0001046327-16-000093.txt : 20160505 0001046327-16-000093.hdr.sgml : 20160505 20160505163202 ACCESSION NUMBER: 0001046327-16-000093 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20160505 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160505 DATE AS OF CHANGE: 20160505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REALNETWORKS INC CENTRAL INDEX KEY: 0001046327 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 911628146 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37745 FILM NUMBER: 161624312 BUSINESS ADDRESS: STREET 1: 1501 FIRST AVENUE SOUTH STREET 2: SUITE 600 CITY: SEATTLE STATE: WA ZIP: 98134 BUSINESS PHONE: 2066742700 MAIL ADDRESS: STREET 1: 1501 FIRST AVENUE SOUTH STREET 2: SUITE 600 CITY: SEATTLE STATE: WA ZIP: 98134 8-K 1 er8-kshellq12016.htm 8-K 8-K

________________________________________________________________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K 
__________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 5, 2016 
__________________________
RealNetworks, Inc.
(Exact name of registrant as specified in its charter) 
__________________________
 
WASHINGTON
 
0-23137
 
91-1628146
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
1501 First Avenue South, Suite 600
Seattle, Washington 98134
(Address of principal executive offices) (Zip code)
(206) 674-2700
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address if changed since last report) 
__________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
___________________________________________________________________________________________________________________

 





 Item 2.02.     Results of Operations and Financial Condition.
On May 5, 2016, RealNetworks, Inc. announced its financial results for the first quarter ended March 31, 2016. The full text of the press release is furnished as Exhibit 99.1 hereto.
Furnished as Exhibit 99.2 hereto is additional information regarding non-GAAP financial measures included in certain public disclosures of RealNetworks, including its first quarter 2016 financial results press release.
Furnished as Exhibit 99.3 hereto is additional information regarding the reorganization that took place in the first quarter of 2016. The Company realigned its business and now reports revenue in three segments: Consumer Media, Mobile Services and Games. Consumer Media combines the PC RealPlayer® products and IP streaming and video management solutions. Mobile Services takes the former Mobile Entertainment product portfolio and includes Mobile RealTimes® products that are primarily sold through mobile carriers and related partners. There was no change to Games, which continues to focus on casual games. Concurrent with the segment change, the Company also changed its methodology of allocating certain corporate expenses which are directly attributable to supporting the businesses in order to increase accountability, resulting in an increase in corporate costs allocated to the Consumer Media and Mobile Services businesses.
The information set forth in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.





2




Item  9.01.
Financial Statements and Exhibits.
(d) Exhibits.
Pursuant to the rules and regulations of the SEC, the attached exhibits are deemed to have been furnished to, but not filed with, the SEC.
 
 
 
Exhibit
No.
 
Description
 
 
 
99.1
Earnings Release of RealNetworks, Inc. dated May 5, 2016
 
 
99.2
Information Regarding Non-GAAP Financial Measures
 
 
99.3
Supplementary Financial Information of RealNetworks, Inc., for the four quarters and years ended December 31, 2015 and December 31, 2014
 
 

3


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 8-K Report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
REALNETWORKS, INC.
 
 
By:
 
/ S /    Marjorie Thomas      
 
 
Marjorie Thomas
 
 
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)


Dated: May 5, 2016

4


EXHIBIT INDEX
 
 
 
Exhibit
Number
 
Description
 
 
 
99.1
Earnings Release of RealNetworks, Inc. dated May 5, 2016
 
 
99.2
Information Regarding Non-GAAP Financial Measures
 
 
99.3
Supplementary Financial Information of RealNetworks, Inc., for the four quarters and years ended December 31, 2015 and December 31, 2014
 
 


5
 EX-99.1 2 exhibit991erq1-16.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
REALNETWORKS ANNOUNCES FIRST QUARTER 2016 RESULTS

 
•
Continued progress in stabilizing revenue and setting the company up for a return to revenue growth and profitability in 2016;
•
Realigned 2 of Real's 3 main operating divisions - Mobile Services and Consumer Media;
•
Signed up Vodafone as our first European Carrier integrating RealTimes® into its offerings;
•
Strengthened management by hiring Reza Rassool as CTO of RealNetworks, and Mike Davis as CEO of Rhapsody International; and
•
Cash and short-term investments of $86.8 million

