EX-99.1 2 exhibit991erq3-13.htm EXHIBIT 99.1 TO ER Q3 2013 Exhibit 99.1 ER Q3-13


Exhibit 99.1
REALNETWORKS ANNOUNCES THIRD QUARTER 2013 RESULTS
 
SEATTLE - October 30, 2013 - RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the third quarter ended September 30, 2013.
Financial Summary
Revenue of $49.0 million 
Net loss of $(31.4) million or $(0.88) per share
Adjusted EBITDA loss of $(8.4) million
Cash and short-term investments of $218.4 million as of September 30, 2013

Recent Highlights
On September 24, launched RealPlayer Cloud, the first integrated video player and cloud service
Acquired Muzicall Limited, a leading service provider for mobile carriers and media companies in Europe, for $6.7 million
Settled our two most significant outstanding litigation matters for an aggregate of $11.5 million

"We are pleased with our continued progress towards revitalizing RealNetworks," said Rob Glaser, Chairman and interim CEO of RealNetworks. "Last month we launched RealPlayer Cloud, our breakthrough product that makes it easy to move, watch, save and share video across every popular digital device. The initial market response to RealPlayer Cloud has been excellent and we think lays the foundation for a great future."

Third Quarter Results

For the third quarter of 2013, revenue was $49.0 million, a sequential decrease of (2)% from the second quarter of 2013, and a decrease of (17)% compared with the third quarter of 2012. Revenue trends in each of RealNetworks' businesses in the third quarter of 2013 compared with the year-earlier quarter were: a (18)% decrease in RealPlayer Group revenue to $17.6 million, a (13)% decrease in Mobile Entertainment revenue to $19.9 million and a (24)% decrease in Games revenue to $11.4 million.

Net loss for the third quarter of 2013 was $(31.4) million, or $(0.88) per share, compared with net loss of $(22.2) million, or $(0.63) per share, in the third quarter of 2012.

Adjusted EBITDA loss for the third quarter of 2013 was $(8.4) million, compared with an adjusted EBITDA loss of $(6.0) million for the third quarter of 2012. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of September 30, 2013, RealNetworks had $218.4 million in unrestricted cash, cash equivalents and short-term investments compared with $271.4 million as of December 31, 2012, of which approximately $37.5 million was held in foreign jurisdictions. In addition, RealNetworks had $39.5 million in restricted cash and available-for-sale securities as of September 30, 2013, compared with $44.3 million as of December 31, 2012.












Segment Operating Results
 
 
 
2013
 
2013
 
2012
 
 
 
Q3
 
Q2
 
Q3
 
 
 
 (in thousands)
Revenue
 
 
 
 
 
 
RealPlayer Group
$
17,641

 
$
18,383

 
$
21,392

 
Mobile Entertainment
19,948

 
18,592

 
22,820

 
Games
11,369

 
12,875

 
14,876

 
Corporate

 

 

 
 
Total
$
48,958

 
$
49,850

 
$
59,088

 
 
 
 
 
 
 
 
Operating Income (loss)
 
 
 
 
 
 
RealPlayer Group
$
(72
)
 
$
(27
)
 
$
1,575

 
Mobile Entertainment
(1,477
)
 
(990
)
 
(1,856
)
 
Games
(3,360
)
 
(2,261
)
 
(2,136
)
 
Corporate
(23,528
)
 
(13,226
)
 
(20,758
)
 
 
Total
$
(28,437
)
 
$
(16,504
)
 
$
(23,175
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
RealPlayer Group
$
624

 
$
470

 
$
2,275

 
Mobile Entertainment
503

 
694

 
341

 
Games
(2,704
)
 
(1,315
)
 
(1,321
)
 
Corporate
(6,792
)
 
(5,602
)
 
(7,337
)
 
 
Total
$
(8,369
)
 
$
(5,753
)
 
$
(6,042
)


Business Outlook

For the fourth quarter of 2013, RealNetworks expects total revenue of $47.0 million to $50.0 million, with all segments declining year over year, Mobile Entertainment increasing, Games flat and RealPlayer Group declining sequentially. We expect adjusted EBITDA for the quarter to be a loss of $(8.0) million to $(11.0) million.

