SEATTLE, Aug. 5, 2020
/PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in
digital media software and services, today announced its financial
results for the second quarter ended June
30, 2020.
- Consolidated revenue of $40.4
million; core revenue without Napster of $17.1 million, up 9% year-over-year
- Games revenue up 23% year-over-year and 12%
quarter-over-quarter driven by success of free-to-play
strategy
- Introduced two innovative new AI-powered consumer PC
software products: RealPlayer® 20/20 and StarSearch™ by
Real®
- SAFR was awarded two Phase II Small Business Innovation
Research (SBIR) contracts with the United States Air Force worth
$1.9 million
- The RealNetworks Foundation committed $1 million in 2020 grants to help address racial
injustice and the COVID-19 Pandemic
- Appointed Mike Ensing
President and Chief Operating Officer, succeeding
Max Pellegrini
Management Commentary
"In Q2 Real delivered solid
results. We were very pleased with our strong operational execution
in the first full quarter of living and working during the global
pandemic," said Rob Glaser, Founder,
Chairman, and Chief Executive Officer of RealNetworks. "We
generated a 9% year-over-year increase in our core revenue when not
including Napster. In addition, we narrowed our adjusted EBITDA
loss, our fourth consecutive quarter of year-over-year improvement
in this metric. We are putting an appropriate amount of fuel into
our growth businesses while also closely managing our overall
expenses."
Mr. Glaser continued, "We were excited to introduce two new
consumer products in commemoration of the 25th
anniversary of the streaming industry. RealPlayer® 20/20 and
StarSearch™ by Real® utilize the power of AI and our SAFR computer
vision platform to make streaming in today's world even better. In
addition, we are continuing to enhance our world-class SAFR
platform and service focused primarily on the traditional security
and safety markets along with innovations focused on new needs at
the intersection of public health and public safety. In particular,
we were honored to be awarded two SBIR contracts by the U.S. Air
Force. These contracts both enable us to continue to enhance
the SAFR platform and also support the important missions of our
U.S. armed forces while enhancing their safety."
Second Quarter 2020 Financial Highlights
- Revenue was $40.4 million
compared to $43.1 million in the
prior quarter and $44.2 million in
the prior year period. RealNetworks' core revenue without Napster
was $17.1 million, up 2% from
$16.8 million in the prior quarter
and up 9% from $15.7 million in the
prior year period.
- Games revenue was $7.5 million,
up 12% compared to $6.6 million in
the prior quarter and up 23% compared to $6.0 million in the prior year period.
- Gross profit margin was 43%, down from 44% in the prior quarter
and up from 38% in the prior year period. RealNetworks' core gross
profit margin without Napster was 75%, down from 76% in the prior
quarter and up from 73% in the prior year period.
- Operating expenses decreased $1.8
million, or 7%, from the prior quarter and decreased
$4.1 million, or 15%, from the prior
year period.
- Net loss attributable to RealNetworks was $(5.1) million, or $(0.13) per diluted share, compared to a net loss
of $(4.6) million, or $(0.12) per diluted share, in the prior quarter
and a net loss of $(9.2) million, or
$(0.24) per diluted share, in the
prior year period.
- Adjusted EBITDA was a loss of $(2.2)
million compared to a loss of $(3.3)
million in the prior quarter and a loss of $(6.3) million in the prior year period.
- At June 30, 2020, the Company had
$19.7 million in unrestricted cash
and cash equivalents compared to $19.0
million at March 31,
2020.
Corporate Developments
- On June 1, 2020, the Company
received a second letter from Nasdaq Staff indicating that the
Company had regained compliance with Nasdaq Listing Rule
5450(a)(1). Nasdaq Staff further indicated that the matter is now
closed.
- On July 9, 2020, The RealNetworks
Foundation, a philanthropic arm of RealNetworks, Inc., allocated an
additional $1 million in grants for
2020 to help address the immediate needs stemming from racial
injustice and COVID-19, two historic challenges that have
disproportionally impacted communities of color. The RealNetworks
Foundation has directed $500,000 to
each cause, applying the funds to both local and national
recipients. More information on the RealNetworks Foundation can be
found at https://www.realnetworks.com/realnetworks-foundation.
