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REALNETWORKS ANNOUNCES FOURTH QUARTER AND FULL YEAR 2021 FINANCIAL RESULTS

February 09, 2022

SEATTLE, Feb. 9, 2022 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), an emerging leader in AI-based software and solutions, today announced its financial results* for the fourth quarter and year ended December 31, 2021.

  • 2021 revenue of $58.2 million, net loss attributable to RealNetworks of $(21.2) million and Adjusted EBITDA loss of $(13.8) million
  • Continued revenue growth in 2021 for the Company's AI-based businesses with 44% growth in SAFR™ and 14% growth in KONTXT
  • Strong balance sheet with unrestricted cash and cash equivalents of $27.1 million and no debt as of December 31, 2021

Management Commentary
"In 2021, we continued our strategic transformation to an AI/Machine Learning based company and grew SAFR by 44 percent and KONTXT by 14 percent. At the same time, our overall financial performance did not meet our expectations. We have moved to align our AI products and investments with the biggest growth opportunities in front of us," said Rob Glaser, Founder, Chairman, and Chief Executive Officer of RealNetworks.

"Additionally, we brought in an outstanding new leader for our Games business who has hit the ground running. We believe that GameHouse will drive meaningful growth in 2023 and beyond."

Glaser concluded: "Putting it all together, we expect that the growth of our AI initiatives will accelerate in 2022, and that our Games business will do so in 2023. As a result, we believe our company will achieve double digit revenue growth in 2022, excluding Games."

Full Year 2021 Financial Results from Continuing Operations

  • 2021 Revenue was $58.2 million, compared to $68.1 million in the prior year.
  • Revenue from our key growth initiatives, SAFR and KONTXT, increased 44% and 14%, respectively, compared to the prior year. Collectively, SAFR and KONTXT represented 34% of total Mobile Services revenue in 2021.
  • 2021 net loss from continuing operations attributable to RealNetworks was $(21.2) million, or $(0.48) per diluted share, compared to a net loss of $(4.8) million, or $(0.13) per diluted share, in the prior year.
  • 2021 Adjusted EBITDA was a loss of $(13.8) million compared to Adjusted EBITDA loss of $(8.6) million in the prior year.
  • At December 31, 2021, the Company had $27.1 million in unrestricted cash and cash equivalents, compared to $23.9 million at December 31, 2020.

Fourth Quarter 2021 Financial Results from Continuing Operations

  • Revenue was $13.4 million, compared to $14.3 million in the prior quarter and $17.6 million in the prior year period.
  • Net loss from continuing operations attributable to RealNetworks was $(1.8) million, or $(0.04) per diluted share, compared to a net loss of $(7.7) million, or $(0.16) per diluted share, in the prior quarter and net income of $6.1 million, or $0.16 per diluted share, in the prior year period.
  • Adjusted EBITDA was a loss of $(3.7) million compared to Adjusted EBITDA loss of $(2.7) million in the prior quarter and Adjusted EBITDA loss of $(0.9) million in the prior year period.

Business Outlook
For the first quarter ending March 31, 2022, RealNetworks expects to achieve the following results from continuing operations:

  • Total revenue is expected to be in the range of $12.0 million to $14.0 million.
  • Adjusted EBITDA loss is expected to be in the range of $(5.5) million to $(4.0) million.

Conference Call and Webcast Information
RealNetworks will host a conference call today to review its results and discuss its performance at approximately 4:30 p.m. ET / 1:30 p.m. PT. Participants may join the conference call by dialing 1-877-451-6152 (United States) or 1-201-389-0879 (International). A telephonic replay of the call will also be available shortly after the completion of the call, until 11:59 pm ET on Wednesday, February 23, 2022, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13726692.

A live webcast will be available on RealNetworks' Investor Relations site under the Events & Presentations section at http://investor.realnetworks.com and will be archived online upon completion of the conference call.

About RealNetworks
Building on a rich history of digital media expertise and innovation, RealNetworks has created a new generation of products that employ best-in-class artificial intelligence and machine learning to enhance and secure our daily lives. Real's portfolio includes SAFR, the world's premier computer vision platform for live video; KONTXT, an industry leading NLP (Natural Language Processing) platform for text and multi-media analysis; and leveraging its digital media expertise, a mobile games business focused on the large free-to-play segment. For information about all of our products, visit www.realnetworks.com.

