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RealNetworks Announces First Quarter 2014 Results
For the first quarter of 2014, revenue was
"During the first quarter of 2014, we continued to invest in laying the foundation for our future growth and profitability," said
"Our
GAAP net loss for the first quarter of 2014 was
As of
Business Outlook
For the second quarter of 2014,
Webcast and Conference Call Information
The company will host a conference call today to review results and discuss the company's performance at
RNWK-F
About
About Non-GAAP Financial Measures
To supplement
In the financial tables of our earnings press release,
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
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to
Condensed Consolidated Statements of Operations (Unaudited) | |||||||||
Quarters Ended | |||||||||
2014 |
2013 | ||||||||
(in thousands, except per share data) | |||||||||
Net revenue |
$ |
45,724 |
$ |
56,793 |
|||||
Cost of revenue |
18,786 |
20,506 |
|||||||
Extinguishment of liability |
(10,580) |
— |
|||||||
Gross profit |
37,518 |
36,287 |
|||||||
Operating expenses: |
|||||||||
Research and development |
14,059 |
15,251 |
|||||||
Sales and marketing |
21,723 |
21,134 |
|||||||
General and administrative |
9,317 |
9,946 |
|||||||
Restructuring and other charges |
1,216 |
1,382 |
|||||||
Lease exit and related charges |
79 |
— |
|||||||
Total operating expenses |
46,394 |
47,713 |
|||||||
Operating income (loss) |
(8,876) |
(11,426) |
|||||||
Other income (expenses): |
|||||||||
Interest income, net |
136 |
647 |
|||||||
Gain (loss) on sale of available for sale securities, net |
2,371 |
— |
|||||||
Equity in net loss of Rhapsody investment |
(838) |
(2,233) |
|||||||
Other income (expense), net |
(77) |
109 |
|||||||
Total other income (expense), net |
1,592 |
(1,477) |
|||||||
Income (loss) before income taxes |
(7,284) |
(12,903) |
|||||||
Income tax expense (benefit) |
486 |
(1,229) |
|||||||
Net income (loss) |
$ |
(7,770) |
$ |
(11,674) |
|||||
Basic net income (loss) per share |
$ |
(0.22) |
$ |
(0.33) |
|||||
Diluted net income (loss) per share |
$ |
(0.22) |
$ |
(0.33) |
|||||
Shares used to compute basic net income (loss) per share |
35,840 |
35,343 |
|||||||
Shares used to compute diluted net income (loss) per share |
35,840 |
35,343 |
|||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
|
| ||||||
(in thousands) | |||||||
ASSETS | |||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
131,276 |
$ |
151,235 |
|||
Short-term investments |
78,361 |
74,920 |
|||||
Trade accounts receivable, net |
25,404 |
24,613 |
|||||
Deferred costs, current portion |
1,629 |
1,601 |
|||||
Deferred tax assets, current |
308 |
306 |
|||||
Prepaid expenses and other current assets |
10,322 |
9,124 |
|||||
Total current assets |
247,300 |
261,799 |
|||||
Equipment, software, and leasehold improvements, at cost: |
|||||||
Equipment and software |
86,585 |
86,721 |
|||||
Leasehold improvements |
3,889 |
3,482 |
|||||
Total equipment, software, and leasehold improvements |
90,474 |
90,203 |
|||||
Less accumulated depreciation and amortization |
68,452 |
67,031 |
|||||
Net equipment, software, and leasehold improvements |
22,022 |
23,172 |
|||||
Restricted cash equivalents and investments |
3,000 |
3,000 |
|||||
Equity method investment |
11,704 |
12,473 |
|||||
Available for sale securities |