The foregoing forward-looking statements reflect RealNetworks' expectations as of October 30, 2013. It is not RealNetworks' general practice to update these forward-looking statements until its next quarterly results announcement.

Webcast and Conference Call Information
The company will host an audio Webcast conference call to review results and discuss the company's operations for the third quarter at 5:00 p.m. ET on October 30. The Webcast will be available at: http://investor.realnetworks.com
The on-demand Webcast will be available beginning approximately two hours following the conclusion of the live Webcast.
Conference Call Details
5 p.m. ET / 2 p.m. PT
Dial in:
888-790-3162 Domestic





415-228-4854 International

Passcode: Third Quarter Earnings
Leader: Rob Glaser

Telephonic replay will be available until 8 p.m. ET, November 20, 2013.
Replay dial in:
800-568-9796 Domestic
203-369-3292 International
Passcode: 103013

RNWK-F

For More Information
Investor Relations: ir@realnetworks.com

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 http://www.realnetworks.com/about-us.
RealNetworks, RealPlayer and GameHouse 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 third quarter 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, future market performance, and its plans to attain growth and profitability and undertake certain strategic initiatives. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. 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
September 30,
 
Nine Months Ended
September 30,
 
 
 
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 (in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 Net revenue
 
 
$
48,958

 
$
59,088

 
$
155,601

 
$
191,578

 
 
 
 
 
 
 
 
 
 
 Cost of revenue
 
 
18,990

 
25,244

 
59,015

 
78,633

 
 
 
 
 
 
 
 
 
 
           Gross profit
 
 
29,968

 
33,844

 
96,586

 
112,945

 
 
 
 
 
 
 
 
 
 
 Sale of patents and other technology assets, net of costs (A)
 
 

 

 

 
116,353

 
 
 
 
 
 
 
 
 
 
 Operating expenses:
 
 
 
 
 
 
 
 
 
       Research and development
 
 
15,707

 
15,321

 
45,951

 
49,167

       Sales and marketing
 
 
19,427

 
21,972

 
59,830

 
68,462

       General and administrative
 
 
9,869

 
8,759

 
28,506

 
35,103

       Restructuring and other charges
 
 
1,877

 
10,724

 
4,075

 
13,872

       Lease exit and related charges
 
 

 
243

 
3,066

 
243

       Loss on litigation settlements
 
 
11,525

 

 
11,525

 

 
 
 
 
 
 
 
 
 
 
           Total operating expenses
 
 
58,405

 
57,019

 
152,953

 
166,847

 
 
 
 
 
 
 
 
 
 
 Operating income (loss)
 
 
(28,437
)
 
(23,175
)
 
(56,367
)
 
62,451

 
 
 
 
 
 
 
 
 
 
 Other income (expenses):
 
 
 
 
 
 
 
 
 
       Interest income, net
 
 
166

 
164

 
992

 
1,033

       Gain (loss) on sale of equity and other investments, net
 
 

 
2,210

 

 
5,288

       Equity in net loss of Rhapsody investment
 
 
(2,629
)
 
(1,613
)
 
(6,209
)
 
(4,095
)
       Other income (expense), net
 
 
(118
)
 
248

 
(146
)
 
1,674

 
 
 
 
 
 
 
 
 
 
           Total other income (expense), net
 
 
(2,581
)
 
1,009

 
(5,363
)
 
3,900

 
 
 
 
 
 
 
 
 
 
 Income (loss) before income taxes
 
 
(31,018
)
 
(22,166
)
 
(61,730
)
 
66,351

 Income tax expense (benefit)
 
 
357

 
48

 
(210
)
 
24,583

 
 
 
 
 
 
 
 
 
 
 Net income (loss)
 
 
$
(31,375
)
 
$
(22,214
)
 
$
(61,520
)
 
$
41,768

 
 
 
 
 
 
 
 
 
 
 Basic net income (loss) per share
 
 
$
(0.88
)
 