About Continuing and Discontinued Operations and Non-GAAP Financial Measures
*This release refers to "continuing" and "discontinued" operations due to the completion of the sale of Napster, RealNetworks' 84%-owned subsidiary, to MelodyVR Group PLC, which closed on December 30, 2020. Effective as of the August 25, 2020 announcement date, Napster has been treated as a discontinued operation for accounting and disclosure purposes; therefore, unless otherwise noted, results presented in this release relate to the continuing operations of RealNetworks, which exclude Napster.

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 contribution margin 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 net income (loss) from continuing operations to adjusted EBITDA and operating income (loss) by reportable segment to contribution margin 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 our current expectations regarding our future growth, profitability, and market position, our financial condition and liquidity, our strategic focus and initiatives, product plans, agreements with partners, Scener's current and future activities, and certain remaining contingencies relating to the sale of Napster. 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 our expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results for RealNetworks, on a consolidated basis, to differ from the results predicted include: our ability to realize operating efficiencies, growth and other benefits from the implementation of our growth initiatives and restructuring efforts; cash usage and conservation, and the pursuit of additional funding sources; successful monetization of our products and services; competitive risks, including the emergence or growth of competing technologies, products and services; issues with the use of AI; potential outcomes and effects of claims and legal proceedings; risks associated with key customer or strategic relationships and business acquisitions and dispositions; challenges caused by the COVID-19 pandemic; disruptions in the global financial markets, including changes in consumer spending and impacts to credit availability, and fluctuations in foreign currencies; volatility of our stock price; material asset impairment; continued declines in subscription revenue; difficulty recruiting and retaining key personnel; regulatory, tax, accounting, and cross-border risks; and risks related to our governance structure. More information about potential risk factors that could affect our business and financial results is included in RealNetworks' latest annual report on Form 10-K for year ended December 31, 2020, 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 our financial statements and forward- looking financial guidance requires us 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. RealNetworks assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

For More Information:
Investor Relations for RealNetworks
Brian M. Prenoveau, CFA
MZ North America
561-489-5315
IR@realnetworks.com
RNWK-F

 

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)



Quarter Ended December
31,


Year ended December 31,




2021


2020


2021


2020










 (in thousands, except per share data)









 Net revenue

$         13,402


$         17,601


$       58,183


$       68,062

 Cost of revenue

3,386


4,036


13,756


16,465

           Gross profit

10,016


13,565


44,427


51,597









 Operating expenses:








       Research and development

5,314


5,944


23,132


24,319

       Sales and marketing

4,947


5,073


22,520


21,042

       General and administrative

4,057


4,068


17,559


17,331

Fair value adjustments to contingent consideration liability


(8,400)


(1,040)


(8,600)

       Restructuring and other charges

(1,777)


1,432


3,129


2,529









           Total operating expenses

12,541


8,117


65,300


56,621









 Operating income (loss)

(2,525)


5,448


(20,873)


(5,024)









 Other income (expenses):








       Interest expense

(22)


(8)


(168)


(20)

       Interest income

7


7


34


38

       Gain on forgiveness of Paycheck Protection Program loan



2,897


       Gain (loss) on equity and other investments, net

1,143


201


(4,927)


111

       Other income (expense), net

(42)


(227)


2,024


(164)









           Total other income (expenses), net

1,086


(27)


(140)


(35)









Net income (loss) from continuing operations before income taxes

(1,439)


5,421


(21,013)


(5,059)

 Income tax expense (benefit)

346


(551)


479


55









Net income (loss) from continuing operations

(1,785)


5,972


(21,492)


(5,114)

Net income (loss) from discontinued operations, net of tax

(733)


2,260


(733)


(206)

Net income (loss)

(2,518)


8,232


(22,225)


(5,320)

Net loss attributable to noncontrolling interests of continuing operations


(88)


(244)


(284)

Net income (loss) attributable to noncontrolling interests of discontinued
operations


180



(184)

Net income (loss) attributable to RealNetworks

$          (2,518)


$            8,140


$      (21,981)


$        (4,852)









Net income (loss) from continuing operations attributable to RealNetworks

$          (1,785)


$            6,060


$      (21,248)


$        (4,830)

Net income (loss) from discontinued operations attributable to RealNetworks

(733)


2,080


(733)


(22)

Net income (loss) attributable to RealNetworks

$          (2,518)


$            8,140


$      (21,981)


$        (4,852)









Net income (loss) per share attributable to RealNetworks- Basic:








