Press Releases

RealNetworks Announces Second Quarter 2015 Results

- Launched major new product RealTimes™, and signed up over 2 million users in first 2 months;
- Achieved continued growth at Rhapsody, which now has over 3 million paying subscribers;
- Announced sale of Slingo and social casino games for $18 million;
- Reducing operating expenses and cash burn; and
- Cash and short-term investments of $111.0 million

SEATTLE, Aug. 5, 2015 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the second quarter ended June 30, 2015.

For the second quarter of 2015, revenue was $34.0 million, compared to $30.6 million in the previous quarter and $40.8 million in the second quarter of 2014.

"During the quarter, we launched RealTimes, a breakthrough product which provides the fastest and easiest way for consumers to get the most out of their personal photos and videos," said Rob Glaser, Chairman and CEO of RealNetworks. "RealTimes, which automatically creates personalized stories that can be easily customized and shared, is off to a great start with over 2 million users in the first 2 months.

"We are also pleased to report continued strong growth at the Rhapsody music service, in which we play a significant role and have a large ownership stake, which recently announced that it has surpassed 3 million paying subscribers.

"At the same time that we're investing in the roll out of RealTimes, we are also taking steps to focus RealNetworks on its best opportunities, generating cash from non-core assets and reducing operating expenses.  Our announced sale of our Slingo and social casino games business for $18 million is a significant step in support of these objectives."

GAAP net loss for the second quarter of 2015 was $(27.8) million or $(0.77) per diluted share, compared to $(21.0) million or $(0.59) per diluted share in the second quarter of 2014. GAAP results for the second quarter of 2015 include $2.0 million severance and restructuring related to the Company's ongoing cost reduction efforts.  Adjusted EBITDA for the second quarter of 2015 was a loss of $(15.2) million, compared to $(13.1) million for the second 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 June 30, 2015, the company had $111.0 million in unrestricted cash, cash equivalents and short-term investments, compared to $134.4 million as of March 31, 2015.

Business Outlook

For the third quarter of 2015, RealNetworks expects total revenue in the range of $29.0 million to $32.0 million and an adjusted EBITDA loss for the third quarter in the range of $(15.0) million to $(18.0) million, excluding the impact of the pending divestiture of the Slingo and social casino games business.  Including the impact of the pending sale, we expect total revenue in the range of $27.0 million to $30.0 million and an adjusted EBITDA loss in the range of $(14.0) million to $(17.0) 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: Second 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, August 26, 2015 by calling 866-431-7918 or +1-203-369-0978 (Passcode: 852015).

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, RealTimes 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 (both with and without the impact of the pending games sale), 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
June 30,


Six Months Ended
June 30,






2015


2014


2015


2014



 (in thousands, except per share data)










 Net revenue


$

33,954



$

40,825



$

64,551



$

86,549


 Cost of revenue


19,832



20,786



36,379



39,572


 Extinguishment of liability








(10,580)


           Gross profit


14,122



20,039



28,172



57,557











 Operating expenses:









       Research and development


11,801



13,267



24,180



27,326


       Sales and marketing


14,047



16,016



26,884



37,739


       General and administrative


7,008



8,577



14,291



17,894


       Restructuring and other charges


1,964



541



2,449



1,757


       Lease exit and related charges


9



470



87



549











           Total operating expenses


34,829



38,871



67,891



85,265











 Operating income (loss)


(20,707)



(18,832)



(39,719)



(27,708)











 Other income (expenses):









       Interest income, net


250



180



450



316


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


94





393



2,371


       Equity in net loss of Rhapsody


(6,916)



(1,802)



(13,096)



(2,640)


       Other income (expense), net


(112)



(95)



331



(172)











           Total other income (expense), net


(6,684)



(1,717)



(11,922)



(125)











 Income (loss) before income taxes


(27,391)



(20,549)



(51,641)



(27,833)


 Income tax expense (benefit)


390



480



609



966











 Net income (loss)


$

(27,781)



$

(21,029)



$

(52,250)



$

(28,799)











 Basic net income (loss) per share


$

(0.77)



