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RealNetworks Announces Fourth Quarter And Full Year 2015 Results
PR Newswire
- Revenue of $29.9 million for Fourth Quarter and $125.3 million for Full Year;
- EBITDA Loss improves to $(4.2) million for Fourth Quarter from $(12.2) million in Third Quarter;
- New mobile carrier partnerships for RealTimes with Verizon and KDDI;
- Rhapsody paid subscribers grew 45% in 2015; and
- Cash and short-term investments of $99.1 million

SEATTLE, Feb. 9, 2016 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the fourth quarter ended December 31, 2015.

For the fourth quarter of 2015, revenue was $29.9 million compared to $30.8 million in the previous quarter and $35.5 million in the fourth quarter of 2014. Excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015, revenue for the previous quarter was $29.8 million and for the fourth quarter of 2014 was $33.7 million. For the full year 2015, revenue was $125.3 million, compared to $156.2 million in 2014. Excluding the Slingo and social casino games business, revenue for the full year 2015 was $120.4 million, compared to $149.4 million in 2014.

"2015 was an important transition year for RealNetworks, with significant successes," said Rob Glaser, Chairman and CEO of RealNetworks. "Our revenue is stabilizing and we've set the stage for growth in 2016.  By rationalizing our costs and cutting our losses significantly, we are also positioned for a return to profitability.

"We've signed up major new partners, such as KDDI and Verizon, and we're gaining traction with big tier 1 carriers around the world for our carrier-oriented products, such as RealTimes and Listen Ring Back Tones.  At the same time, we've simplified and focused our games business, going back to our roots in Casual Games and setting it up for sustained growth.

"We are also pleased with 45% subscriber growth in 2015 at the Rhapsody music service, in which we play a significant role and have a large ownership stake.

"While it's taken longer and required more capital to achieve these results than I had hoped when I came back to run RealNetworks three and a half years ago, I'm confident that we're on a path to succeed and create value in each of our businesses and for the company as a whole."

GAAP net loss for the fourth quarter of 2015 was $(8.4) million or $(0.23) per share, compared to $(20.8) million or $(0.58) per share in the fourth quarter of 2014. GAAP net loss for 2015 was $(81.8) million or $(2.26) per share, compared to $(71.8) million or $(2.00) in 2014.

Adjusted EBITDA for the fourth quarter of 2015 was a loss of $(4.2) million, compared to $(12.2) million for the previous quarter and $(15.2) million for the fourth quarter of 2014. Adjusted EBITDA for the full year 2015 was a loss of $(45.8) million, compared to $(56.6) million for the prior year. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of December 31, 2015, the company had $99.1 million in unrestricted cash, cash equivalents and short-term investments, compared to $112.2 million as of September 30, 2015.

Business Outlook

For the first quarter of 2016, RealNetworks expects total revenue in the range of $26 million to $29 million and an adjusted EBITDA loss for the first quarter in the range of $(6.0) million to $(9.0) 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: Fourth 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, March 1, 2016 by calling 866-421-5931 or +1-203-369-0814 (Passcode: 2092016).

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 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 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, 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)








Quarters Ended
December 31,


Year Ended
December 31,






2015


2014


2015


2014



 (in thousands, except per share data)










 Net revenue


$

29,922



$

35,506



$

125,296



$

156,212


 Cost of revenue


15,828



17,881



70,297



76,381


 Extinguishment of liability








(10,580)


           Gross profit


14,094



17,625



54,999



90,411











 Operating expenses:









       Research and development


8,945



12,655



43,626



52,765


       Sales and marketing


9,409



15,904



48,231



66,926


       General and administrative


3,237



8,384



24,549



34,001


       Restructuring and other charges


(284)



1,187



5,279



4,992


       Lease exit and related charges


293



177



2,501



880











           Total operating expenses


21,600



38,307



124,186



159,564











 Operating income (loss)


(7,506)



(20,682)



(69,187)



(69,153)











 Other income (expenses):









       Interest income, net


83



160



680



556


       Gain (loss) on investments, net


63





(159)



2,371


       Equity in net loss of Rhapsody


(690)



(282)



(14,521)



(4,452)


       Other income (expense), net


(122)



(10)



506



143











           Total other income (expense), net


(666)



(132)



(13,494)



(1,382)











 Income (loss) before income taxes


(8,172)