SEATTLE - May 5, 2016 - RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the first quarter ended March 31, 2016.
For the first quarter of 2016, revenue was $28.2 million compared to $29.9 million in the previous quarter and $28.8 million in the first quarter of 2015, excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015.
"In the first quarter of 2016, we continued to make progress in turning RealNetworks around and setting the company up for growth and a return to profitability in the quarters ahead," said Rob Glaser, Chairman and CEO of RealNetworks. "First, we realigned 2 of our divisions to focus our business on the best opportunities in front of us. Second, we hired Reza Rassool as CTO and helped bring in Mike Davis as CEO of our affiliate Rhapsody. Third, we continued to make progress on stabilizing the company's revenue while continuing to manage operating expenses carefully."
Pursuant to the realignment, the company re-segmented its first quarter 2016 and historical financial statements to reflect these changes and a change in the corporate expense allocation methodology reflected in the tables presented below.
The Company's operating expenses in the first quarter of 2016 were down 16% from the same period in 2015, excluding stock compensation, restructuring charges, expenses from the Slingo and social casino games business, and the impact of a non-cash warrant from Rhapsody.
GAAP net loss for the first quarter of 2016 was $(15.2) million or $(0.42) per share, compared to $(24.5) million or $(0.68) per share in the first quarter of 2015. Adjusted EBITDA for the first quarter of 2016 was a loss of $(8.1) million, compared to $(4.2) million for the previous quarter and $(10.8) million for the first quarter of 2015, excluding the results of the Slingo and social casino games business, which was sold in August 2015. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.
As of March 31, 2016, the company had $86.8 million in unrestricted cash, cash equivalents and short-term investments, compared to $99.1 million as of December 31, 2015.

Business Outlook

For the second quarter of 2016, RealNetworks expects total revenue in the range of $26 million to $29 million and an adjusted EBITDA loss for the second 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: First 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, May 26, 2016 by calling 800-678-8548 or +1-402-220-6449 (Passcode: 5516).


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
March 31,
 
 

 
2016
 
2015
 
 
 (in thousands, except per share data)
 
 
 
 
 
 Net revenue
 
$
28,230

 
$
30,597

 Cost of revenue
 
15,172

 
16,547

           Gross profit
 
13,058

 
14,050

 
 
 
 
 
 Operating expenses:
 
 
 


       Research and development
 
9,319

 
12,379

       Sales and marketing
 
9,225

 
12,837

       General and administrative
 
8,077

 
7,283

       Restructuring and other charges
 
385

 
485

       Lease exit and related charges
 
831

 
78

 
 
 
 
 
           Total operating expenses
 
27,837

 
33,062

 
 
 
 
 
 Operating income (loss)
 
(14,779
)
 
(19,012
)
 
 
 
 
 
 Other income (expenses):
 
 
 
 
       Interest income, net
 
117

 
200

       Gain (loss) on investments, net
 
3

 
299

       Equity in net loss of Rhapsody
 
—

 
(6,180
)
       Other income (expense), net
 
(287
)
 
443

 
 
 
 
 
           Total other income (expense), net
 
(167
)
 
(5,238
)
 
 
 
 
 
 Income (loss) before income taxes
 
(14,946
)
 
(24,250
)
 Income tax expense (benefit)
 
225

 
219

 
 
 
 
 
 Net income (loss)
 
$
(15,171
)
 
$
(24,469
)
 
 
 
 
 
 Basic net income (loss) per share
 
$
(0.42
)
 
$
(0.68
)
 Diluted net income (loss) per share
 
$
(0.42
)
 
$
(0.68
)
 
 
 
 
 
 Shares used to compute basic net income (loss) per share
 
36,520

 
36,104

 Shares used to compute diluted net income (loss) per share
 
36,520

 
36,104

 
 
 
 
 
 
 
 
 
 





RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
March 31,
2016
 
December 31,
2015
 
 (in thousands)
ASSETS
 Current assets:
 
 
 
 Cash and cash equivalents
$
40,539

 
$
47,315

 Short-term investments
46,289

 
51,814

 Trade accounts receivable, net
23,527

 
22,511

 Deferred costs, current portion
452

 
460

 Prepaid expenses and other current assets
5,563

 
7,140

 Total current assets
116,370

 
129,240

 
 
 
 
 Equipment and software
61,330

 
66,702

 Leasehold improvements
3,190

 
3,122

 Total equipment, software, and leasehold improvements
64,520

 
69,824

 Less accumulated depreciation and amortization
56,983

 
61,024

 Net equipment, software, and leasehold improvements
7,537

 
8,800

 
 
 
 
 Restricted cash equivalents and investments
3,100

 
2,890

 Available for sale securities
1,910

 
1,721

 Other assets
2,273

 
2,307

 Deferred costs, non-current portion
660

 
212

 Deferred tax assets, net
996

 
957

 Other intangible assets, net
1,753

 
2,136

 Goodwill
13,099

 
13,080

 
 
 
 
 Total assets
$
147,698

 
$
161,343

 
 
 
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 Current liabilities:
 
 
 
 Accounts payable
$
15,368

 
$
17,050

 Accrued and other current liabilities
17,110

 
17,320

 Deferred revenue, current portion
3,537

 
3,497

 Total current liabilities
36,015

 
37,867

 
 
 
 
 Deferred revenue, non-current portion
583

 
105

 Deferred rent
579

 
620

 Deferred tax liabilities, net
90

 
88

 Other long-term liabilities
1,668

 
1,980

 
 
 
 
 Total liabilities
38,935

 
40,660

 
 