$

(0.59)



$

(1.45)



$

(0.80)


 Diluted net income (loss) per share


$

(0.77)



$

(0.59)



$

(1.45)



$

(0.80)











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


36,106



35,890



36,105



35,865


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


36,106



35,890



36,105



35,865


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)



June 30,
 2015


December 31,
 2014


 (in thousands)

ASSETS

 Current assets:




 Cash and cash equivalents

$

92,663



$

103,253


 Short-term investments

18,337



58,453


 Trade accounts receivable, net

21,922



15,257


 Deferred costs, current portion

305



702


 Deferred tax assets, current

645



652


 Prepaid expenses and other current assets

9,108



8,980


   Total current assets

142,980



187,297






Equipment, software, and leasehold improvements, at cost:




 Equipment and software

71,552



74,100


 Leasehold improvements

3,737



3,590


   Total equipment, software, and leasehold improvements

75,289



77,690


 Less accumulated depreciation and amortization

61,886



61,442


   Net equipment, software, and leasehold improvements

13,403



16,248






 Restricted cash equivalents and investments

3,000



3,000


 Investment in and advances to Rhapsody

5,121



10,000


 Available for sale securities

2,394



2,676


 Other assets

3,187



2,299


 Deferred costs, non-current portion

204



316


 Deferred tax assets, net, non-current portion

916



999


 Other intangible assets, net

9,181



10,109


 Goodwill

17,001



17,355






   Total assets

$

197,387



$

250,299






 LIABILITIES AND SHAREHOLDERS' EQUITY





 Current liabilities:




 Accounts payable

$

18,241



$

18,653


 Accrued and other current liabilities

22,803



25,286


 Deferred tax liabilities, net, current portion

1,580



1,628


 Deferred revenue, current portion

3,637



5,301


   Total current liabilities

46,261



50,868






 Deferred revenue, non-current portion

124



235


 Deferred rent

1,240



1,215


 Deferred tax liabilities, net, non-current portion

693



702


 Other long-term liabilities

458



81






   Total liabilities

48,776



53,101










 Shareholders' equity

148,611



197,198






 Total liabilities and shareholders' equity

$

197,387



$

250,299


 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Six Months Ended
June 30,


2015


2014


 (in thousands)


 Cash flows from operating activities:




 Net income (loss)

$

(52,250)



$

(28,799)


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

  Depreciation and amortization

4,894



6,145


  Stock-based compensation

2,583



3,010


  Extinguishment of liability



(10,580)


  Equity in net loss of Rhapsody

13,096



2,640


  Deferred income taxes, net

(23)



10


  Gain on sale of available for sale securities

(393)



(2,371)


  Realized translation gain



(48)


  Fair value of warrants, net of mark to market adjustments

(1,128)




  Interest receivable on advance to Rhapsody

(121)




   Net change in certain operating assets and liabilities

(10,230)



(785)


    Net cash provided by (used in) operating activities

(43,572)



(30,778)


 Cash flows from investing activities:




  Purchases of equipment, software, and leasehold improvements

(859)



(1,689)


  Proceeds from sale of available for sale securities

459



2,754


  Purchases of short-term investments

(8,514)



(48,326)


  Proceeds from sales and maturities of short-term investments

48,630



52,663


  Acquisitions, net of cash acquired

(161)



(733)


  Advance to Rhapsody

(5,000)




  Other



(467)


   Net cash provided by (used in) investing activities

34,555



4,202


 Cash flows from financing activities:




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

276



580


  Tax payments from shares withheld upon vesting of restricted stock

(10)



(307)


  Payment of contingent consideration



(696)


   Net cash provided by (used in) financing activities

266



(423)


 Effect of exchange rate changes on cash and cash equivalents

(1,839)



214


   Net increase (decrease) in cash and cash equivalents

(10,590)



(26,785)


 Cash and cash equivalents, beginning of period

103,253



151,235


 Cash and cash equivalents, end of period

$

92,663



$

124,450


 


RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)




2015


2014



 Q2


Q1


 Q4


 Q3


 Q2


 Q1



 (in thousands)

