SEATTLE, May 3, 2017 /PRNewswire/ --
-- Revenue stability, with year-over-year revenue growth for first quarter; -- Reduced year-over-year operating expenses by $6.5 million in first quarter; and -- Investing in key growth initiatives
RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced results for the first quarter ended March 31, 2017.
For the first quarter of 2017, revenue was $30.6 million, up from $28.2 million in the first quarter of 2016. For the first quarter of 2017, the Company reduced its operating expenses by $6.5 million or 23% from the same period in 2016.
Net loss for the first quarter of 2017 was $(9.4) million or $(0.25) per share, compared to $(15.2) million or $(0.42) per share in the first quarter of 2016. Adjusted EBITDA for the first quarter of 2017 was a loss of $(4.4) million, compared to a loss of $(8.1) million in the first quarter of 2016. A reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
"In Q1, we achieved our financial objectives while also investing in our key growth initiatives," said Rob Glaser, Chairman and CEO of RealNetworks. "We achieved stable revenue while also reducing our operating expenses by 23% from a year ago. At the same time, we're growing our mobile games business, developing new Mobile Service offerings, and continuing to build partnerships and seed the ecosystem for our new RealMedia HD codec."
As of March 31, 2017, the Company had $66.3 million in unrestricted cash, cash equivalents and short-term investments, compared to $77.1 million as of December 31, 2016.
Business Outlook
For the second quarter of 2017, RealNetworks expects total revenue in the range of $28 million to $31 million and an adjusted EBITDA loss for the second quarter in the range of $(3.0) million to $(5.0) 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 888-831-6080 or +1-210-234-0017 (Passcode: 1ST QUARTER). 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 24, 2017 by calling 866-453-2318 or +1-203-369-1226 (Passcode: 532017).
For More Information
Investor Relations for RealNetworks
+1-206-674-2700
IR@realnetworks.com
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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 and RealTimes 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 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) 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 RealNetworks' current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our strategic focus and initiatives, agreements with partners, 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) Quarter Ended March 31, --------- 2017 2016 ---- ---- (in thousands, except per share data) Net revenue $30,576 $28,230 Cost of revenue 17,293 15,172 Gross profit 13,283 13,058 ------ ------ Operating expenses: Research and development 7,349 9,319 Sales and marketing 7,155 9,225 General and administrative 5,303 8,077 Restructuring and other charges 1,564 385 Lease exit and related charges - 831 --- --- Total operating expenses 21,371 27,837 ------ ------ Operating income (loss) (8,088) (14,779) ------ ------- Other income (expenses): Interest income, net 128 117 Gain (loss) on investments, net - 3 Equity in net loss of Rhapsody (748) - Other income (expense), net (226) (287) ---- ---- Total other income (expense), net (846) (167) ---- ---- Income (loss) before income taxes (8,934) (14,946) Income tax expense (benefit) 490 225 --- --- Net income (loss) $(9,424) $(15,171) ======= ======== Basic net income (loss) per share $(0.25) $(0.42) Diluted net income (loss) per share $(0.25) $(0.42) Shares used to compute basic net income (loss) per share 37,030 36,520 Shares used to compute diluted net income (loss) per share 37,030 36,520