$
(0.63
)
 
$
(1.73
)
 
$
1.20

 Diluted net income (loss) per share
 
 
$
(0.88
)
 
$
(0.63
)
 
$
(1.73
)
 
$
1.19

 
 
 
 
 
 
 
 
 
 
 Shares used to compute basic net income (loss) per share
 
 
35,670

 
34,998

 
35,490

 
34,747

 Shares used to compute diluted net income (loss) per share
 
 
35,670

 
34,998

 
35,490

 
35,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(A) On April 5, 2012, RealNetworks completed the sale of certain patents and other technology assets to Intel for a cash purchase of $120.0 million.






RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
September 30,
2013
 
December 31,
2012
 
 (in thousands)
ASSETS
 Current assets:
 
 
 
 Cash and cash equivalents
$
134,879

 
$
163,198

 Short-term investments
83,527

 
108,216

 Trade accounts receivable, net
26,494

 
30,754

 Deferred costs, current portion
1,622

 
825

 Deferred tax assets - current
3,942

 
2,869

 Prepaid expenses and other current assets
12,152

 
17,002

 Total current assets
262,616

 
322,864

 
 
 
 
 Equipment, software, and leasehold improvements, at cost:
 
 
 
 Equipment and software
94,054

 
98,041

 Leasehold improvements
3,516

 
22,767

 Total equipment, software, and leasehold improvements
97,570

 
120,808

 Less accumulated depreciation and amortization
73,105

 
91,492

 Net equipment, software, and leasehold improvements
24,465

 
29,316

 
 
 
 
 Restricted cash equivalents and investments
5,000

 
10,000

 Equity method investment
12,656

 
19,204

 Available for sale securities
34,485

 
34,334

 Other assets
2,844

 
3,153

 Deferred costs, non-current portion
1,032

 
531

 Deferred tax assets, net, non-current portion
1,576

 
4,911

 Other intangible assets, net
14,051

 
3,275

 Goodwill
17,518

 
6,309

 
 
 
 
 Total assets
$
376,243

 
$
433,897

 
 
 
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 Current liabilities:
 
 
 
 Accounts payable
$
20,562

 
$
19,013

 Accrued and other current liabilities
58,024

 
57,530

 Deferred revenue, current portion
7,604

 
8,675

 Total current liabilities
86,190

 
85,218

 
 
 
 
 Deferred revenue, non-current portion
167

 
169

 Deferred rent
613

 
2,250

 Deferred tax liabilities, net, non-current portion
3,166

 
432

 Other long-term liabilities
492

 
3,100

 
 
 
 
 Total liabilities
90,628

 
91,169

 
 
 
 
 
 
 
 
 Shareholders' equity
285,615

 
342,728

 
 
 
 
 Total liabilities and shareholders' equity
$
376,243

 
$
433,897








RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended
September 30,
 
2013
 
2012
 
 (in thousands)
 
 Cash flows from operating activities:
 
 
 
 Net income (loss)
$
(61,520
)
 
$
41,768

 Adjustments to reconcile net income (loss) to net cash used in operating activities:
 Depreciation and amortization
15,045

 
12,478

 Stock-based compensation
5,671

 
6,419

 Loss on asset disposal

 
1,965

 Equity in net loss of Rhapsody
6,209

 
4,095

 Deferred income taxes, net
(1,238
)
 
22,399

 Gain on sale of patent and other technology assets, net of costs

 
(116,353
)
 Gain on sale of equity and other investments, net

 
(5,288
)
 Realized translation gain
(35
)
 
(1,968
)
 Other
51

 

 Net change in certain operating assets and liabilities
7,514

 
3,735

 Net cash provided by (used in) operating activities
(28,303
)
 
(30,750
)
 
 
 
 
 Cash flows from investing activities:
 
 
 
 Purchases of equipment, software, and leasehold improvements
(5,798
)
 
(6,478
)
 Proceeds from sale of patents and other technology assets, net of costs

 
116,353

 Proceeds from sale of equity and other investments

 
7,244

 Purchases of short-term investments
(85,670
)
 