Net Revenue by Line of Business












RealPlayer Group (A)


$

7,344



$

8,013



$

8,865



$

6,565



$

8,556



$

15,215


Mobile Entertainment (B)


18,515



14,480



17,616



19,190



23,182



19,913


Games (C)


8,095



8,104



9,025



8,402



9,087



10,596


     Total net revenue


$

33,954



$

30,597



$

35,506



$

34,157



$

40,825



$

45,724















Net Revenue by Product













RealPlayer Group













- License (D)


$

4,208



$

4,672



$

4,496



$

3,255



$

3,273



$

5,018


- Subscriptions (E)


2,435



2,408



2,691



2,680



2,569



2,777


- Media Properties (F)


701



933



1,678



630



2,714



7,420















Mobile Entertainment













- SaaS (G)


18,155



13,298



16,727



17,919



20,175



18,463


- Technology License & Other (H)


360



1,182



889



1,271



3,007



1,450















Games













- License (I)


3,943



3,835



3,854



2,988



3,399



3,849


- Subscriptions (J)


3,373



3,570



3,947



4,320



4,440



5,241


- Media Properties (K)


779



699



1,224



1,094



1,248



1,506















     Total net revenue


$

33,954



$

30,597



$

35,506



$

34,157



$

40,825



$

45,724















Net Revenue by Geography













United States


$

12,303



$

12,349



$

13,860



$

12,280



$

15,092



$

20,428


Rest of world


21,651



18,248



21,646



21,877



25,733



25,296


     Total net revenue


$

33,954



$

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 and its successor application, RealTimesTM, 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 intellectual property licenses and RealPlayer Plus software licenses to consumers.

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

(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.

(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 and sales of mobile games.

(J) Subscriptions revenue within Games includes revenue from online games subscriptions as well as microtransactions from mobile and social games.

(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


2015


2014



Q2


Q1


Q2


YTD


YTD



 (in thousands)

RealPlayer Group






















Net revenue


$

7,344



$

8,013



$

8,556



$

15,357



$

23,771


Cost of revenue


4,317



4,112



3,620



8,429



7,138


Gross profit


3,027



3,901



4,936



6,928



16,633













   Gross margin


41

%


49

%


58

%


45

%


70

%












Operating expenses


13,001



12,375



12,489



25,376



30,276


Operating income (loss)


$

(9,974)



$

(8,474)



$

(7,553)



$

(18,448)



$

(13,643)













  Adjusted EBITDA


$

(9,411)



$

(7,875)



$

(6,893)



$

(17,286)



$

(12,384)













Mobile Entertainment






















Net revenue


$

18,515



$

14,480



$

23,182



$

32,995



$

43,095


Cost of revenue


13,079



9,506



14,298



22,585



26,248


Gross profit


5,436



4,974



8,884



10,410



16,847













   Gross margin


29

%


34

%


38

%


32

%


39

%












Operating expenses


5,301



5,633



9,424



10,934



19,040


Operating income (loss)


$

135



$

(659)



$

(540)



$

(524)



$

(2,193)













  Adjusted EBITDA


$

1,013



$

225



$

808



$

1,238



$

469













Games






















Net revenue


$

8,095



$

8,104



$

9,087



$

16,199



$

19,683


Cost of revenue


2,286



2,794



2,717



5,080



5,846


Gross profit


5,809



5,310



6,370



11,119



13,837













   Gross margin


72

%


66

%


70

%


69

%


70

%












Operating expenses


8,719



8,683



8,769



17,402



18,535


Operating income (loss)


$

(2,910)



$

(3,373)



$

(2,399)



$

(6,283)



$

(4,698)













   Adjusted EBITDA


$

(2,354)



$

(2,783)



$

(1,798)



$

(5,137)



$

(3,472)













Corporate






















Net revenue


$



$



$



$



$


Cost of revenue


150



135



151



285



340


Extinguishment of liability










(10,580)


Gross profit


(150)



(135)



(151)



(285)



(10,240)