- On August 4, 2020, the Company
announced the appointment of Mike
Ensing to the position of President and Chief Operating
Officer, succeeding Max Pellegrini.
Mr. Ensing previously served as interim CFO and as a strategic
advisor to the Company from early January to early May of this
year. Mr. Ensing will assume worldwide responsibility for the
operations of Real's core businesses and will help guide strategic
decision-making.
Business Outlook
Given the ongoing uncertainty surrounding the global economy and
the future impact of COVID-19, RealNetworks is not providing
guidance for the third quarter ending September 30, 2020.
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
1-855-327-6837 (United States) or
1-631-891-4304 (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, August 26,
2020, by dialing 1-844-512-2921 (United States) or 1-412-317-6671
(International) and entering the replay pin number: 10010362.
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 legacy 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. SAFR (www.safr.com) is the
world's premier facial recognition platform for live video. Leading
in real-world performance and accuracy as evidenced in testing by
NIST, SAFR enables new applications for security, convenience, and
analytics. For information about our other products, visit
www.realnetworks.com.
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)
including noncontrolling interests 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, use of loan proceeds, our ability to
maintain compliance with Nasdaq listing standards, and the growth
and future prospects relating to our Napster segment. 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; potential outcomes and effects of claims and
legal proceedings; risks associated with key customer or strategic
relationships and business acquisitions; challenges caused by the
COVID-19 pandemic; disruptions in the global financial markets,
including changes in consumer spending and impacts to credit
availability; fluctuations in foreign currencies; and unique risk
factors that relate to our Napster segment, such as risks stemming
from its streaming music service and related music royalties. More
information about potential risk factors that could affect our
business and financial results is included in RealNetworks' annual
report on Form 10-K for the most recent year ended December 31, 2019, 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
Kimberly Orlando, Addo Investor
Relations
310-829-5400
IR@realnetworks.com
RNWK-F
RealNetworks, Inc.
and Subsidiaries
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
|
Quarter
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
40,424
|
|
|
$
|
44,248
|
|
|
$
|
83,569
|
|
|
$
|
83,720
|
|
Cost of
revenue
|
23,033
|
|
|
27,282
|
|
|
47,209
|
|
|
52,152
|
|
Gross profit
|
17,391
|
|
|
16,966
|
|
|
36,360
|
|
|
31,568
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
7,802
|
|
|
8,876
|
|
|
16,420
|
|
|
17,709
|
|
Sales and
marketing
|
6,927
|
|
|
8,360
|
|
|
15,044
|
|
|
16,502
|
|
General and
administrative
|
6,680
|
|
|
8,392
|
|
|
13,793
|
|
|
16,756
|
|
Restructuring
and other charges
|
881
|
|
|
729
|
|
|
1,090
|
|
|
896
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
22,290
|
|
|
26,357
|
|
|
46,347
|
|
|
51,863
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
(4,899)
|
|
|
(9,391)
|
|
|
(9,987)
|
|
|
(20,295)
|
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
Interest
expense
|
(278)
|
|
|
(43)
|
|
|
(540)
|
|
|
(209)
|
|
Interest
income
|
23
|
|
|
40
|
|
|
28
|
|
|
117
|
|
Gain (loss) on
equity investments, net
|
(53)
|
|
|
—
|
|
|
(53)
|
|
|
12,338
|
|
Other income
(expenses), net
|
(134)
|
|
|
183
|
|
|
661
|
|
|
310
|
|
|
|
|
|
|
|
|
|
Total other income (expenses), net
|
(442)
|
|
|
180
|
|
|
96
|
|
|
12,556
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
(5,341)
|
|
|
(9,211)
|
|
|
(9,891)
|
|
|
(7,739)
|
|
Income tax
expense
|
213
|
|
|
244
|
|
|
352
|
|
|
502
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
(5,554)
|
|
|
(9,455)
|
|
|
(10,243)
|
|
|
(8,241)
|
|
Net income (loss)
attributable to noncontrolling interests
|
(442)
|
|
|
(253)
|
|
|
(489)
|
|
|
(572)
|
|
Net income (loss)
attributable to RealNetworks
|
$
|
(5,112)
|
|
|
$
|
(9,202)
|
|
|
$
|
(9,754)
|
|
|
$
|
(7,669)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to RealNetworks- Basic:
|
$
|
(0.13)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.26)
|
|
|
$
|
(0.20)
|
|
Net income (loss) per
share attributable to RealNetworks- Diluted:
|
$
|
(0.13)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.26)
|
|
|
$
|
(0.20)
|
|
|
|
|
|
|
|
|
|
Shares used to
compute basic net income (loss) per share
|
38,243
|
|
|
37,948
|
|
|
38,236
|
|
|
37,885
|
|
Shares used to
compute diluted net income (loss) per share
|
38,243
|
|
|
37,948
|
|
|
38,236
|
|
|
37,885
|
|
RealNetworks, Inc.