 
 
 
 
 
 
 Shareholders' equity
108,763

 
120,683

 
 
 
 
 Total liabilities and shareholders' equity
$
147,698

 
$
161,343







RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Quarters Ended
March 31,
 
 
2016
 
2015
 
 (in thousands)
 
 Cash flows from operating activities:
 
 
 
 Net income (loss)
$
(15,171
)
 
$
(24,469
)
 Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
2,598

 
2,503

Stock-based compensation
3,171

 
1,329

Equity in net loss of Rhapsody
—

 
6,180

Deferred income taxes, net
(128
)
 
(77
)
Loss (gain) on investments, net
(3
)
 
(299
)
Fair value of warrants granted in 2015, net of subsequent mark to market adjustments in 2016 and 2015
44

 
(1,155
)
Net change in certain operating assets and liabilities
(1,722
)
 
(4,106
)
  Net cash provided by (used in) operating activities
(11,211
)
 
(20,094
)
 Cash flows from investing activities:
 
 
 
Purchases of equipment, software, and leasehold improvements
(828
)
 
(306
)
Proceeds from sale of available for sale securities
—

 
352

Purchases of short-term investments
(17,876
)
 
(6,018
)
Proceeds from sales and maturities of short-term investments
23,401

 
33,077

Decrease (increase) in restricted cash equivalents and investments, net
(210
)
 
—

Advance to Rhapsody
—

 
(5,000
)
 Net cash provided by (used in) investing activities
4,487

 
22,105

 Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock (stock options and stock purchase plan)
16

 
6

Tax payments from shares withheld upon vesting of restricted stock
(787
)
 
(7
)
 Net cash provided by (used in) financing activities
(771
)
 
(1
)
 Effect of exchange rate changes on cash and cash equivalents
719

 
(2,269
)
 Net increase (decrease) in cash and cash equivalents
(6,776
)
 
(259
)
 Cash and cash equivalents, beginning of period
47,315

 
103,253

 Cash and cash equivalents, end of period
$
40,539

 
$
102,994










RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
 
2016
 
2015
 
Q1
 
 Q4
 
 Q3
 
 Q2
 
 Q1
 
 (in thousands)
Net Revenue by Line of Business
 
 
 
 
 
 
 
 
 
Consumer Media (A)
$
5,726

 
$
6,848

 
$
6,495

 
$
7,281

 
$
7,989

Mobile Services (B)
16,465

 
16,369

 
16,484

 
18,578

 
14,504

Games (C)
6,039

 
6,705

 
7,844

 
8,095

 
8,104

     Total net revenue
$
28,230

 
$
29,922

 
$
30,823

 
$
33,954

 
$
30,597

 
 
 
 
 
 
 
 
 
 
Net Revenue by Product
 
 
 
 
 
 
 
 
 
Consumer Media
 
 
 
 
 
 
 
 
 
- License (D)
$
3,104

 
$
3,967

 
$
3,628

 
$
4,208

 
$
4,672

- Subscriptions (E)
1,975

 
2,054

 
2,147

 
2,372

 
2,384

- Media Properties (F)
647

 
827

 
720

 
701

 
933

 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
- SaaS (G)
16,220

 
16,157

 
16,217

 
18,218

 
13,322

- Technology License & Other (H)
245

 
212

 
267

 
360

 
1,182

 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
- License (I)
2,761

 
3,268

 
4,128

 
3,943

 
3,835

- Subscriptions (J)
3,029

 
3,126

 
3,231

 
3,373

 
3,570

- Media Properties (K)
249

 
311

 
485

 
779

 
699

 
 
 
 
 
 
 
 
 
 
     Total net revenue
$
28,230

 
$
29,922

 
$
30,823

 
$
33,954

 
$
30,597

 
 
 
 
 
 
 
 
 
 
Net Revenue by Geography
 
 
 
 
 
 
 
 
 
United States
$
10,383

 
$
10,781

 
$
11,460

 
$
12,303

 
$
12,349

Rest of world
17,847

 
19,141

 
19,363

 
21,651

 
18,248

     Total net revenue
$
28,230

 
$
29,922

 
$
30,823

 
$
33,954

 
$
30,597

 
 
 
 
 
 
 
 
 
 
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 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 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 and social games.
(K) Media Properties revenue within Games includes advertising on games sites and social network sites.




