference call by calling 888-790-3440 or +1-517-308-9350 (Passcode: First 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, May 27, 2015 by calling 800-839-2808 or +1- 203-369-3625 (Passcode: 562015).

For More Information

Michael Newman, StreetConnect
Investor Relations for RealNetworks
+1-206-729-3625
IR@realnetworks.com

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 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, 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 March 31,





2015


2014



(in thousands, except per share data)






Net revenue


$

30,597



$

45,724


Cost of revenue


16,547



18,786


Extinguishment of liability




(10,580)


     Gross profit


14,050



37,518







Operating expenses:






   Research and development


12,379



14,059


   Sales and marketing


12,837



21,723


   General and administrative


7,283



9,317


   Restructuring and other charges


485



1,216


   Lease exit and related charges


78



79







     Total operating expenses


33,062



46,394







Operating income (loss)


(19,012)



(8,876)







Other income (expenses):





   Interest income, net


200



136


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


299



2,371


   Equity in net loss of Rhapsody


(6,180)



(838)


   Other income (expense), net


443



(77)







     Total other income (expense), net


(5,238)



1,592







Income (loss) before income taxes


(24,250)



(7,284)


Income tax expense (benefit)


219



486







Net income (loss)


$

(24,469)



$

(7,770)







Basic net income (loss) per share


$

(0.68)



$

(0.22)


Diluted net income (loss) per share


$

(0.68)



$

(0.22)







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


36,104



35,840


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


36,104



35,840












 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)










March 31, 2015


December 31, 2014


(in thousands)

ASSETS

Current assets:




Cash and cash equivalents

$

102,994



$

103,253


Short-term investments

31,394



58,453


Trade accounts receivable, net

15,510



15,257


Deferred costs, current portion

314



702


Deferred tax assets, current

651



652


Prepaid expenses and other current assets

8,278



8,980


  Total current assets

159,141



187,297






Equipment, software, and leasehold improvements, at cost:




Equipment and software

71,840



74,100


Leasehold improvements

3,395



3,590


  Total equipment, software, and leasehold improvements

75,235



77,690


Less accumulated depreciation and amortization

60,610



61,442


  Net equipment, software, and leasehold improvements

14,625



16,248






Restricted cash equivalents and investments

3,000



3,000


Investment in and advances to Rhapsody

10,743



10,000


Available for sale securities

2,648



2,676


Other assets

3,761



2,299


Deferred costs, non-current portion

263



316


Deferred tax assets, net, non-current portion

899



999


Other intangible assets, net

9,700



10,109


Goodwill

16,839



17,355






  Total assets

$

221,619



$

250,299






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:




Accounts payable

$

18,315



$

18,653


Accrued and other current liabilities

22,052



25,286


Deferred tax liabilities, net, current portion

1,576



1,628


Deferred revenue, current portion

3,857



5,301


  Total current liabilities

45,800



50,868






Deferred revenue, non-current portion

173



235


Deferred rent

1,207



1,215


Deferred tax liabilities, net, non-current portion

690



702


Other long-term liabilities

448



81






  Total liabilities

48,318



53,101










Shareholders' equity

173,301



197,198






Total liabilities and shareholders' equity

$

221,619



$

250,299


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)










Quarters Ended March 31,


2015


2014


(in thousands)


Cash flows from operating activities:




Net income (loss)

$

(24,469)



$

(7,770)


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

  Depreciation and amortization

2,503



2,983


  Stock-based compensation

1,329



1,337


  Extinguishment of liability



(10,580)


  Equity in net loss of Rhapsody

6,180



838


  Deferred income taxes, net

(77)



10


  Gain on sale of available for sale securities

(299)



(2,371)


  Realized translation gain



(48)


  Fair value of warrants received

(1,155)




  Net change in certain operating assets and liabilities

(4,106)



(2,909)


    Net cash provided by (used in) operating activities

(20,094)



(18,510)


Cash flows from investing activities:




Purchases of equipment, software, and leasehold improvements

(306)



(998)


Proceeds from sale of available for sale securities

352



2,754


Purchases of short-term investments

(6,018)



(29,030)


Proceeds from sales and maturities of short-term investments

33,077



25,589


Advance to Rhapsody

(5,000)




  Net cash provided by (used in) investing activities

22,105



(1,685)


Cash flows from financing activities:




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

6



210


Tax payments from shares withheld upon vesting of restricted stock

(7)



(60)


  Net cash provided by (used in) financing activities

(1)



150


Effect of exchange rate changes on cash and cash equivalents

(2,269)



86


  Net increase (decrease) in cash and cash equivalents

(259)



(19,959)


Cash and cash equivalents, beginning of period

103,253



151,235


Cash and cash equivalents, end of period

$

102,994



$

131,276


 

RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)






















2015


2014


Q1


Q4


Q3


Q2


Q1


(in thousands)

Net Revenue by Line of Business










RealPlayer Group (A)

$

8,013



$

8,865



$

6,565



$

8,556



$

15,215


Mobile Entertainment (B)

14,480



17,616



19,190



23,182



19,913


Games (C)

8,104



9,025



8,402



9,087



10,596


   Total net revenue

$

30,597



$

35,506



$

34,157



$

40,825



$

45,724












Net Revenue by Product










RealPlayer Group










- License (D)

$

4,672



$

4,496



$

3,255



$

3,273



$

5,018


- Subscriptions (E)