and Subsidiaries
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
|
June 30,
2020
|
|
December
31,
2019
|
|
(in
thousands)
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
19,688
|
|
|
$
|
16,805
|
|
Trade accounts
receivable, net
|
28,289
|
|
|
29,507
|
|
Deferred costs,
current portion
|
743
|
|
|
823
|
|
Prepaid expenses
and other current assets
|
5,688
|
|
|
7,445
|
|
Total
current assets
|
54,408
|
|
|
54,580
|
|
|
|
|
|
Equipment and
software
|
30,862
|
|
|
32,167
|
|
Leasehold
improvements
|
2,916
|
|
|
3,311
|
|
Total
equipment, software, and leasehold improvements
|
33,778
|
|
|
35,478
|
|
Less accumulated
depreciation and amortization
|
31,297
|
|
|
32,657
|
|
Net
equipment, software, and leasehold improvements
|
2,481
|
|
|
2,821
|
|
|
|
|
|
Operating lease
assets
|
10,058
|
|
|
11,592
|
|
Restricted cash
equivalents
|
5,374
|
|
|
5,374
|
|
Other
assets
|
992
|
|
|
1,891
|
|
Deferred costs,
non-current portion
|
1,004
|
|
|
1,021
|
|
Deferred tax
assets, net
|
756
|
|
|
761
|
|
Other
intangible assets, net
|
16,931
|
|
|
19,286
|
|
Goodwill
|
62,336
|
|
|
62,428
|
|
|
|
|
|
Total
assets
|
$
|
154,340
|
|
|
$
|
159,754
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
4,125
|
|
|
$
|
4,927
|
|
Accrued
royalties, fulfillment and other current liabilities
|
75,865
|
|
|
77,303
|
|
Deferred
revenue, current portion
|
6,181
|
|
|
6,620
|
|
Notes
payable
|
4,495
|
|
|
7,331
|
|
Total
current liabilities
|
90,666
|
|
|
96,181
|
|
|
|
|
|
Deferred
revenue, non-current portion
|
396
|
|
|
96
|
|
Deferred tax
liabilities, net
|
1,122
|
|
|
1,172
|
|
Long-term lease
liabilities
|
7,088
|
|
|
8,466
|
|
Long-term
debt
|
8,495
|
|
|
3,900
|
|
Other long-term
liabilities
|
8,232
|
|
|
11,666
|
|
|
|
|
|
Total
liabilities
|
115,999
|
|
|
121,481
|
|
|
|
|
|
Total
shareholders' equity
|
39,332
|
|
|
38,775
|
|
|
|
|
|
Noncontrolling
interests
|
(991)
|
|
|
(502)
|
|
|
|
|
|
Total
equity
|
38,341
|
|
|
38,273
|
|
|
|
|
|
Total
liabilities and equity
|
$
|
154,340
|
|
|
$
|
159,754
|
|
RealNetworks, Inc.