RealNetworks, Inc. and Subsidiaries
Segment Results of Operations
(Unaudited)
 
 
2016
 
2015
 
 
Q1
 
Q4
 
Q1
 
 (in thousands)
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
5,726

 
$
6,848

 
$
7,989

Cost of revenue
 
2,417

 
3,084

 
3,464

Gross profit
 
3,309

 
3,764

 
4,525

 
 
 
 
 
 
 
   Gross margin
 
58
%
 
55
%
 
57
%
 
 
 
 
 
 
 
Operating expenses
 
5,376

 
6,644

 
6,594

Operating income (loss)
 
$
(2,067
)
 
$
(2,880
)
 
$
(2,069
)
 
 
 
 
 
 
 
  Adjusted EBITDA
 
$
(764
)
 
$
(1,842
)
 
$
(1,558
)
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
16,465

 
$
16,369

 
$
14,504

Cost of revenue
 
10,917

 
11,032

 
10,308

Gross profit
 
5,548

 
5,337

 
4,196

 
 
 
 
 
 
 
   Gross margin
 
34
%
 
33
%
 
29
%
 
 
 
 
 
 
 
Operating expenses
 
9,794

 
9,158

 
11,961

Operating income (loss)
 
$
(4,246
)
 
$
(3,821
)
 
$
(7,765
)
 
 
 
 
 
 
 
  Adjusted EBITDA
 
$
(3,516
)
 
$
(2,958
)
 
$
(6,793
)
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
6,039

 
$
6,705

 
$
8,104

Cost of revenue
 
1,845

 
1,698

 
2,794

Gross profit
 
4,194

 
5,007

 
5,310

 
 
 
 
 
 
 
   Gross margin
 
69
%
 
75
%
 
66
%
 
 
 
 
 
 
 
Operating expenses
 
5,295

 
5,253

 
8,683

Operating income (loss)
 
$
(1,101
)
 
$
(246
)
 
$
(3,373
)
 
 
 
 
 
 
 
   Adjusted EBITDA
 
$
(897
)
 
$
(25
)
 
$
(2,783
)
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
$
(7
)
 
$
14

 
$
(19
)
Gross profit
 
7

 
(14
)
 
19

 
 
 
 
 
 
 
   Gross margin
 
N/A

 
N/A

 
N/A

 
 
 
 
 
 
 
Operating expenses
 
7,372

 
545

 
5,824

Operating income (loss)
 
$
(7,365
)
 
$
(559
)
 
$
(5,805
)
 
 
 
 
 
 
 
   Adjusted EBITDA
 
$
(2,904
)
 
$
601

 
$
(3,040
)
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
28,230

 
$
29,922

 
$
30,597

Cost of revenue
 
15,172

 
15,828

 
16,547

Gross profit
 
13,058

 
14,094

 
14,050

 
 
 
 
 
 
 
   Gross margin
 
46
%
 
47
%
 
46
%
 
 
 
 
 
 
 
Operating expenses
 
27,837

 
21,600

 
33,062

Operating income (loss)
 
$
(14,779
)
 
$
(7,506
)
 
$
(19,012
)
 
 
 
 
 
 
 
   Adjusted EBITDA
 
$
(8,081
)
 
$
(4,224
)
 
$
(14,174
)











RealNetworks, Inc. and Subsidiaries
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment
(Unaudited)
 
 
2016
 
2015
 
 
 Q1
 
 Q4
 
 Q1
 
 
 (in thousands)
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(2,067
)
 
$
(2,880
)
 
$
(2,069
)
Depreciation and amortization
 
1,303

 
1,038

 
511

   Adjusted EBITDA
 
$
(764
)
 
$
(1,842
)
 
$
(1,558
)
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(4,246
)
 
$
(3,821
)
 
$
(7,765
)
Acquisitions related intangible asset amortization
 
308

 
379

 
392

Depreciation and amortization
 
422

 
484

 
580

   Adjusted EBITDA
 
$
(3,516
)
 
$
(2,958
)
 
$
(6,793
)
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(1,101
)
 
$
(246
)
 
$
(3,373
)
Acquisitions related intangible asset amortization
 
25

 
24

 
293

Depreciation and amortization
 
179

 
197

 
297

   Adjusted EBITDA
 
$
(897
)
 
$
(25
)
 
$
(2,783
)
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(7,365
)
 
$
(559
)
 
$
(5,805
)
Other income (expense), net
 
(287
)
 
(122
)
 
443

Depreciation and amortization
 
361

 
336

 
430

Restructuring and other charges
 
385

 
(284
)
 
485

Stock-based compensation
 
3,171

 
937

 
1,329

Lease exit and related charges
 
831

 
293

 
78

   Adjusted EBITDA
 
$
(2,904
)
 
$
601

 
$
(3,040
)
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP operating income (loss) to adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(14,779
)
 
$
(7,506
)
 
$
(19,012
)
Other income (expense), net
 
(287
)
 
(122
)
 
443

Acquisitions related intangible asset amortization
 
333

 
403

 
685

Depreciation and amortization
 
2,265

 
2,055

 
1,818

Restructuring and other charges
 
385

 
(284
)
 
485

Stock-based compensation
 
3,171

 
937

 
1,329

Lease exit and related charges
 
831

 
293

 
78

   Adjusted EBITDA
 
$
(8,081
)
 
$
(4,224
)
 
$
(14,174
)