2,408



2,691



2,680



2,569



2,777


- Media Properties (F)

933



1,678



630



2,714



7,420












Mobile Entertainment










- SaaS (G)

13,298



16,727



17,919



20,175



18,463


- Technology License & Other (H)

1,182



889



1,271



3,007



1,450












Games










- License (I)

3,835



3,854



2,988



3,399



3,849


- Subscriptions (J)

3,570



3,947



4,320



4,440



5,241


- Media Properties (K)

699



1,224



1,094



1,248



1,506












   Total net revenue

$

30,597



$

35,506



$

34,157



$

40,825



$

45,724












Net Revenue by Geography










United States

$

12,349



$

13,860



$

12,280



$

15,092



$

20,428


Rest of world

18,248



21,646



21,877



25,733



25,296


   Total net revenue

$

30,597



$

35,506



$

34,157



$

40,825



$

45,724













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 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 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) Technology licensing and other revenue within Mobile Entertainment includes revenue from 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)














2015


2014


Q1


Q4


Q1


(in thousands)

RealPlayer Group












Net revenue

$

8,013



$

8,865



$

15,215


Cost of revenue

4,112



3,804



3,518


Gross profit

3,901



5,061



11,697








   Gross margin

49

%


57

%


77

%







Operating expenses

12,375



13,074



17,787


Operating income (loss)

$

(8,474)



$

(8,013)



$

(6,090)








   Adjusted EBITDA

$

(7,875)



$

(7,320)



$

(5,491)








Mobile Entertainment












Net revenue

$

14,480



$

17,616



$

19,913


Cost of revenue

9,506



11,525



11,950


Gross profit

4,974



6,091



7,963








   Gross margin

34

%


35

%


40

%







Operating expenses

5,633



7,199



9,616


Operating income (loss)

$

(659)



$

(1,108)



$

(1,653)








   Adjusted EBITDA

$

225



$

24



$

(339)








Games












Net revenue

$

8,104



$

9,025



$

10,596


Cost of revenue

2,794



2,655



3,129


Gross profit

5,310



6,370



7,467








   Gross margin

66

%


71

%


70

%







Operating expenses

8,683



9,977



9,766


Operating income (loss)

$

(3,373)



$

(3,607)



$

(2,299)








   Adjusted EBITDA

$

(2,783)



$

(3,024)



$

(1,674)








Corporate












Net revenue

$



$



$


Cost of revenue

135



(103)



189


Extinguishment of liability





(10,580)


Gross profit

(135)



103



10,391








   Gross margin

N/A



N/A



N/A








Operating expenses

6,371



8,057



9,225


Operating income (loss)

$

(6,506)



$

(7,954)



$

1,166








   Adjusted EBITDA

$

(3,741)



$

(4,879)



$

(6,414)








Total












Net revenue

$

30,597



$

35,506



$

45,724


Cost of revenue

16,547



17,881



18,786


Extinguishment of liability





(10,580)


Gross profit

14,050



17,625



37,518








   Gross margin

46

%


50

%


82

%







Operating expenses

33,062



38,307



46,394


Operating income (loss)

$

(19,012)



$

(20,682)



$

(8,876)








   Adjusted EBITDA

$

(14,174)



$

(15,199)



$

(13,918)


 

RealNetworks, Inc. and Subsidiaries

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

(Unaudited)














2015


2014


Q1


Q4


Q1


(in thousands)

RealPlayer Group












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











Operating income (loss)

$

(8,474)



$

(8,013)



$

(6,090)


Acquisitions related intangible asset amortization

88



96



60


Depreciation and amortization

511



597



539


   Adjusted EBITDA

$

(7,875)



$

(7,320)



$

(5,491)








Mobile Entertainment












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











Operating income (loss)

$

(659)



$

(1,108)



$

(1,653)


Acquisitions related intangible asset amortization

304



271



607


Depreciation and amortization

580



861



707


   Adjusted EBITDA

$

225



$

24



$

(339)








Games












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











Operating income (loss)

$

(3,373)



$

(3,607)



$

(2,299)


Acquisitions related intangible asset amortization

293



314



314


Depreciation and amortization

297



269



311


   Adjusted EBITDA

$

(2,783)



$

(3,024)



$

(1,674)








Corporate












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











Operating income (loss)

$

(6,506)



$

(7,954)



$

1,166


Other income (expense), net

443



(10)



(77)


Depreciation and amortization

430



675



445


Lease exit and related charges

78



177



79


Restructuring and other charges

485



1,187



1,216


Stock-based compensation

1,329



1,046



1,337


Extinguishment of liability





(10,580)


   Adjusted EBITDA

$

(3,741)



$

(4,879)



$

(6,414)








Total












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











Operating income (loss)

$

(19,012)



$

(20,682)



$

(8,876)


Other income (expense), net

443



(10)



(77)


Acquisitions related intangible asset amortization

685



681



981


Depreciation and amortization

1,818



2,402



2,002


Lease exit and related charges

78



177



79


Restructuring and other charges

485



1,187



1,216


Stock-based compensation

1,329



1,046



1,337


Extinguishment of liability





(10,580)


   Adjusted EBITDA

$

(14,174)



$

(15,199)



$

(13,918)


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-first-quarter-2015-results-300078809.html

SOURCE RealNetworks, Inc.

News Provided by Acquire Media

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