   Gross margin


N/A



N/A



 N/A



N/A



N/A













Operating expenses


7,808



6,371



8,189



14,179



17,414


Operating income (loss)


$

(7,958)



$

(6,506)



$

(8,340)



$

(14,464)



$

7,174













   Adjusted EBITDA


$

(4,449)



$

(3,741)



$

(5,198)



$

(8,190)



$

(11,612)













Total






















Net revenue


$

33,954



$

30,597



$

40,825



$

64,551



$

86,549


Cost of revenue


19,832



16,547



20,786



36,379



39,572


Extinguishment of liability










(10,580)


Gross profit


14,122



14,050



20,039



28,172



57,557













   Gross margin


42

%


46

%


49

%


44

%


67

%












Operating expenses


34,829



33,062



38,871



67,891



85,265


Operating income (loss)


$

(20,707)



$

(19,012)



$

(18,832)



$

(39,719)



$

(27,708)













   Adjusted EBITDA


$

(15,201)



$

(14,174)



$

(13,081)



$

(29,375)



$

(26,999)


 

RealNetworks, Inc. and Subsidiaries

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

(Unaudited)




2015


2014

2015


2014



 Q2


 Q1


 Q2


 YTD


 YTD



 (in thousands)

RealPlayer Group






















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


















Operating income (loss)


$

(9,974)



$

(8,474)



$

(7,553)



$

(18,448)



$

(13,643)


Acquisitions related intangible asset amortization


85



88



125



173



185


Depreciation and amortization


478



511



535



989



1,074


   Adjusted EBITDA


$

(9,411)



$

(7,875)



$

(6,893)



$

(17,286)



$

(12,384)













Mobile Entertainment






















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


















Operating income (loss)


$

135



$

(659)



$

(540)



$

(524)



$

(2,193)


Acquisitions related intangible asset amortization


299



304



628



603



1,235


Depreciation and amortization


579



580



720



1,159



1,427


   Adjusted EBITDA


$

1,013



$

225



$

808



$

1,238



$

469













Games






















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


















Operating income (loss)


$

(2,910)



$

(3,373)



$

(2,399)



$

(6,283)



$

(4,698)


Acquisitions related intangible asset amortization


312



293



314



605



628


Depreciation and amortization


244



297



287



541



598


   Adjusted EBITDA


$

(2,354)



$

(2,783)



$

(1,798)



$

(5,137)



$

(3,472)













Corporate






















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


















Operating income (loss)


$

(7,958)



$

(6,506)



$

(8,340)



$

(14,464)



$

(7,174)


Other income (expense), net


(112)



443



(95)



331



(172)


Depreciation and amortization


394



430



553



824



998


Lease exit and related charges


9



78



470



87



549


Restructuring and other charges


1,964



485



541



2,449



1,757


Stock-based compensation


1,254



1,329



1,673



2,583



3,010


Extinguishment of liability










(10,580)


   Adjusted EBITDA


$

(4,449)



$

(3,741)



$

(5,198)



$

(8,190)



$

(11,612)













Total






















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


















Operating income (loss)


$

(20,707)



$

(19,012)



$

(18,832)



$

(39,719)



$

(27,708)


Other income (expense), net


(112)



443



(95)



331



(172)


Acquisitions related intangible asset amortization


696



685



1,067



1,381



2,048


Depreciation and amortization


1,695



1,818



2,095



3,513



4,097


Lease exit and related charges


9



78



470



87



549


Restructuring and other charges


1,964



485



541



2,449



1,757


Stock-based compensation


1,254



1,329



1,673



2,583



3,010


Extinguishment of liability










(10,580)


   Adjusted EBITDA


$

(15,201)



$

(14,174)



$

(13,081)



$

(29,375)



$

(26,999)


 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-second-quarter-2015-results-300124328.html

SOURCE RealNetworks, Inc.

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(NASDAQ: RNWK)
Price:
$4.56
Change:
- 0.04
Day High:
$4.69
Day Low:
$4.50
Volume:
33,700
4:00 PM ET on 04/25/2017

Delayed at least 20 minutes.
Provided by eSignal.


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