 EX-99.2 3 exhibit992erq1-16.htm EXHIBIT 99.2 Exhibit


EXHIBIT 99.2
About Non-GAAP Financial Measures
To supplement RealNetworks’ condensed consolidated financial statements presented in accordance with GAAP, the Company presents investors with certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA by reportable segment (also sometimes referred to as contribution margin by segment). Adjusted EBITDA and adjusted EBITDA by reportable segment consist of operating income (loss) and includes other income (expense) net, but excludes the impact of the following: depreciation and amortization; acquisitions related intangible asset amortization; stock-based compensation; restructuring and other charges; lease exit and related charges; and extinguishment of liability.
RealNetworks believes that the presentation of adjusted EBITDA and adjusted EBITDA by reportable segment provide important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with RealNetworks’ past financial reports, and also facilitates comparisons with other companies in the Company’s industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Management has historically used these non-GAAP measures when evaluating operating performance because the inclusion or exclusion of the items described above provides additional useful measures of the Company’s operating results and facilitates comparisons of the Company’s core operating performance against prior periods and its business model objectives. The Company has chosen to provide this information to investors in order to enable them to perform additional analyses of past, present and future operating performance, to enable them to compare RealNetworks with other companies, and as a supplemental means to evaluate the Company’s ongoing operations. Externally, the Company believes that adjusted EBITDA is useful to investors in their assessment of RealNetworks’ operating performance and the valuation of the Company.
Internally, adjusted EBITDA and adjusted EBITDA by reportable segment are significant measures used by management for purposes of:
•
supplementing the financial results and forecasts reported to the Company’s board of directors;
•
evaluating the operating performance of RealNetworks, which includes direct and incrementally controllable revenue and costs of operations but excludes items considered by management to be non-cash or non-operating such as interest income and expense, stock-based compensation, tax expense, depreciation and amortization, impairment of deferred costs and long-lived assets, and other items that are not within management’s control;
•
managing and comparing performance internally across the Company’s businesses and externally against the Company’s peers;
•
establishing internal operating budgets; and
•
evaluating and valuing potential acquisition candidates.
Adjusted EBITDA and adjusted EBITDA by reportable segment are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of RealNetworks’ business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of RealNetworks’ results as reported under GAAP. The Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from its non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. Some of the limitations in relying on the Company’s non-GAAP financial measures are that adjusted EBITDA and adjusted EBITDA by reportable segment are measures that the Company has defined for internal and investor purposes and are not in accordance with GAAP. A further limitation associated with these measures is that they do not include all costs and income that impact the Company’s operating income (loss). The Company compensates for these limitations by prominently disclosing GAAP operating income (loss), which the Company believes is the most directly comparable GAAP measure, and providing investors with reconciliations from GAAP operating income (loss) to adjusted EBITDA and to adjusted EBITDA by reportable segment.
RealNetworks has included reconciliations of GAAP operating income (loss) to adjusted EBITDA and GAAP operating income (loss) by reportable segment to adjusted EBITDA by reportable segment for the relevant periods in the financial tables of its earnings press release, which is included as Exhibit 99.1 to this report.




EX-99.3 4 exhibit993erq1-16resegment.htm EXHIBIT 99.3 Exhibit


Exhibit 99.3
 
RealNetworks, Inc. and Subsidiaries
Segment Results of Operations
(Unaudited)
 
 
2014
 
2015
 
 
 Q1
 
 Q2
 
 Q3
 
 Q4
 
 YTD
 
 Q1
 
 Q2
 
 Q3
 
 Q4
 
 YTD
 
 
 (in thousands)
 
 (in thousands)
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
15,215

 
$
8,556

 
$
6,527

 
$
8,823

 
$
39,121

 
$
7,989

 
$
7,281

 
$
6,495

 
$
6,848

 
$
28,613

Cost of revenue
 
3,344

 
3,375

 
3,240

 
3,507

 
13,466

 
3,464

 
3,567

 
3,142

 
3,084

 
13,257

Gross profit
 
11,871

 
5,181

 
3,287

 
5,316

 
25,655

 
4,525

 
3,714

 
3,353

 
3,764

 
15,356

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
78
%
 
61
%
 
50
%
 
60
%
 
66
%
 
57
%
 
51
%
 
52
%
 
55
%
 
54
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
14,511

 
9,018

 
8,997

 
9,424

 
41,950

 
6,594

 
6,867

 
6,421

 
6,644

 
26,526

Operating income (loss)
 
$
(2,640
)

$
(3,837
)

$
(5,710
)

$
(4,108
)

$
(16,295
)

$
(2,069
)

$
(3,153
)

$
(3,068
)

$
(2,880
)

$
(11,170
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(2,041
)
 
$
(3,199
)
 
$
(5,101
)
 
$
(3,446
)
 
$
(13,787
)
 
$
(1,558
)
 
$
(2,675
)
 
$
(2,549
)
 
$
(1,842
)
 