and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Six Months
Ended
June 30,
|
|
2020
|
|
2019
|
|
(in
thousands)
|
|
Cash flows from
operating activities:
|
|
|
|
Net income (loss)
including noncontrolling interests
|
$
|
(10,243)
|
|
|
$
|
(8,241)
|
|
Adjustments to
reconcile net income (loss) including noncontrolling interests to
net cash used in operating activities:
|
|
|
|
Depreciation and
amortization
|
2,832
|
|
|
2,959
|
|
Stock-based
compensation
|
703
|
|
|
1,917
|
|
(Gain) loss on equity
investments, net
|
53
|
|
|
(12,338)
|
|
Foreign currency
(gain) loss
|
(612)
|
|
|
(315)
|
|
Fair value adjustments
to contingent consideration liability
|
(200)
|
|
|
300
|
|
Net change in certain
operating assets and liabilities
|
(1,110)
|
|
|
(381)
|
|
Net cash used
in operating activities
|
(8,577)
|
|
|
(16,099)
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
equipment, software, and leasehold improvements
|
(326)
|
|
|
(873)
|
|
Proceeds from sales
and maturities of short-term investments
|
—
|
|
|
24
|
|
Acquisition, net of
cash acquired
|
—
|
|
|
12,260
|
|
|
|
|
|
Net cash (used
in) provided by investing activities
|
(326)
|
|
|
11,411
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of common stock (stock options and stock purchase plan)
|
—
|
|
|
144
|
|
Proceeds from issuance
of preferred stock
|
10,000
|
|
|
—
|
|
Tax payments from
shares withheld upon vesting of restricted stock
|
(5)
|
|
|
(287)
|
|
Proceeds from notes
payable and long-term debt
|
18,776
|
|
|
19,760
|
|
Repayments of notes
payable and long-term debt
|
(16,889)
|
|
|
(24,018)
|
|
Other financing
activities
|
—
|
|
|
450
|
|
Net cash
provided by (used in) financing activities
|
11,882
|
|
|
(3,951)
|
|
Effect of
exchange rate changes on cash, cash equivalents and restricted
cash
|
(96)
|
|
|
(89)
|
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
2,883
|
|
|
(8,728)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
22,179
|
|
|
37,191
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
25,062
|
|
|
$
|
28,463
|
|
RealNetworks, Inc.
and Subsidiaries
Supplemental
Financial Information
(Unaudited)
|
|
|
2020
|
|
2019
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
(in
thousands)
|
Net Revenue by
Segment
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Media
(A)
|
$
|
3,159
|
|
|
$
|
3,495
|
|
|
$
|
4,432
|
|
|
$
|
3,632
|
|
|
$
|
2,620
|
|
|
$
|
2,486
|
|
Mobile Services
(B)
|
6,461
|
|
|
6,690
|
|
|
6,312
|
|
|
6,895
|
|
|
6,997
|
|
|
6,939
|
|
Games (C)
|
7,465
|
|
|
6,637
|
|
|
6,567
|
|
|
7,164
|
|
|
6,048
|
|
|
5,710
|
|
Napster
(D)
|
23,339
|
|
|
26,323
|
|
|
26,089
|
|
|
27,302
|
|
|
28,583
|
|
|
24,337
|
|
Total net
revenue
|
$
|
40,424
|
|
|
$
|
43,145
|
|
|
$
|
43,400
|
|
|
$
|
44,993
|
|
|
$
|
44,248
|
|
|
$
|
39,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Product
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Media
|
|
|
|
|
|
|
|
|
|
|
|
- Software License
(E)
|
$
|
1,702
|
|
|
$
|
2,020
|
|
|
$
|
2,856
|
|
|
$
|
1,987
|
|
|
$
|
944
|
|
|
$
|
735
|
|
- Subscription
Services (F)
|
898
|
|
|
929
|
|
|
992
|
|
|
1,028
|
|
|
1,040
|
|
|
1,088
|
|
- Product Sales
(G)
|
261
|
|
|
222
|
|
|
193
|
|
|
207
|
|
|
206
|
|
|
219
|
|
- Advertising &
Other (H)
|