3,212 |
7,181 |
|||||
Other assets |
2,517 |
2,332 |
|||||
Deferred costs, non-current portion |
1,040 |
946 |
|||||
Deferred tax assets, net, non-current portion |
1,408 |
1,409 |
|||||
Other intangible assets, net |
12,045 |
12,993 |
|||||
Goodwill |
17,336 |
17,476 |
|||||
Total assets |
$ |
321,584 |
$ |
342,781 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
21,402 |
$ |
19,987 |
|||
Accrued and other current liabilities |
27,704 |
41,893 |
|||||
Deferred tax liabilities, net, current portion |
909 |
899 |
|||||
Deferred revenue, current portion |
8,718 |
7,498 |
|||||
Total current liabilities |
58,733 |
70,277 |
|||||
Deferred revenue, non-current portion |
155 |
166 |
|||||
Deferred rent |
1,378 |
1,318 |
|||||
Deferred tax liabilities, net, non-current portion |
1,556 |
1,556 |
|||||
Other long-term liabilities |
595 |
483 |
|||||
Total liabilities |
62,417 |
73,800 |
|||||
Shareholders' equity |
259,167 |
268,981 |
|||||
Total liabilities and shareholders' equity |
$ |
321,584 |
$ |
342,781 |
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
Quarters Ended | |||||||
2014 |
2013 | ||||||
(in thousands) | |||||||
Cash flows from operating activities: |
|||||||
Net income (loss) |
$ |
(7,770) |
$ |
(11,674) |
|||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Depreciation and amortization |
2,983 |
4,888 |
|||||
Stock-based compensation |
1,337 |
2,038 |
|||||
Equity in net loss of Rhapsody |
838 |
2,233 |
|||||
Deferred income taxes, net |
10 |
(1,559) |
|||||
Gain on sale of available for sale securities |
(2,371) |
— |
|||||
Realized translation gain |
(48) |
— |
|||||
Extinguishment of liability |
(10,580) |
— |
|||||
Other |
— |
(75) |
|||||
Net change in certain operating assets and liabilities |
(2,909) |
(2,584) |
|||||
Net cash provided by (used in) operating activities |
(18,510) |
(6,733) |
|||||
Cash flows from investing activities: |
|||||||
Purchases of equipment, software, and leasehold improvements |
(998) |
(1,194) |
|||||
Proceeds from sale of available for sale securities |
2,754 |
— |
|||||
Purchases of short-term investments |
(29,030) |
(43,318) |
|||||
Proceeds from sales and maturities of short-term investments |
25,589 |
27,640 |
|||||
Acquisitions of businesses, net of cash acquired |
— |
(700) |
|||||
Net cash provided by (used in) investing activities |
(1,685) |
(17,572) |
|||||
Cash flows from financing activities: |
|||||||
Proceeds from issuance of common stock (stock options and stock purchase plan) |
210 |
20 |
|||||
Tax payments from shares withheld upon vesting of restricted stock |
(60) |
(166) |
|||||
Payment of contingent consideration |
— |
(828) |
|||||
Net cash provided by (used in) financing activities |
150 |
(974) |
|||||
Effect of exchange rate changes on cash and cash equivalents |
86 |
(1,225) |
|||||
Net increase (decrease) in cash and cash equivalents |
(19,959) |
(26,504) |
|||||
Cash and cash equivalents, beginning of period |
151,235 |
163,198 |
|||||
Cash and cash equivalents, end of period |
$ |
131,276 |
$ |
136,694 |
Supplemental Financial Information (Unaudited) | ||||||||||||||||||||
2014 |
2013 | |||||||||||||||||||
Q1 |
Q4 |
Q3 |
Q2 |
Q1 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net Revenue by Line of Business |
||||||||||||||||||||
|
$ |
15,215 |
$ |
16,799 |
$ |
17,641 |
$ |
18,383 |
$ |
22,383 |
||||||||||
Mobile Entertainment (B) |