       Continuing operations

$            (0.04)


$              0.16


$          (0.48)


$          (0.13)

       Discontinued operations

(0.01)


0.05


(0.02)


              Net income (loss) per share attributable to RealNetworks- Basic

$            (0.05)


$              0.21


$          (0.50)


$          (0.13)









Net income (loss) per share attributable to RealNetworks- Diluted:








       Continuing operations

$            (0.04)


$              0.16


$          (0.48)


$          (0.13)

       Discontinued operations

(0.01)


0.05


(0.02)


              Net income (loss) per share attributable to RealNetworks- Diluted

$            (0.05)


$              0.21


$          (0.50)


$          (0.13)









 Shares used to compute basic net loss per share

47,141


38,345


44,277


38,272

 Shares used to compute diluted net loss per share

47,141


38,489


44,277


38,272

 

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)



December 31,

2021


December 31,

2020


 (in thousands)

ASSETS

 Current assets:




 Cash and cash equivalents

$                      27,109


$                      23,940

 Trade accounts receivable, net

9,556


10,229

 Deferred costs, current portion

49


196

 Investments

1,755


9,965

 Prepaid expenses and other current assets

3,166


3,480

 Total current assets

41,635


47,810





 Equipment and software

29,464


30,726

 Leasehold improvements

2,750


2,776

 Total equipment, software, and leasehold improvements

32,214


33,502

 Less accumulated depreciation and amortization

30,744


31,631

 Net equipment, software, and leasehold improvements

1,470


1,871





 Operating lease assets

3,992


7,937

 Restricted cash equivalents

1,630


1,630

 Other assets

2,878


4,150

 Deferred costs, non-current portion


74

 Deferred tax assets, net

727


909

 Goodwill

16,976


17,375





 Total assets

$                      69,308


$                      81,756





 LIABILITIES AND SHAREHOLDERS' EQUITY





 Current liabilities:




 Accounts payable

$                         2,578


$                         2,750

 Accrued and other current liabilities

13,286


17,850

 Deferred revenue, current portion

2,614


2,122

 Total current liabilities

18,478


22,722





 Deferred revenue, non-current portion

183


45

 Deferred tax liabilities, net

1,132


1,129

 Long-term lease liabilities

2,300


6,837

 Long-term debt


2,895

 Other long-term liabilities

1,142


2,241





 Total liabilities

23,235


35,869





 Total shareholders' equity

46,073


46,149





Noncontrolling interests


(262)





 Total equity

46,073


45,887





 Total liabilities and equity

$                      69,308


$                      81,756

 

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)



Year ended December 31,


2021


2020


 (in thousands)


Cash flows from operating activities:




Net loss from continuing operations

$                       (21,492)


$                         (5,114)

Adjustment to reconcile net loss from continuing operations to net cash used in operating
activities:




Depreciation and amortization

749


944

Stock-based compensation

4,224


1,420

(Gain) loss on equity and other investments, net

4,927


(111)

Loss on impairment of operating lease assets

2,461


1,055

Gain on release of operating lease liabilities

(3,596)


Deferred income taxes, net

201


(191)

Foreign currency (gain) loss

(23)


330

Fair value adjustments to contingent consideration liability

(1,040)


(8,600)

Gain on deconsolidation of subsidiary

(1,961)


Gain on forgiveness of Paycheck Protection Program loan

(2,897)


Net change in certain operating assets and liabilities

3,406


2,184

Net cash used in operating activities - continuing operations

(15,041)


(8,083)

Net cash used in operating activities - discontinued operations


(2,555)

Net cash used in operating activities

(15,041)


(10,638)

Cash flows from investing activities:




Purchases of equipment, software, and leasehold improvements

(466)


(408)

Deconsolidation of subsidiary, net

(836)


Net cash used in investing activities - continuing operations

(1,302)


(408)

Net cash provided by (used in)  investing activities - discontinued operations

2,048


(2,160)

Net cash provided by (used in) investing activities

746


(2,568)

Cash flows from financing activities:




Proceeds from issuance of common stock (stock options)

534


Proceeds from issuance of preferred stock


10,000

Proceeds from equity offering, net of costs

20,114


Tax payments from shares withheld upon vesting of restricted stock

(186)


(26)

Payment of contingent consideration liability

(2,500)


Proceeds from long-term debt


2,876

Repayments of notes payable and long-term debt


(3,922)