$
(8,624
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
19,913

 
$
23,182

 
$
19,228

 
$
17,658

 
$
79,981

 
$
14,504

 
$
18,578

 
$
16,484

 
$
16,369

 
$
65,935

Cost of revenue
 
12,313

 
14,706

 
13,146

 
12,028

 
52,193

 
10,308

 
13,982

 
12,512

 
11,032

 
47,834

Gross profit
 
7,600

 
8,476

 
6,082

 
5,630

 
27,788

 
4,196

 
4,596

 
3,972

 
5,337

 
18,101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
38
%
 
37
%
 
32
%
 
32
%
 
35
%
 
29
%
 
25
%
 
24
%
 
33
%
 
27
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
14,422

 
14,594

 
12,129

 
12,382

 
53,527

 
11,961

 
12,099

 
11,093

 
9,158

 
44,311

Operating income (loss)
 
$
(6,822
)

$
(6,118
)

$
(6,047
)

$
(6,752
)

$
(25,739
)

$
(7,765
)

$
(7,503
)

$
(7,121
)

$
(3,821
)

$
(26,210
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(5,508
)

$
(4,748
)
 
$
(5,064
)
 
$
(5,589
)
 
$
(20,909
)
 
$
(6,793
)
 
$
(6,540
)
 
$
(6,239
)
 
$
(2,958
)
 
$
(22,530
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
10,596

 
$
9,087

 
$
8,402

 
$
9,025

 
$
37,110

 
$
8,104

 
$
8,095

 
$
7,844

 
$
6,705

 
$
30,748

Cost of revenue
 
3,129

 
2,717

 
2,573

 
2,655

 
11,074

 
2,794

 
2,286

 
2,513

 
1,698

 
9,291

Gross profit
 
7,467

 
6,370

 
5,829

 
6,370

 
26,036

 
5,310

 
5,809

 
5,331

 
5,007

 
21,457

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
70
%
 
70
%
 
69
%
 
71
%
 
70
%
 
66
%
 
72
%
 
68
%
 
75
%
 
70
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
9,766

 
8,769

 
8,658

 
9,977

 
37,170

 
8,683

 
8,719

 
6,431

 
5,253

 
29,086

Operating income (loss)
 
$
(2,299
)
 
$
(2,399
)
 
$
(2,829
)
 
$
(3,607
)
 
$
(11,134
)
 
$
(3,373
)
 
$
(2,910
)
 
$
(1,100
)
 
$
(246
)
 
$
(7,629
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(1,674
)
 
$
(1,798
)
 
$
(2,246
)
 
$
(3,024
)
 
$
(8,742
)
 
$
(2,783
)
 
$
(2,354
)
 
$
(716
)
 
$
(25
)
 
$
(5,878
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Cost of revenue
 
—

 
(12
)
 
(31
)
 
(309
)
 
(352
)
 
(19
)
 
(3
)
 
(77
)
 
14

 
(85
)
Extinguishment of liability
 
(10,580
)
 
—

 
—

 
—

 
(10,580
)
 
—

 
—

 
—

 
—

 
—

Gross profit
 
10,580

 
12

 
31

 
309

 
10,932

 
19

 
3

 
77

 
(14
)
 
85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
7,695

 
6,490

 
6,208

 
6,524

 
26,917

 
5,824

 
7,144

 
10,750

 
545

 
24,263

Operating income (loss)
 
$
2,885

 
$
(6,478
)
 
$
(6,177
)
 
$
(6,215
)
 
$
(15,985
)
 
$
(5,805
)
 
$
(7,141
)
 
$
(10,673
)
 
$
(559
)
 
$
(24,178
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(4,695
)
 
$
(3,336
)
 
$
(1,946
)
 
$
(3,140
)
 
$
(13,117
)
 
$
(3,040
)
 
$
(3,632
)
 
$
(2,690
)
 
$
601

 
$
(8,761
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
45,724

 
$
40,825

 
$
34,157

 
$
35,506

 
$
156,212

 
$
30,597

 
$
33,954

 
$
30,823

 
$
29,922

 
$
125,296

Cost of revenue
 
18,786

 
20,786

 
18,928

 
17,881

 
76,381

 
16,547

 
19,832

 
18,090

 
15,828

 
70,297

Extinguishment of liability
 
(10,580
)
 
—

 
—

 
—

 
(10,580
)
 
—

 
—

 
—

 
—

 
—

Gross profit
 
37,518

 
20,039

 
15,229

 
17,625

 
90,411

 
14,050

 
14,122

 
12,733

 
14,094

 
54,999

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
82
%
 
49
%
 
45
%
 
50
%
 
58
%
 
46
%
 
42
%
 
41
%
 
47
%
 
44
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
46,394

 
38,871

 
35,992

 
38,307

 
159,564

 
33,062

 
34,829

 
34,695

 
21,600

 
124,186

Operating income (loss)
 
$
(8,876
)
 
$
(18,832
)
 
$
(20,763
)
 
$
(20,682
)
 