19,913 |
22,146 |
19,948 |
18,592 |
20,495 |
|||||||||||||||
Games (C) |
10,596 |
11,650 |
11,369 |
12,875 |
13,915 |
|||||||||||||||
Total net revenue |
$ |
45,724 |
$ |
50,595 |
$ |
48,958 |
$ |
49,850 |
$ |
56,793 |
||||||||||
Net Revenue by Product |
||||||||||||||||||||
|
||||||||||||||||||||
- License (D) |
$ |
5,018 |
$ |
7,128 |
$ |
7,281 |
$ |
6,766 |
$ |
8,332 |
||||||||||
- Subscriptions (E) |
2,777 |
3,118 |
3,615 |
4,193 |
4,924 |
|||||||||||||||
- |
7,420 |
6,553 |
6,745 |
7,424 |
9,127 |
|||||||||||||||
Mobile Entertainment |
||||||||||||||||||||
- |
18,463 |
20,406 |
18,156 |
17,002 |
18,674 |
|||||||||||||||
- Technology License & Other (H) |
1,450 |
1,740 |
1,792 |
1,590 |
1,821 |
|||||||||||||||
Games |
||||||||||||||||||||
- License (I) |
3,849 |
3,511 |
3,421 |
4,089 |
5,249 |
|||||||||||||||
- Subscriptions (J) |
5,241 |
5,688 |
5,733 |
5,980 |
6,312 |
|||||||||||||||
- |
1,506 |
2,451 |
2,215 |
2,806 |
2,354 |
|||||||||||||||
Total net revenue |
$ |
45,724 |
$ |
50,595 |
$ |
48,958 |
$ |
49,850 |
$ |
56,793 |
||||||||||
Net Revenue by Geography |
||||||||||||||||||||
|
$ |
20,428 |
$ |
19,724 |
$ |
21,039 |
$ |
21,463 |
$ |
28,024 |
||||||||||
Rest of world |
25,296 |
30,871 |
27,919 |
28,387 |
28,769 |
|||||||||||||||
Total net revenue |
$ |
45,724 |
$ |
50,595 |
$ |
48,958 |
$ |
49,850 |
$ |
56,793 |
||||||||||
Net Revenue by Line of Business | ||||||||||||||||||||
(A) | ||||||||||||||||||||
(B) The Mobile Entertainment division primarily includes revenue from | ||||||||||||||||||||
(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 | ||||||||||||||||||||
(E) Subscriptions revenue within the | ||||||||||||||||||||
(F) | ||||||||||||||||||||
(G) | ||||||||||||||||||||
(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) |
Segment Results of Operations (Unaudited) | ||||||||||||
2014 |
2013 | |||||||||||
Q1 |
Q4 |
Q1 | ||||||||||
(in thousands) | ||||||||||||
|
||||||||||||
Net revenue |
$ |
15,215 |
$ |
16,799 |
$ |
22,383 |
||||||
Cost of revenue |
3,518 |
3,236 |
5,311 |
|||||||||
Gross profit |
11,697 |
13,563 |
17,072 |
|||||||||
Gross margin |
77% |
81% |
76% |
|||||||||
Operating expenses |
17,787 |
15,828 |
16,206 |
|||||||||
Operating income (loss) |
$ |
(6,090) |
$ |
(2,265) |
$ |
866 |
||||||
Adjusted EBITDA |
$ |
(5,491) |
$ |
(1,474) |
$ |
1,331 |
||||||
Mobile Entertainment |
||||||||||||
Net revenue |
$ |
19,913 |
$ |
22,146 |
$ |
20,495 |
||||||
Cost of revenue |
11,950 |
13,634 |
10,832 |
|||||||||
Gross profit |
7,963 |
8,512 |
9,663 |
|||||||||
Gross margin |
40% |
38% |
47% |
|||||||||
Operating expenses |
9,616 |
8,863 |
9,111 |
|||||||||
Operating income (loss) |
$ |
(1,653) |
$ |
(351) |
$ |
552 |
||||||
Adjusted EBITDA |
$ |
(339) |
$ |
1,251 |
$ |
3,382 |
||||||
Games |
||||||||||||
Net revenue |
$ |
10,596 |
$ |
11,650 |
$ |
13,915 |
||||||
Cost of revenue |
3,129 |
2,962 |
3,800 |
|||||||||
Gross profit |
7,467 |
8,688 |
10,115 |
|||||||||
Gross margin |
70% |
75% |
73% |
|||||||||
Operating expenses |
9,766 |
12,057 |
11,852 |
|||||||||
Operating income (loss) |
$ |
(2,299) |
$ |
(3,369) |
$ |
(1,737) |
||||||
Adjusted EBITDA |
$ |
(1,674) |
$ |
(2,724) |
$ |
(1,154) |
||||||
Corporate |
||||||||||||
Net revenue |
$ |
— |
$ |
— |
$ |
— |
||||||
Cost of revenue |
189 |
244 |
563 |
|||||||||
Extinguishment of liability |
(10,580) |
— |
— |
|||||||||