298
|
|
|
324
|
|
|
391
|
|
|
410
|
|
|
430
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Services
|
|
|
|
|
|
|
|
|
|
|
|
- Software License
(I)
|
972
|
|
|
831
|
|
|
657
|
|
|
888
|
|
|
957
|
|
|
599
|
|
- Subscription
Services (J)
|
5,489
|
|
|
5,859
|
|
|
5,655
|
|
|
6,007
|
|
|
6,040
|
|
|
6,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Games
|
|
|
|
|
|
|
|
|
|
|
|
- Subscription
Services (K)
|
2,730
|
|
|
2,770
|
|
|
3,007
|
|
|
3,056
|
|
|
3,073
|
|
|
2,985
|
|
- Product Sales
(L)
|
3,712
|
|
|
2,978
|
|
|
2,580
|
|
|
3,078
|
|
|
2,177
|
|
|
1,988
|
|
- Advertising &
Other (M)
|
1,023
|
|
|
889
|
|
|
980
|
|
|
1,030
|
|
|
798
|
|
|
737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Napster
|
|
|
|
|
|
|
|
|
|
|
|
- Subscription
Services (N)
|
23,339
|
|
|
26,323
|
|
|
26,089
|
|
|
27,302
|
|
|
28,583
|
|
|
24,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
revenue
|
$
|
40,424
|
|
|
$
|
43,145
|
|
|
$
|
43,400
|
|
|
$
|
44,993
|
|
|
$
|
44,248
|
|
|
$
|
39,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Geography
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$
|
20,785
|
|
|
$
|
22,420
|
|
|
$
|
21,053
|
|
|
$
|
22,015
|
|
|
$
|
21,322
|
|
|
$
|
18,970
|
|
Rest of
world
|
19,639
|
|
|
20,725
|
|
|
22,347
|
|
|
22,978
|
|
|
22,926
|
|
|
20,502
|
|
Total net
revenue
|
$
|
40,424
|
|
|
$
|
43,145
|
|
|
$
|
43,400
|
|
|
$
|
44,993
|
|
|
$
|
44,248
|
|
|
$
|
39,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
(D) The Napster
segment primarily includes revenue from subscription music
offerings from on-demand streaming services and conditional
downloads. Napster revenues are included in our consolidated
results from the January 18, 2019 acquisition date
forward.
|
Net Revenue by
Product
|
|
|
|
|
|
|
|
|
|
|
|
(E) Software
licensing revenue within Consumer Media includes revenues from
licenses of our video codec technologies.
|
(F) Subscriptions
revenue within Consumer Media includes revenue from subscriptions
such as our RealPlayer Plus and SuperPass offerings.
|
(G) Product sales
within Consumer Media includes sales of RealPlayer Plus software to
consumers.
|
(H) Advertising &
other revenue within Consumer Media includes distribution of
third-party software products and advertising on RealPlayer
websites.
|
(I) Software license
revenue within Mobile Services includes revenue from our integrated
RealTimes platform and our facial recognition platform,
SAFR.
|
(J) Subscription
services revenue within Mobile Services includes revenue from
ringback tones and our messaging platform services, as well as from
related professional services provided to mobile
carriers.
|
(K) Subscription
services revenue within Games includes revenue from online games
subscriptions.
|
(L) Product sales
revenue within Games includes revenue from player purchases of
in-game virtual goods, retail and wholesale games-related revenue,
sales of mobile games.
|
(M) Advertising &
other revenue within Games includes advertising on games sites and
social network sites.
|
(N) Subscription
services revenue within Napster includes music tracks by way of
on-demand streaming and conditional downloads offered directly to
end consumers and distribution partners.
|
RealNetworks, Inc.