$
(69,153
)
 
$
(19,012
)
 
$
(20,707
)
 
$
(21,962
)
 
$
(7,506
)
 
$
(69,187
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Adjusted EBITDA
 
$
(13,918
)
 
$
(13,081
)
 
$
(14,357
)
 
$
(15,199
)
 
$
(56,555
)
 
$
(14,174
)
 
$
(15,201
)
 
$
(12,194
)
 
$
(4,224
)
 
$
(45,793
)






RealNetworks, Inc. and Subsidiaries
Reconciliation of segment operating income (loss) to adjusted EBITDA by segment
(Unaudited)
 
 
 
2014
 
2015
 
 
 Q1
 
 Q2
 
 Q3
 
 Q4
 
 YTD
 
 Q1
 
 Q2
 
 Q3
 
 Q4
 
 YTD
 
 
 (in thousands)
 
 (in thousands)
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(2,640
)
 
$
(3,837
)
 
$
(5,710
)
 
$
(4,108
)
 
$
(16,295
)
 
$
(2,069
)
 
$
(3,153
)
 
$
(3,068
)
 
$
(2,880
)
 
$
(11,170
)
Acquisitions related intangible asset amortization
 
60

 
103

 
89

 
65

 
317

 
—

 
—

 
—

 
—

 
—

Depreciation and amortization
 
539

 
535

 
520

 
597

 
2,191

 
511

 
478

 
519

 
1,038

 
2,546

 Adjusted EBITDA
 
$
(2,041
)

$
(3,199
)

$
(5,101
)

$
(3,446
)

$
(13,787
)

$
(1,558
)

$
(2,675
)

$
(2,549
)

$
(1,842
)

$
(8,624
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(6,822
)
 
$
(6,118
)
 
$
(6,047
)
 
$
(6,752
)
 
$
(25,739
)
 
$
(7,765
)
 
$
(7,503
)
 
$
(7,121
)
 
$
(3,821
)
 
$
(26,210
)
Acquisitions related intangible asset amortization
 
607

 
650

 
301

 
302

 
1,860

 
392

 
384

 
389

 
379

 
1,544

Depreciation and amortization
 
707

 
720

 
682

 
861

 
2,970

 
580

 
579

 
493

 
484

 
2,136

 Adjusted EBITDA
 
$
(5,508
)

$
(4,748
)

$
(5,064
)

$
(5,589
)

$
(20,909
)

$
(6,793
)

$
(6,540
)

$
(6,239
)

$
(2,958
)

$
(22,530
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(2,299
)
 
$
(2,399
)
 
$
(2,829
)
 
$
(3,607
)
 
$
(11,134
)
 
$
(3,373
)
 
$
(2,910
)
 
$
(1,100
)
 
$
(246
)
 
$
(7,629
)
Acquisitions related intangible asset amortization
 
314

 
314

 
314

 
314

 
1,256

 
293

 
312

 
170

 
24

 
799

Depreciation and amortization
 
311

 
287

 
269

 
269

 
1,136

 
297

 
244

 
214

 
197

 
952

 Adjusted EBITDA
 
$
(1,674
)

$
(1,798
)

$
(2,246
)

$
(3,024
)

$
(8,742
)

$
(2,783
)

$
(2,354
)

$
(716
)

$
(25
)

$
(5,878
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
2,885

 
$
(6,478
)
 
$
(6,177
)
 
$
(6,215
)
 
$
(15,985
)
 
$
(5,805
)
 
$
(7,141
)
 
$
(10,673
)
 
$
(559
)
 
$
(24,178
)
Other income (expense), net
 
(77
)
 
(95
)
 
325

 
(10
)
 
143

 
443

 
(112
)
 
297

 
(122
)
 
506

Depreciation and amortization
 
445

 
553

 
556

 
675

 
2,229

 
430

 
394

 
1,273

 
336

 
2,433

Restructuring and other charges
 
1,216

 
541

 
2,048

 
1,187

 
4,992

 
485

 
1,964

 
3,114

 
(284
)
 
5,279

Stock-based compensation
 
1,337

 
1,673

 
1,148

 
1,046

 
5,204

 
1,329

 
1,254

 
1,178

 
937

 
4,698

Lease exit and related charges, net of sublease income
 
79

 
470

 
154

 
177

 
880

 
78

 
9

 
2,121

 
293

 
2,501

Extinguishment of liability
 
(10,580
)
 
—

 
—

 
—

 
(10,580
)
 
—

 
—

 
—

 
—

 
—

 Adjusted EBITDA
 
$
(4,695
)

$
(3,336
)

$
(1,946
)

$
(3,140
)

$
(13,117
)

$
(3,040
)

$
(3,632
)

$
(2,690
)

$
601


$
(8,761
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
(8,876
)
 
$
(18,832
)
 
$
(20,763
)
 
$
(20,682
)
 
$
(69,153
)
 
$
(19,012
)
 