Other financing activities


2,106

Net cash provided by financing activities - continuing operations

17,962


11,034

Net cash provided by financing activities - discontinued operations


4,945

Net cash provided by financing activities

17,962


15,979

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(498)


618

Net increase in cash, cash equivalents and restricted cash

3,169


3,391

Cash, cash equivalents, and restricted cash, beginning of period

25,570


22,179

Cash, cash equivalents, and restricted cash, end of period

$                        28,739


$                        25,570

 

RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information (Unaudited)




2021


2020



YTD


Q4


 Q3


 Q2


Q1


YTD


 Q4


 Q3


 Q2


 Q1



 (in thousands)

Net Revenue by Segment




















Consumer Media (A)


$ 10,301


$   2,168


$   2,763


$    2,061


$    3,309


$  12,581


$    3,384


$    2,543


$    3,159


$    3,495

Mobile Services (B)


23,788


5,680


5,772


6,356


5,980


26,889


7,338


6,400


6,461


6,690

Games (C)


24,094


5,554


5,797


6,144


6,599


28,592


6,879


7,611


7,465


6,637

     Total net revenue


$ 58,183


$ 13,402


$ 14,332


$  14,561


$  15,888


$  68,062


$  17,601


$  16,554


$  17,085


$  16,822






















Net Revenue by Product





















Consumer Media





















- Software License (D)


$   5,076


$      854


$   1,506


$       841


$    1,875


$    5,957


$    1,593


$       642


$    1,702


$    2,020

- Subscription Services (E)


3,158


768


779


793


818


3,586


867


892


898


929

- Product Sales (F)


1,306


268


270


330


438


1,301


625


193


261


222

- Advertising & Other (G)


761


278


208


97


178


1,737


299


816


298


324






















Mobile Services





















- Software License (H)


6,397


1,616


1,459


1,931


1,391


5,110


2,376


931


972


831

- Subscription Services (I)


17,391


4,064


4,313


4,425


4,589


21,779


4,962


5,469


5,489


5,859






















Games





















- Subscription Services (J)


9,606


2,286


2,361


2,431


2,528


10,794


2,589


2,705


2,730


2,770

- Product Sales (K)


11,058


2,453


2,612


2,830


3,163


13,879


3,315


3,874


3,712


2,978

- Advertising & Other (L)


3,430


815


824


883


908


3,919


975


1,032


1,023


889











































     Total net revenue


$ 58,183


$ 13,402


$ 14,332


$  14,561


$  15,888


$  68,062


$  17,601


$  16,554


$  17,085


$  16,822






















Net Revenue by Geography





















United States


$ 36,494


$   8,126


$   9,227


$    9,209


$    9,932


$  43,704


$  10,893


$  11,855


$  10,742


$  10,214

Rest of world


21,689


5,276


5,105


5,352


5,956


24,358


6,708


4,699


6,343


6,608

     Total net revenue


$ 58,183


$ 13,402


$ 14,332


$  14,561


$  15,888


$  68,062


$  17,601


$  16,554


$  17,085


$  16,822






















Net Revenue by Segment




















(A) The Consumer Media segment primarily includes revenue from the licensing of our portfolio of video codec technologies. Also included is RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software to consumers, and consumer subscriptions such as RealPlayer Plus and SuperPass.

(B) The Mobile Services segment primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.

(C) The Games segment primarily includes revenue from player purchases of in-game virtual goods within our free-to-play games, mobile and PC games, online games subscription services, and advertising on games sites and social network sites.

Net Revenue by Product





















(D) Software licensing revenue within Consumer Media includes revenues from licenses of our video codec technologies.

(E) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.

(F) Product sales within Consumer Media includes sales of RealPlayer Plus software to consumers.

(G) Advertising & other revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.

(H) Software license revenue within Mobile Services includes revenue from our facial recognition platform, SAFR, and our integrated RealTimes platform.

(I) Subscription services revenue within Mobile Services includes revenue from our messaging products, including Metcalf intercarrier messaging services and KONTXT, as well as ringback tones and related professional services provided to mobile carriers.

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

(K) Product sales revenue within Games includes revenue from player purchases of in-game virtual goods, retail and wholesale games-related revenue, as well as sales of mobile games.

(L) Advertising & other revenue within Games includes advertising on games sites and social network sites.