Gross profit |
10,391 |
(244) |
(563) |
|||||||||
Gross margin |
N/A |
N/A |
N/A |
|||||||||
Operating expenses |
9,225 |
8,212 |
10,544 |
|||||||||
Operating income (loss) |
$ |
1,166 |
$ |
(8,456) |
$ |
(11,107) |
||||||
Adjusted EBITDA |
$ |
(6,414) |
$ |
(3,668) |
$ |
(6,568) |
||||||
Total |
||||||||||||
Net revenue |
$ |
45,724 |
$ |
50,595 |
$ |
56,793 |
||||||
Cost of revenue |
18,786 |
20,076 |
20,506 |
|||||||||
Extinguishment of liability |
(10,580) |
— |
— |
|||||||||
Gross profit |
37,518 |
30,519 |
36,287 |
|||||||||
Gross margin |
82% |
60% |
64% |
|||||||||
Operating expenses |
46,394 |
44,960 |
47,713 |
|||||||||
Operating income (loss) |
$ |
(8,876) |
$ |
(14,441) |
$ |
(11,426) |
||||||
Adjusted EBITDA |
$ |
(13,918) |
$ |
(6,615) |
$ |
(3,009) |
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment (Unaudited) | ||||||||||||
2014 |
2013 | |||||||||||
Q1 |
Q4 |
Q1 | ||||||||||
(in thousands) | ||||||||||||
|
||||||||||||
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: |
||||||||||||
Operating income (loss) |
$ |
(6,090) |
$ |
(2,265) |
$ |
866 |
||||||
Acquisitions related intangible asset amortization |
60 |
60 |
67 |
|||||||||
Depreciation and amortization |
539 |
731 |
398 |
|||||||||
Adjusted EBITDA |
$ |
(5,491) |
$ |
(1,474) |
$ |
1,331 |
||||||
Mobile Entertainment |
||||||||||||
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: |
||||||||||||
Operating income (loss) |
$ |
(1,653) |
$ |
(351) |
$ |
552 |
||||||
Acquisitions related intangible asset amortization |
607 |
781 |
813 |
|||||||||
Depreciation and amortization |
707 |
821 |
2,017 |
|||||||||
Adjusted EBITDA |
$ |
(339) |
$ |
1,251 |
$ |
3,382 |
||||||
Games |
||||||||||||
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: |
||||||||||||
Operating income (loss) |
$ |
(2,299) |
$ |
(3,369) |
$ |
(1,737) |
||||||
Acquisitions related intangible asset amortization |
314 |
314 |
21 |
|||||||||
Depreciation and amortization |
311 |
331 |
562 |
|||||||||
Adjusted EBITDA |
$ |
(1,674) |
$ |
(2,724) |
$ |
(1,154) |
||||||
Corporate |
||||||||||||
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment: |
||||||||||||
Operating income (loss) |
$ |
1,166 |
$ |
(8,456) |
$ |
(11,107) |
||||||
Other income (expense), net |
(77) |
613 |
109 |
|||||||||
Depreciation and amortization |
445 |
665 |
1,010 |
|||||||||
Lease exit and related charges |
79 |
23 |
— |
|||||||||
Restructuring and other charges |
1,216 |
1,690 |
1,382 |
|||||||||
Stock-based compensation |
1,337 |
1,797 |
2,038 |
|||||||||
Extinguishment of liability |
(10,580) |
— |
— |
|||||||||
Adjusted EBITDA |
$ |
(6,414) |
$ |
(3,668) |
$ |
(6,568) |
||||||
Total |
||||||||||||
Reconciliation of GAAP operating income (loss) to adjusted EBITDA: |
||||||||||||
Operating income (loss) |
$ |
(8,876) |
$ |
(14,441) |
$ |
(11,426) |
||||||
Other income (expense), net |
(77) |
613 |
109 |
|||||||||
Acquisitions related intangible asset amortization |
981 |
1,155 |
901 |
|||||||||
Depreciation and amortization |
2,002 |
2,548 |
3,987 |
|||||||||
Lease exit and related charges |
79 |
23 |
— |
|||||||||
Restructuring and other charges |
1,216 |
1,690 |
1,382 |
|||||||||
Stock-based compensation |
1,337 |
1,797 |
2,038 |
|||||||||
Extinguishment of liability |
(10,580) |
— |
— |
|||||||||
Adjusted EBITDA |
$ |
(13,918) |
$ |
(6,615) |
$ |
(3,009) |
SOURCE
News Provided by Acquire Media