(20,814)



(82,681)



(70,535)


 Income tax expense (benefit)


241



24



(834)



1,280











 Net income (loss)


$

(8,413)



$

(20,838)



$

(81,847)



$

(71,815)











 Basic net income (loss) per share


$

(0.23)



$

(0.58)



$

(2.26)



$

(2.00)


 Diluted net income (loss) per share


$

(0.23)



$

(0.58)



$

(2.26)



$

(2.00)











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


36,257



36,052



36,165



35,947


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


36,257



36,052



36,165



35,947




















 

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






December 31,
2015


December 31,
2014


 (in thousands)

ASSETS

 Current assets:




 Cash and cash equivalents

$

47,315



$

103,253


 Short-term investments

51,814



58,453


 Trade accounts receivable, net

22,511



15,257


 Deferred costs, current portion

460



702


 Deferred tax assets, current



652


 Prepaid expenses and other current assets

7,140



8,980


    Total current assets

129,240



187,297






Equipment, software, and leasehold improvements, at cost:




 Equipment and software

66,702



74,100


 Leasehold improvements

3,122



3,590


    Total equipment, software, and leasehold improvements

69,824



77,690


 Less accumulated depreciation and amortization

61,024



61,442


    Net equipment, software, and leasehold improvements

8,800



16,248






 Restricted cash equivalents and investments

2,890



3,000


 Investment in and advances to Rhapsody



10,000


 Available for sale securities

1,721



2,676


 Other assets

2,307



2,299


 Deferred costs, non-current portion

212



316


 Deferred tax assets, net, non-current portion

957



999


 Other intangible assets, net

2,136



10,109


 Goodwill

13,080



17,355






    Total assets

$

161,343



$

250,299






 LIABILITIES AND SHAREHOLDERS' EQUITY





 Current liabilities:




 Accounts payable

$

17,050



$

18,653


 Accrued and other current liabilities

17,320



25,286


 Deferred tax liabilities, net, current portion



1,628


 Deferred revenue, current portion

3,497



5,301


    Total current liabilities

37,867



50,868






 Deferred revenue, non-current portion

105



235


 Deferred rent

620



1,215


 Deferred tax liabilities, net, non-current portion

88



702


 Other long-term liabilities

1,980



81






    Total liabilities

40,660



53,101










 Shareholders' equity

120,683



197,198






 Total liabilities and shareholders' equity

$

161,343



$

250,299


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




Year Ended

December 31,


2015


2014


 (in thousands)


 Cash flows from operating activities:




 Net income (loss)

$

(81,847)



$

(71,815)


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

  Depreciation and amortization

10,410



11,959


  Stock-based compensation

4,698



5,204


  Extinguishment of liability



(10,580)


  Equity in net loss of Rhapsody

14,521



4,452


  Accrued loss (gain) on excess office facilities

2,501



668


  Deferred income taxes, net

(1,558)



(237)


  Loss (gain) on investments, net

159



(2,371)


  Realized translation gain

(264)



(48)


  Fair value of warrants, net of mark to market adjustments

(1,053)




  Net change in certain operating assets and liabilities

(16,549)



2,524


    Net cash provided by (used in) operating activities

(68,982)



(60,244)


 Cash flows from investing activities:




Purchases of equipment, software, and leasehold improvements

(1,319)



(2,460)


  Proceeds from sale of available for sale securities

459



2,754


  Purchases of short-term investments

(72,136)



(81,216)


  Proceeds from sales and maturities of short-term investments

78,775



97,683


  Decrease (increase) in restricted cash equivalents and investments, net

110




  Acquisitions, net of cash acquired

(161)



(733)


  Advance to Rhapsody

(5,000)




  Receipt of payment from Rhapsody

5,000




  Proceeds from the sale of Slingo and Social Casino business

10,000




  Other



(467)


   Net cash provided by (used in) investing activities

15,728



15,561


 Cash flows from financing activities:




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

426



812


  Tax payments from shares withheld upon vesting of restricted stock

(85)



(407)


  Payment of contingent consideration



(1,042)


   Net cash provided by (used in) financing activities

341



(637)


 Effect of exchange rate changes on cash and cash equivalents

(3,025)



(2,662)


   Net increase (decrease) in cash and cash equivalents

(55,938)



(47,982)