and Subsidiaries
Segment Results of
Operations and Reconciliation to non-GAAP Contribution
Margin
(Unaudited)
|
|
|
2020
|
|
2019
|
2020
|
|
2019
|
|
Q2
|
|
Q1
|
|
Q2
|
|
YTD
|
|
YTD
|
|
(in
thousands)
|
Consumer
Media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
3,159
|
|
|
$
|
3,495
|
|
|
$
|
2,620
|
|
|
$
|
6,654
|
|
|
$
|
5,106
|
|
Cost of
revenue
|
519
|
|
|
611
|
|
|
803
|
|
|
1,130
|
|
|
1,636
|
|
Gross
profit
|
2,640
|
|
|
2,884
|
|
|
1,817
|
|
|
5,524
|
|
|
3,470
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
84
|
%
|
|
83
|
%
|
|
69
|
%
|
|
83
|
%
|
|
68
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
2,204
|
|
|
2,458
|
|
|
2,877
|
|
|
4,662
|
|
|
5,996
|
|
Operating income
(loss), a GAAP measure
|
$
|
436
|
|
|
$
|
426
|
|
|
$
|
(1,060)
|
|
|
$
|
862
|
|
|
$
|
(2,526)
|
|
Depreciation and
amortization
|
15
|
|
|
13
|
|
|
56
|
|
|
28
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin, a
non-GAAP measure
|
$
|
451
|
|
|
$
|
439
|
|
|
$
|
(1,004)
|
|
|
$
|
890
|
|
|
$
|
(2,416)
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
6,461
|
|
|
$
|
6,690
|
|
|
$
|
6,997
|
|
|
$
|
13,151
|
|
|
$
|
13,936
|
|
Cost of
revenue
|
1,782
|
|
|
1,696
|
|
|
1,865
|
|
|
3,478
|
|
|
3,913
|
|
Gross
profit
|
4,679
|
|
|
4,994
|
|
|
5,132
|
|
|
9,673
|
|
|
10,023
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
72
|
%
|
|
75
|
%
|
|
73
|
%
|
|
74
|
%
|
|
72
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
5,682
|
|
|
7,588
|
|
|
7,438
|
|
|
13,270
|
|
|
14,999
|
|
Operating income
(loss), a GAAP measure
|
$
|
(1,003)
|
|
|
$
|
(2,594)
|
|
|
$
|
(2,306)
|
|
|
$
|
(3,597)
|
|
|
$
|
(4,976)
|
|
Depreciation and
amortization
|
102
|
|
|
98
|
|
|
106
|
|
|
200
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin, a
non-GAAP measure
|
$
|
(901)
|
|
|
$
|
(2,496)
|
|
|
$
|
(2,200)
|
|
|
$
|
(3,397)
|
|
|
$
|
(4,639)
|
|
|
|
|
|
|
|
|
|
|
|
Games
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
7,465
|
|
|
$
|
6,637
|
|
|
$
|
6,048
|
|
|
$
|
14,102
|
|
|
$
|
11,758
|
|
Cost of
revenue
|
1,958
|
|
|
1,794
|
|
|
1,655
|
|
|
3,752
|
|
|
3,325
|
|
Gross
profit
|
5,507
|
|
|
4,843
|
|
|
4,393
|
|
|
10,350
|
|
|
8,433
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
74
|
%
|
|
73
|
%
|
|
73
|
%
|
|
73
|
%
|
|
72
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
4,976
|
|
|
4,923
|
|
|
5,288
|
|
|
9,899
|
|
|
10,325
|
|
Operating income
(loss), a GAAP measure
|
$
|
531
|
|
|
$
|
(80)
|
|
|
$
|
(895)
|
|
|
$
|
451
|
|
|
$
|
(1,892)
|
|
Acquisitions related
intangible asset amortization
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
Depreciation and
amortization
|
66
|
|
|
138
|
|
|
84
|
|
|
204
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin, a
non-GAAP measure
|
$
|
597
|
|
|
$
|
58
|
|
|
$
|
(811)
|
|
|
$
|
655
|
|
|
$
|
(1,702)
|
|
|
|
|
|
|
|
|
|
|
|
Napster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
$
|
23,339
|
|
|
$
|
26,323
|
|
|
$
|
28,583
|
|
|
$
|
49,662
|
|
|
$
|
52,920
|
|
Cost of
revenue
|
18,770
|
|
|
20,072
|
|
|
23,026
|
|
|
38,842
|
|
|
43,422
|
|
Gross
profit
|
4,569
|
|
|
6,251
|
|
|
5,557
|
|
|
10,820
|
|
|
9,498
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
20
|
%
|
|
24
|
%
|
|
19
|
%
|
|
22
|
%