 

RealNetworks, Inc. and Subsidiaries
Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin
(Unaudited)




2021


2020

2021


2020



Q4


Q3


Q4


YTD


YTD



 (in thousands)

Consumer Media






















Net revenue


$   2,168


$   2,763


$   3,384


$ 10,301


$ 12,581

Cost of revenue


423


418


550


1,816


2,273

Gross profit


1,745


2,345


2,834


8,485


10,308












Gross margin


80%


85%


84%


82%


82%












Operating expenses


1,399


1,495


2,135


7,427


8,889

Operating income, a GAAP measure


$      346


$      850


$      699


$   1,058


$   1,419

Depreciation and amortization


(15)


16


17


22


62












Contribution margin, a non-GAAP measure


$      331


$      866


$      716


$   1,080


$   1,481












Mobile Services






















Net revenue


$   5,680


$   5,772


$   7,338


$ 23,788


$ 26,889

Cost of revenue


1,429


1,282


1,736


5,720


6,725

Gross profit


4,251


4,490


5,602


18,068


20,164












Gross margin


75%


78%


76%


76%


75%












Operating expenses


5,932


5,890


5,940


24,299


24,787

Operating loss, a GAAP measure


$  (1,681)


$  (1,400)


$     (338)


$  (6,231)


$  (4,623)

Depreciation and amortization


78


80


130


321


418












Contribution margin, a non-GAAP measure


$  (1,603)


$  (1,320)


$     (208)


$  (5,910)


$  (4,205)












Games






















Net revenue


$   5,554


$   5,797


$   6,879


$ 24,094


$ 28,592

Cost of revenue


1,521


1,414


1,744


6,192


7,451

Gross profit


4,033


4,383


5,135


17,902


21,141












Gross margin


73%


76%


75%


74%


74%












Operating expenses


4,672


4,844


4,885


19,463


19,936

Operating income (loss), a GAAP measure


$     (639)


$     (461)


$      250


$  (1,561)


$   1,205

Depreciation and amortization


58


78


72


293


347












Contribution margin, a non-GAAP measure


$     (581)


$     (383)


$      322


$  (1,268)


$   1,552












Corporate






















Cost of revenue


$        13


$          5


$          6


$        28


$        16

Gross profit


(13)


(5)


(6)


(28)


(16)












Gross margin


N/A


N/A


N/A


N/A


N/A












Operating expenses


538


5,443


(4,843)


14,111


3,009

Operating income (loss), a GAAP measure


$     (551)


$  (5,448)


$   4,837


$ (14,139)


$  (3,025)

Other expense, net


(43)


46


(227)


62


(164)

Foreign currency (gain) loss


40


(47)


305


(22)


330

Depreciation and amortization


29


29


28


114


117

Fair value adjustments to contingent consideration liability




(8,400)


(1,040)


(8,600)

Restructuring and other charges


(1,777)


1,017


1,432


3,129


2,529

Stock-based compensation


435


2,518


327


4,224


1,420












Contribution margin, a non-GAAP measure


$  (1,867)


$  (1,885)


$  (1,698)


$  (7,672)


$  (7,393)

 

RealNetworks, Inc. and Subsidiaries
Reconciliation of Net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure
(Unaudited)




2021


2020

2021


2020



Q4


Q3


Q4


 YTD


 YTD



(in thousands)












Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA:


















Net income (loss) from continuing operations


$     (1,785)


$     (7,668)


$       5,972


$   (21,492)


$     (5,114)

Income tax expense (benefit)


346


6


(551)


479


55

Interest expense


22


27


8


168


20

Interest income


(7)


(7)


(7)


(34)


(38)

(Gain) loss on equity and other investments, net


(1,143)


1,229


(201)


4,927


(111)

Foreign currency (gain) loss


40


(47)


305


(22)


330

Depreciation and amortization


149


203


247


749


944

Fair value adjustments to contingent consideration liability




(8,400)


(1,040)


(8,600)

Gain on forgiveness of Paycheck Protection Program loan





(2,897)


Gain on deconsolidation of subsidiary





(1,961)


Restructuring and other charges


(1,777)


1,017


1,432


3,129


2,529

Stock-based compensation


435


2,518


327


4,224


1,420

   Adjusted EBITDA, a non-GAAP measure


$     (3,720)


$     (2,722)


$        (868)


$   (13,770)


$     (8,565)

 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/realnetworks-announces-fourth-quarter-and-full-year-2021-financial-results-301479146.html

SOURCE RealNetworks, Inc.

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