 Cash and cash equivalents, beginning of period

103,253



151,235


 Cash and cash equivalents, end of period

$

47,315



$

103,253


 


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












2015




2014


 YTD


 Q4


 Q3


 Q2


Q1


 YTD


 Q4


 Q3


 Q2


 Q1


 (in thousands)

Net Revenue by Line of Business




















RealPlayer Group (A)

$

29,141



$

7,219



$

6,565



$

7,344



$

8,013



$

39,201



$

8,865



$

6,565



$

8,556



$

15,215


Mobile Entertainment (B)

65,407



15,998



16,414



18,515



14,480



79,901



17,616



19,190



23,182



19,913


Games (C)

30,748



6,705



7,844



8,095



8,104



37,110



9,025



8,402



9,087



10,596


     Total net revenue

$

125,296



$

29,922



$

30,823



$

33,954



$

30,597



$

156,212



$

35,506



$

34,157



$

40,825



$

45,724






















Net Revenue by Product




















RealPlayer Group




















- License (D)

$

16,475



$

3,967



$

3,628



$

4,208



$

4,672



$

16,042



$

4,496



$

3,255



$

3,273



$

5,018


- Subscriptions (E)

9,485



2,425



2,217



2,435



2,408



10,717



2,691



2,680



2,569



2,777


- Media Properties (F)

3,181



827



720



701



933



12,442



1,678



630



2,714



7,420






















Mobile Entertainment




















- SaaS (G)

63,386



15,786



16,147



18,155



13,298



73,284



16,727



17,919



20,175



18,463


- Technology License & Other (H)

2,021



212



267



360



1,182



6,617



889



1,271



3,007



1,450






















Games




















- License (I)

15,174



3,268



4,128



3,943



3,835



14,090



3,854



2,988



3,399



3,849


- Subscriptions (J)

13,300



3,126



3,231



3,373



3,570



17,948



3,947



4,320



4,440



5,241


- Media Properties (K)

2,274



311



485



779



699



5,072



1,224



1,094



1,248



1,506






















     Total net revenue

$

125,296



$

29,922



$

30,823



$

33,954



$

30,597



$

156,212



$

35,506



$

34,157



$

40,825



$

45,724






















Net Revenue by Geography




















United States

$

46,893



$

10,781



$

11,460



$

12,303



$

12,349



$

61,660



$

13,860



$

12,280



$

15,092



$

20,428


Rest of world

78,403



19,141



19,363



21,651



18,248



94,552



21,646



21,877



25,733



25,296


     Total net revenue

$

125,296



$

29,922



$

30,823



$

33,954



$

30,597



$

156,212



$

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 RealPlayer Cloud, 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



Q4


Q3


Q4


YTD


YTD



 (in thousands)

RealPlayer Group






















Net revenue


$

7,219



$

6,565



$

8,865



$

29,141



$

39,201


Cost of revenue


3,840



3,902



3,804



16,171



14,508


Gross profit


3,379



2,663



5,061



12,970



24,693













   Gross margin


47

%


41

%


57

%


45

%


63

%












Operating expenses


10,281



11,492



13,074



47,149



55,742


Operating income (loss)


$

(6,902)



$

(8,829)



$

(8,013)



$

(34,179)



$

(31,049)













  Adjusted EBITDA


$

(5,780)



$

(8,224)



$

(7,320)



$

(31,290)



$

(28,474)













Mobile Entertainment






















Net revenue


$

15,998



$

16,414



$

17,616



$

65,407



$

79,901


Cost of revenue


10,109



11,518



11,525



44,212



50,399


Gross profit


5,889



4,896



6,091



21,195



29,502













   Gross margin


37

%


30

%


35

%


32

%


37

%












Operating expenses


4,103



5,219



7,199



20,256



33,325


Operating income (loss)


$

1,786



$

(323)



$

(1,108)



$

939



$

(3,823)













  Adjusted EBITDA


$

2,565



$

473



$

24



$

4,276



$

940













Games






















Net revenue


$

6,705



$

7,844



$

9,025



$

30,748



$

37,110


Cost of revenue


1,698



2,513



2,655



9,291



11,074


Gross profit


5,007



5,331



6,370



21,457



26,036













   Gross margin


75

%


68

%


71

%


70

%


70

%












Operating expenses


5,253



6,431



9,977



29,086



37,170


Operating income (loss)