(76,191
)
 Proceeds from sales and maturities of short-term investments
110,359

 
51,885

 Decrease (increase) in restricted cash equivalents and investments, net
5,000

 
103

 Acquisitions of businesses, net of cash acquired
(22,480
)
 

 Net cash provided by (used in) investing activities
1,411

 
92,916

 Cash flows from financing activities:
 
 
 
 Proceeds from issuance of common stock (stock options and stock purchase plan)
408

 
3,240

 Tax payments from shares withheld upon vesting of restricted stock
(911
)
 
(964
)
 Payment of contingent consideration
(828
)
 

 Net cash provided by (used in) financing activities
(1,331
)
 
2,276

 Effect of exchange rate changes on cash and cash equivalents
(96
)
 
(73
)
 Net increase (decrease) in cash and cash equivalents
(28,319
)
 
64,369

 Cash and cash equivalents, beginning of period
163,198

 
106,333

 Cash and cash equivalents, end of period
$
134,879

 
$
170,702











RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
 
 
2013
 
2012
 
 
 Q3
 
 Q2
 
Q1
 
 Q4
 
 Q3
 
 Q2
 
 Q1
 
 
 (in thousands)
Net Revenue by Line of Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RealPlayer Group (A)
 
$
17,641

 
$
18,383

 
$
22,383

 
$
25,838

 
$
21,392

 
$
22,158

 
$
22,081

Mobile Entertainment (B)
 
19,948

 
18,592

 
20,495

 
25,718

 
22,820

 
26,005

 
25,775

Games (C)
 
11,369

 
12,875

 
13,915

 
15,708

 
14,876

 
17,363

 
19,108

     Total net revenue
 
$
48,958

 
$
49,850

 
$
56,793

 
$
67,264

 
$
59,088

 
$
65,526

 
$
66,964

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Product
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RealPlayer Group
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- License (D)
 
$
7,281

 
$
6,766

 
$
8,332

 
$
10,956

 
$
6,757

 
$
8,334

 
$
7,733

- Subscriptions (E)
 
3,616

 
4,193

 
4,924

 
6,192

 
7,056

 
6,810

 
7,601

- Media Properties (F)
 
6,745

 
7,424

 
9,127

 
8,690

 
7,579

 
7,014

 
6,747

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mobile Entertainment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- SaaS (G)
 
18,155

 
17,002

 
18,674

 
22,793

 
20,696

 
23,286

 
23,464

- Systems Integration / Professional Services (H)
 
322

 
300

 
291

 
1,295

 
247

 
965

 
426

- Technology License & Other (I)
 
1,470

 
1,290

 
1,530

 
1,630

 
1,877

 
1,754

 
1,885

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- License (J)
 
3,421

 
4,089

 
5,249

 
5,222

 
5,136

 
6,053

 
7,587

- Subscriptions (K)
 
5,733

 
5,980

 
6,312

 
6,876

 
6,952

 
7,536

 
8,170

- Media Properties (L)
 
2,215

 
2,806

 
2,354

 
3,610

 
2,788

 
3,774

 
3,351

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Total net revenue
 
$
48,958

 
$
49,850

 
$
56,793

 
$
67,264

 
$
59,088

 
$
65,526

 
$
66,964

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
 
$
21,039

 
$
21,463

 
$
28,024

 
$
28,315

 
$
29,101

 
$
28,614

 
$
31,814

Rest of world
 
27,919

 
28,387

 
28,769

 
38,949

 
29,987

 
36,912

 
35,150

     Total net revenue
 
$
48,958

 
$
49,850

 
$
56,793

 
$
67,264

 
$
59,088

 
$
65,526

 
$
66,964

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 SuperPass.
(B) The Mobile Entertainment division primarily includes revenue from SaaS services, system integration, and professional services to mobile carriers, and sales of technology licenses of our software products such as Helix.
(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 RealPlayer Plus software licenses to consumers and sales of intellectual property licenses.
(E) Subscriptions revenue within the RealPlayer Group includes revenue from subscriptions such as SuperPass.
(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, video on demand, ringtones, ringback tones, and intercarrier messaging services provided to network services providers who are largely mobile phone networks.
(H) Systems Integration / Professional Services revenue within Mobile Entertainment includes professional services, other than those associated with software sales, provided to mobile carriers.
(I) Licensing revenue within Mobile Entertainment includes revenue from Helix-related products.
(J) Licensing revenue within Games includes retail games-related revenue, microtransactions from online and social games and sales of mobile games.
(K) Subscriptions revenue within Games includes revenue from online games subscriptions.
(L) 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)
 