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
6,609
|
|
|
6,461
|
|
|
6,638
|
|
|
13,070
|
|
|
12,170
|
|
Operating income
(loss), a GAAP measure
|
$
|
(2,040)
|
|
|
$
|
(210)
|
|
|
$
|
(1,081)
|
|
|
$
|
(2,250)
|
|
|
$
|
(2,672)
|
|
Acquisitions related
intangible asset amortization
|
1,124
|
|
|
1,125
|
|
|
1,129
|
|
|
2,249
|
|
|
2,072
|
|
Depreciation and
amortization
|
59
|
|
|
32
|
|
|
69
|
|
|
91
|
|
|
184
|
|
Restructuring and
other charges
|
177
|
|
|
122
|
|
|
—
|
|
|
299
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin, a
non-GAAP measure
|
$
|
(680)
|
|
|
$
|
1,069
|
|
|
$
|
117
|
|
|
$
|
389
|
|
|
$
|
(416)
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
(67)
|
|
|
$
|
7
|
|
|
$
|
(144)
|
|
Gross
profit
|
(4)
|
|
|
(3)
|
|
|
67
|
|
|
(7)
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
2,819
|
|
|
2,627
|
|
|
4,116
|
|
|
5,446
|
|
|
8,373
|
|
Operating income
(loss), a GAAP measure
|
$
|
(2,823)
|
|
|
$
|
(2,630)
|
|
|
$
|
(4,049)
|
|
|
$
|
(5,453)
|
|
|
$
|
(8,229)
|
|
Other income
(expense), net
|
(134)
|
|
|
795
|
|
|
183
|
|
|
661
|
|
|
310
|
|
Foreign currency
(gain) loss
|
155
|
|
|
(767)
|
|
|
(164)
|
|
|
(612)
|
|
|
(315)
|
|
Depreciation and
amortization
|
30
|
|
|
30
|
|
|
33
|
|
|
60
|
|
|
66
|
|
Fair value
adjustments to contingent consideration liability
|
100
|
|
|
(300)
|
|
|
300
|
|
|
(200)
|
|
|
300
|
|
Restructuring and
other charges
|
704
|
|
|
87
|
|
|
729
|
|
|
791
|
|
|
896
|
|
Stock-based
compensation
|
323
|
|
|
380
|
|
|
533
|
|
|
703
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
|
Contribution margin, a
non-GAAP measure
|
$
|
(1,645)
|
|
|
$
|
(2,405)
|
|
|
$
|
(2,435)
|
|
|
$
|
(4,050)
|
|
|
$
|
(5,055)
|
|
RealNetworks, Inc.
and Subsidiaries
Reconciliation of
Net income (loss) including noncontrolling interests to adjusted
EBITDA, a non-GAAP measure
(Unaudited)
|
|
|
2020
|
|
2019
|
2020
|
|
2019
|
|
Q2
|
|
Q1
|
|
Q2
|
|
YTD
|
|
YTD
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Net income (loss) including noncontrolling interests to
adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
$
|
(5,554)
|
|
|
$
|
(4,689)
|
|
|
$
|
(9,455)
|
|
|
$
|
(10,243)
|
|
|
$
|
(8,241)
|
|
Income tax expense
(benefit)
|
213
|
|
|
139
|
|
|
244
|
|
|
352
|
|
|
502
|
|
Interest
expense
|
278
|
|
|
262
|
|
|
43
|
|
|
540
|
|
|
209
|
|
Interest
income
|
(23)
|
|
|
(5)
|
|
|
(40)
|
|
|
(28)
|
|
|
(117)
|
|
(Gain) loss on equity
investments, net
|
53
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
(12,338)
|
|
Foreign currency
(gain) loss
|
155
|
|
|
(767)
|
|
|
(164)
|
|
|
(612)
|
|
|
(315)
|
|
Acquisitions related
intangible asset amortization
|
1,124
|
|
|
1,125
|
|
|
1,129
|
|
|
2,249
|
|
|
2,095
|
|
Depreciation and
amortization
|
272
|
|
|
311
|
|
|
348
|
|
|
583
|
|
|
864
|
|
Fair value
adjustments to contingent consideration liability
|
100
|
|
|
(300)
|
|
|
300
|
|
|
(200)
|
|
|
300
|
|
Restructuring and
other charges
|
881
|
|
|
209
|
|
|
729
|
|
|
1,090
|
|
|
896
|
|
Stock-based
compensation
|
323
|
|
|
380
|
|
|
533
|
|
|
703
|
|
|
1,917
|
|
Adjusted
EBITDA, a non-GAAP measure
|
$
|
(2,178)
|
|
|
$
|
(3,335)
|
|
|
$
|
(6,333)
|
|
|
$
|
(5,513)
|
|
|
$
|
(14,228)
|
|
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SOURCE RealNetworks, Inc.