$

(246)



$

(1,100)



$

(3,607)



$

(7,629)



$

(11,134)













   Adjusted EBITDA


$

(25)



$

(716)



$

(3,024)



$

(5,878)



$

(8,742)













Corporate






















Net revenue


$



$



$



$



$


Cost of revenue


181



157



(103)



623



400


Extinguishment of liability










(10,580)


Gross profit


(181)



(157)



103



(623)



10,180













   Gross margin


N/A



N/A



N/A



N/A



N/A













Operating expenses


1,963



11,553



8,057



27,695



33,327


Operating income (loss)


$

(2,144)



$

(11,710)



$

(7,954)



$

(28,318)



$

(23,147)













   Adjusted EBITDA


$

(984)



$

(3,727)



$

(4,879)



$

(12,901)



$

(20,279)













Total






















Net revenue


$

29,922



$

30,823



$

35,506



$

125,296



$

156,212


Cost of revenue


15,828



18,090



17,881



70,297



76,381


Extinguishment of liability










(10,580)


Gross profit


14,094



12,733



17,625



54,999



90,411













   Gross margin


47

%


41

%


50

%


44

%


58

%












Operating expenses


21,600



34,695



38,307



124,186



159,564


Operating income (loss)


$

(7,506)



$

(21,962)



$

(20,682)



$

(69,187)



$

(69,153)













   Adjusted EBITDA


$

(4,224)



$

(12,194)



$

(15,199)



$

(45,793)



$

(56,555)


 

RealNetworks, Inc. and Subsidiaries
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment
(Unaudited)










2015


2014


2015


2014


 Q4


 Q3


 Q4


 YTD


 YTD


 (in thousands)

RealPlayer Group




















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
















Operating income (loss)

$

(6,902)



$

(8,829)



$

(8,013)



$

(34,179)



$

(31,049)


Acquisitions related intangible asset amortization

84



86



96



343



384


Depreciation and amortization

1,038



519



597



2,546



2,191


   Adjusted EBITDA

$

(5,780)



$

(8,224)



$

(7,320)



$

(31,290)



$

(28,474)












Mobile Entertainment




















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
















Operating income (loss)

$

1,786



$

(323)



$

(1,108)



$

939



$

(3,823)


Acquisitions related intangible asset amortization

295



303



271



1,201



1,793


Depreciation and amortization

484



493



861



2,136



2,970


   Adjusted EBITDA

$

2,565



$

473



$

24



$

4,276



$

940












Games




















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
















Operating income (loss)

$

(246)



$

(1,100)



$

(3,607)



$

(7,629)



$

(11,134)


Acquisitions related intangible asset amortization

24



170



314



799



1,256


Depreciation and amortization

197



214



269



952



1,136


   Adjusted EBITDA

$

(25)



$

(716)



$

(3,024)



$

(5,878)



$

(8,742)












Corporate




















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
















Operating income (loss)

$

(2,144)



$

(11,710)



$

(7,954)



$

(28,318)



$

(23,147)


Other income (expense), net

(122)



297



(10)



506



143


Depreciation and amortization

336



1,273



675



2,433



2,229


Lease exit and related charges

293



2,121



177



2,501



880


Restructuring and other charges

(284)



3,114



1,187



5,279



4,992


Stock-based compensation

937



1,178



1,046



4,698



5,204


Extinguishment of liability









(10,580)


   Adjusted EBITDA

$

(984)



$

(3,727)



$

(4,879)



$

(12,901)



$

(20,279)












Total




















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
















Operating income (loss)

$

(7,506)



$

(21,962)



$

(20,682)



$

(69,187)



$

(69,153)


Other income (expense), net

(122)



297



(10)



506



143


Acquisitions related intangible asset amortization

403



559



681



2,343



3,433


Depreciation and amortization

2,055



2,499



2,402



8,067



8,526


Lease exit and related charges

293



2,121



177



2,501



880


Restructuring and other charges

(284)



3,114



1,187



5,279



4,992


Stock-based compensation

937



1,178



1,046



4,698



5,204


Extinguishment of liability









(10,580)


   Adjusted EBITDA

$

(4,224)



$

(12,194)



$

(15,199)



$

(45,793)



$

(56,555)


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-fourth-quarter-and-full-year-2015-results-300217618.html

SOURCE RealNetworks, Inc.

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