 
2013
 
2012
 
2013
 
2012
 
 
Q3
 
Q2
 
Q3
 
YTD
 
 YTD
 
 
 (in thousands)
RealPlayer Group
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
17,641

 
$
18,383

 
$
21,392

 
$
58,407

 
$
65,631

Cost of revenue
 
3,264

 
4,409

 
6,735

 
12,984

 
16,026

Gross profit
 
14,377

 
13,974

 
14,657

 
45,423

 
49,605

 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
81
%
 
76
%
 
69
%
 
78
%
 
76
%
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
14,449

 
14,001

 
13,082

 
44,656

 
41,849

Operating income (loss)
 
$
(72
)
 
$
(27
)
 
$
1,575

 
$
767

 
$
7,756

 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
624

 
$
470

 
$
2,275

 
$
2,425

 
$
9,347

 
 
 
 
 
 
 
 
 
 
 
Mobile Entertainment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
19,948

 
$
18,592

 
$
22,820

 
$
59,035

 
$
74,600

Cost of revenue
 
11,972

 
11,170

 
12,740

 
33,974

 
43,093

Gross profit
 
7,976

 
7,422

 
10,080

 
25,061

 
31,507

 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
40
%
 
40
%
 
44
%
 
42
%
 
42
%
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
9,453

 
8,412

 
11,936

 
26,976

 
40,591

Operating income (loss)
 
$
(1,477
)
 
$
(990
)
 
$
(1,856
)
 
$
(1,915
)
 
$
(9,084
)
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
503

 
$
694

 
$
341

 
$
4,579

 
$
(2,145
)
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
11,369

 
$
12,875

 
$
14,876

 
$
38,159

 
$
51,347

Cost of revenue
 
3,216

 
3,381

 
4,989

 
10,397

 
17,332

Gross profit
 
8,153

 
9,494

 
9,887

 
27,762

 
34,015

 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
72
%
 
74
%
 
66
%
 
73
%
 
66
%
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
11,513

 
11,755

 
12,023

 
35,120

 
39,962

Operating income (loss)
 
$
(3,360
)
 
$
(2,261
)
 
$
(2,136
)
 
$
(7,358
)
 
$
(5,947
)
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(2,704
)
 
$
(1,315
)
 
$
(1,321
)
 
$
(5,173
)
 
$
(3,790
)
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$

 
$

 
$

 
$

 
$

Cost of revenue
 
538

 
559

 
780

 
1,660

 
2,182

Gross profit
 
(538
)
 
(559
)
 
(780
)
 
(1,660
)
 
(2,182
)
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 
 
 
 
 
 
 
 
 
 
Gain on sale of patents and other technology assets, net of costs
 

 

 

 

 
116,353

Operating expenses
 
22,990

 
12,667

 
19,978

 
46,201

 
44,445

Operating income (loss)
 
$
(23,528
)
 
$
(13,226
)
 
$
(20,758
)
 
$
(47,861
)
 
$
69,726

 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(6,792
)
 
$
(5,602
)
 
$
(7,337
)
 
$
(18,962
)
 
$
(23,380
)
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
48,958

 
$
49,850

 
$
59,088

 
$
155,601

 
$
191,578

Cost of revenue
 
18,990

 
19,519

 
25,244

 
59,015

 
78,633

Gross profit
 
29,968

 
30,331

 
33,844

 
96,586

 
112,945

 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
61
%
 
61
%
 
57
%
 
62
%
 
59
%
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of patents and other technology assets, net of costs
 