$
(20,707
)
 
$
(21,962
)
 
$
(7,506
)
 
$
(69,187
)
Other income (expense), net
 
(77
)
 
(95
)
 
325

 
(10
)
 
143

 
443

 
(112
)
 
297

 
(122
)
 
506

Acquisitions related intangible asset amortization
 
981

 
1,067

 
704

 
681

 
3,433

 
685

 
696

 
559

 
403

 
2,343

Depreciation and amortization
 
2,002

 
2,095

 
2,027

 
2,402

 
8,526

 
1,818

 
1,695

 
2,499

 
2,055

 
8,067

Restructuring and other charges
 
1,216

 
541

 
2,048

 
1,187

 
4,992

 
485

 
1,964

 
3,114

 
(284
)
 
5,279

Stock-based compensation
 
1,337

 
1,673

 
1,148

 
1,046

 
5,204

 
1,329

 
1,254

 
1,178

 
937

 
4,698

Lease exit and related charges, net of sublease income
 
79

 
470

 
154

 
177

 
880

 
78

 
9

 
2,121

 
293

 
2,501

Extinguishment of liability
 
(10,580
)
 
—

 
—

 
—

 
(10,580
)
 
—

 
—

 
—

 
—

 
—

 Adjusted EBITDA
 
$
(13,918
)

$
(13,081
)

$
(14,357
)

$
(15,199
)

$
(56,555
)

$
(14,174
)

$
(15,201
)

$
(12,194
)

$
(4,224
)

$
(45,793
)




RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
 
 
2014
 
2015
 
 
 Q1
 
 Q2
 
 Q3
 
 Q4
 
 YTD
 
 Q1
 
 Q2
 
 Q3
 
 Q4
 
 YTD
 
 
 (in thousands)
 
 (in thousands)
Net Revenue by Line of Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Media (A)
 
$
15,215

 
$
8,556

 
$
6,527

 
$
8,823

 
$
39,121

 
$
7,989

 
$
7,281

 
$
6,495

 
$
6,848

 
$
28,613

Mobile Services (B)
 
19,913

 
23,182

 
19,228

 
17,658

 
79,981

 
14,504

 
18,578

 
16,484

 
16,369

 
65,935

Games (C)
 
10,596

 
9,087

 
8,402

 
9,025

 
37,110

 
8,104

 
8,095

 
7,844

 
6,705

 
30,748

                               Total net revenue
 
$
45,724

 
$
40,825

 
$
34,157

 
$
35,506

 
$
156,212

 
$
30,597

 
$
33,954

 
$
30,823

 
$
29,922

 
$
125,296

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Product
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- License (D)
 
$
5,018

 
$
3,273

 
$
3,255

 
$
4,496

 
$
16,042

 
$
4,672

 
$
4,208

 
$
3,628

 
$
3,967

 
$
16,475

- Subscriptions (E)
 
2,777

 
2,569

 
2,642

 
2,649

 
10,637

 
2,384

 
2,372

 
2,147

 
2,054

 
8,957

- Media Properties (F)
 
7,420

 
2,714

 
630

 
1,678

 
12,442

 
933

 
701

 
720

 
827

 
3,181

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- SaaS (G)
 
18,463

 
20,175

 
17,957

 
16,769

 
73,364

 
13,322

 
18,218

 
16,217

 
16,157

 
63,914

- Technology License and Other (H)
 
1,450

 
3,007

 
1,271

 
889

 
6,617

 
1,182

 
360

 
267

 
212

 
2,021

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- License (I)
 
3,849

 
3,399

 
2,988

 
3,854

 
14,090

 
3,835

 
3,943

 
4,128

 
3,268

 
15,174

- Subscriptions (J)
 
5,241

 
4,440

 
4,320

 
3,947

 
17,948

 
3,570

 
3,373

 
3,231

 
3,126

 
13,300

- Media Properties (K)
 
1,506

 
1,248

 
1,094

 
1,224

 
5,072

 
699

 
779

 
485

 
311

 
2,274

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                              Total net revenue
 
$
45,724

 
$
40,825

 
$
34,157

 
$
35,506

 
$
156,212

 
$
30,597

 
$
33,954

 
$
30,823

 
$
29,922

 
$
125,296

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Geography:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
 
$
20,428

 
$
15,092

 
$
12,280

 
$
13,860

 
$
61,660

 
$
12,349

 
$
12,303

 
$
11,460

 
$
10,781

 
$
46,893

Rest of world
 
25,296

 
25,733

 
21,877

 
21,646

 
94,552

 
18,248

 
21,651

 
19,363

 
19,141

 
78,403

                           Total net revenue
 
$
45,724

 
$
40,825

 
$
34,157

 
$
35,506

 
$
156,212

 
$
30,597

 
$
33,954

 
$
30,823

 
$
29,922

 
$
125,296

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 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 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 and social games.
(K) Media Properties revenue within Games includes advertising on games sites and social network sites.