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, 2017 2016 ---- ---- (in thousands) ASSETS Current assets: Cash and cash equivalents $38,498 $33,721 Short-term investments 27,778 43,331 Trade accounts receivable, net 26,833 22,162 Deferred costs, current portion 541 760 Prepaid expenses and other current assets 4,843 4,910 ----- ----- Total current assets 98,493 104,884 ------ ------- Equipment and software 44,640 46,231 Leasehold improvements 3,330 3,317 ----- ----- Total equipment, software, and leasehold improvements 47,970 49,548 Less accumulated depreciation and amortization 43,181 44,294 ------ ------ Net equipment, software, and leasehold improvements 4,789 5,254 Restricted cash equivalents and investments 2,700 2,700 Other assets 2,412 1,742 Deferred costs, non- current portion 1,071 1,246 Deferred tax assets, net 836 816 Other intangible assets, net 729 938 Goodwill 12,915 12,857 ------ ------ Total assets $123,945 $130,437 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $19,432 $18,225 Accrued and other current liabilities 15,425 15,425 Commitment to Rhapsody - 1,500 Deferred revenue, current portion 3,918 3,430 ----- ----- Total current liabilities 38,775 38,580 Deferred revenue, non- current portion 724 240 Deferred rent 679 748 Deferred tax liabilities, net 87 87 Other long- term liabilities 1,890 2,201 ----- ----- Total liabilities 42,155 41,856 ------ ------ Shareholders' equity 81,790 88,581 ------ ------ Total liabilities and shareholders' equity $123,945 $130,437 ======== ========
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Quarter ended March 31, 2017 2016 ---- ---- (in thousands) Cash flows from operating activities: Net income (loss) $(9,424) $(15,171) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 921 2,598 Stock-based compensation 1,434 3,171 Equity in net loss of Rhapsody 748 - Deferred income taxes, net (20) (128) Loss (gain) on investments, net - (3) Fair value of warrants granted in 2015 and 2017, net of subsequent mark to market adjustments in 2017 and 2016 (471) 44 Net change in certain operating assets and liabilities (2,598) (1,722) ------ Net cash provided by (used in) operating activities (9,410) (11,211) ------ ------- Cash flows from investing activities: Purchases of equipment, software, and leasehold improvements (207) (828) Purchases of short-term investments (6,142) (17,876) Proceeds from sales and maturities of short- term investments 21,695 23,401 Decrease (increase) in restricted cash equivalents and investments, net - (210) Advance to Rhapsody (1,500) - Net cash provided by (used in) investing activities 13,846 4,487 ------ ----- Cash flows from financing activities: Proceeds from issuance of common stock (stock options and stock purchase plan) 34 16 Tax payments from shares withheld upon vesting of restricted stock (181) (787) Net cash provided by (used in) financing activities (147) (771) ---- ---- Effect of exchange rate changes on cash and cash equivalents 488 719 --- --- Net increase (decrease) in cash and cash equivalents 4,777 (6,776) Cash and cash equivalents, beginning of year 33,721 47,315 ------ ------ Cash and cash equivalents, end of year $38,498 $40,539 ======= =======
RealNetworks, Inc. and Subsidiaries Supplemental Financial Information (Unaudited) 2017 2016 Q1 Q4 Q3 Q2 Q1 --- --- --- --- --- (in thousands) Net Revenue by Line of Business Consumer Media (A) $5,669 $6,443 $6,482 $6,400 $5,726 Mobile Services (B) 19,084 18,833 17,683 17,297 16,465 Games (C) 5,823 6,177 6,886 6,037 6,039 Total net revenue $30,576 $31,453 $31,051 $29,734 $28,230 ======= ======= ======= ======= ======= Net Revenue by Product Consumer Media -------------- - License (D) $3,672 $4,252 $4,136 $3,914 $3,104 - Subscriptions (E) 1,564 1,671 1,931 1,871 1,975 -Media Properties (F) 433 520 415 615 647 Mobile Services --------------- - SaaS (G) 18,987 18,726 17,141 17,208 16,220 -Technology License & Other (H) 97 107 542 89 245 Games ----- - License (I) 2,862 3,178 3,683 2,793 2,761 - Subscriptions (J) 2,828 2,836 3,005 3,024 3,029 -Media Properties (K) 133 163 198 220 249 --- --- --- --- --- Total net revenue $30,576 $31,453 $31,051 $29,734 $28,230 ======= ======= ======= ======= ======= Net Revenue by Geography United States $9,740 $10,125 $10,642 $10,355 $10,383 Rest of world 20,836 21,328 20,409 19,379 17,847 ------ ------ ------ ------ ------ Total net revenue $30,576 $31,453 $31,051 $29,734 $28,230 ======= ======= ======= ======= =======