 

 

 

 
116,353

Operating expenses
 
58,405

 
46,835

 
57,019

 
152,953

 
166,847

Operating income (loss)
 
$
(28,437
)
 
$
(16,504
)
 
$
(23,175
)
 
$
(56,367
)
 
$
62,451

 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(8,369
)
 
$
(5,753
)
 
$
(6,042
)
 
$
(17,131
)
 
$
(19,968
)






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

 
 
2013
 
2012
 
2013
 
2012
 
 
 Q3
 
 Q2
 
 Q3
 
 YTD
 
 YTD
 
 
 (in thousands)
RealPlayer Group
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(72
)
 
$
(27
)
 
$
1,575

 
$
767

 
$
7,756

Acquisitions related intangible asset amortization
 
60

 
62

 
62

 
189

 
220

Depreciation and amortization
 
636

 
435

 
638

 
1,469

 
1,371

 Adjusted EBITDA
 
$
624

 
$
470

 
$
2,275

 
$
2,425

 
$
9,347

 
 
 
 
 
 
 
 
 
 
 
Mobile Entertainment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(1,477
)
 
$
(990
)
 
$
(1,856
)
 
$
(1,915
)
 
$
(9,084
)
Acquisitions related intangible asset amortization
 
1,055

 
638

 
796

 
2,506

 
2,384

Depreciation and amortization
 
925

 
1,046

 
1,401

 
3,988

 
4,555

 Adjusted EBITDA
 
$
503

 
$
694

 
$
341

 
$
4,579

 
$
(2,145
)
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(3,360
)
 
$
(2,261
)
 
$
(2,136
)
 
$
(7,358
)
 
$
(5,947
)
Acquisitions related intangible asset amortization
 
314

 
230

 
171

 
565

 
587

Depreciation and amortization
 
342

 
716

 
644

 
1,620

 
1,570

 Adjusted EBITDA
 
$
(2,704
)
 
$
(1,315
)
 
$
(1,321
)
 
$
(5,173
)
 
$
(3,790
)
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(23,528
)
 
$
(13,226
)
 
$
(20,758
)
 
$
(47,861
)
 
$
69,726

Other income (expense), net
 
(118
)
 
(137
)
 
248

 
(146
)
 
1,674

Depreciation and amortization
 
1,839

 
1,859

 
604

 
4,708

 
1,791

Restructuring and other charges
 
1,877

 
816

 
10,724

 
4,075

 
13,872

Stock-based compensation
 
1,613

 
2,020

 
1,602

 
5,671

 
5,667

Gain on sale of patents and other technology assets, net of costs
 

 

 

 

 
(116,353
)
Lease exit and related charges
 

 
3,066

 
243

 
3,066

 
243

Loss on litigation settlements
 
11,525

 

 

 
11,525

 

 Adjusted EBITDA
 
$
(6,792
)
 
$
(5,602
)
 
$
(7,337
)
 
$
(18,962
)
 
$
(23,380
)
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP operating income (loss) to adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(28,437
)
 
$
(16,504
)
 
$
(23,175
)
 
$
(56,367
)
 
$
62,451

Other income (expense), net
 
(118
)
 
(137
)
 
248

 
(146
)
 
1,674

Acquisitions related intangible asset amortization
 
1,429

 
930

 
1,029

 
3,260

 
3,191

Depreciation and amortization
 
3,742

 
4,056

 
3,287

 
11,785

 
9,287

Lease exit and related charges
 

 
3,066

 
243

 
3,066

 
243

Loss on litigation settlements
 
11,525

 

 

 
11,525

 

Restructuring and other charges
 
1,877

 
816

 
10,724

 
4,075

 
13,872

Stock-based compensation
 
1,613

 
2,020

 
1,602

 
5,671

 
5,667

Gain on sale of patents and other technology assets, net of costs
 

 

 

 

 
(116,353
)
 Adjusted EBITDA
 
$
(8,369
)
 
$
(5,753
)
 
$
(6,042
)
 
$
(17,131
)
 
$
(19,968
)