Net Revenue by Line of Business (A) The Consumer Media division primarily includes revenue from RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, and consumer subscriptions such as RealPlayer Plus and SuperPass. (B) The Mobile Services 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 mobile games, sales of games licenses, online games subscription services, advertising on games sites and social network sites, and microtransactions from online games. Net Revenue by Product (D) Licensing revenue within Consumer Media includes sales of intellectual property licenses and RealPlayer Plus software licenses to consumers. (E) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings. (F) Media Properties revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites. (G) SaaS revenue within Mobile Services includes revenue from music on demand, ringback tones, intercarrier messaging services, and RealTimes. (H) Technology licensing and other revenue within Mobile Services 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 games. (K) Media Properties 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) 2017 2016 ---- Q1 Q4 Q1 --- --- --- (in thousands) Consumer Media -------------- Net revenue $5,669 $6,443 $5,726 Cost of revenue 1,405 1,589 2,417 Gross profit 4,264 4,854 3,309 Gross margin 75% 75% 58% Operating expenses 4,010 4,459 5,376 Operating income (loss), a GAAP measure $254 $395 $(2,067) Depreciation and amortization 167 239 1,303 --- Contribution margin, a non- GAAP measure $421 $634 $(764) ---- ---- ----- Mobile Services --------------- Net revenue $19,084 $18,833 $16,465 Cost of revenue 13,914 13,679 10,917 Gross profit 5,170 5,154 5,548 Gross margin 27% 27% 34% Operating expenses 8,119 7,786 9,794 Operating income (loss), a GAAP measure $(2,949) $(2,632) $(4,246) Acquisitions related intangible asset amortization 196 198 308 Depreciation and amortization 203 290 422 --- --- --- Contribution margin, a non- GAAP measure $(2,550) $(2,144) $(3,516) ------- ------- ------- Games ----- Net revenue $5,823 $6,177 $6,039 Cost of revenue 1,937 2,054 1,845 Gross profit 3,886 4,123 4,194 Gross margin 67% 67% 69% Operating expenses 4,947 4,975 5,295 Operating income (loss), a GAAP measure $(1,061) $(852) $(1,101) Acquisitions related intangible asset amortization 27 27 25 Depreciation and amortization 141 146 179 --- --- --- Contribution margin, a non- GAAP measure $(893) $(679) $(897) ----- ----- ----- Corporate --------- Cost of revenue $37 $36 $(7) Gross profit (37) (36) 7 Gross margin N/A N/A N/A Operating expenses 4,295 3,244 7,372 Operating income (loss), a GAAP measure $(4,332) $(3,280) $(7,365) Other income (expense), net (226) (128) (287) Depreciation and amortization 187 260 361 Restructuring and other charges 1,564 192 385 Stock-based compensation 1,434 867 3,171 Lease exit and related charges - 48 831 --- --- --- Contribution margin, a non- GAAP measure $(1,373) $(2,041) $(2,904) ------- ------- -------
RealNetworks, Inc. and Subsidiaries Reconciliation of Net income (loss) to adjusted EBITDA, a non-GAAP measure (Unaudited) 2017 2016 ---- Q1 Q4 Q1 --- --- --- (in thousands) Reconciliation of GAAP Net income (loss) to adjusted EBITDA: Net income (loss) $(9,424) $(9,976) $(15,171) Income tax expense (benefit) 490 203 225 Interest income, net (128) (133) (117) Gain (loss) on investments, net - (2,495) (3) Equity in net loss of Rhapsody 748 5,904 - Acquisitions related intangible asset amortization 223 225 333 Depreciation and amortization 698 935 2,265 Restructuring and other charges 1,564 192 385 Stock-based compensation 1,434 867 3,171 Lease exit and related charges - 48 831 Adjusted EBITDA, a non-GAAP measure $(4,395) $(4,230) $(8,081) ------- ------- -------
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SOURCE RealNetworks, Inc.