EX-99.1 2 exhibit991erq4-18.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
REALNETWORKS ANNOUNCES FOURTH QUARTER AND FULL YEAR 2018 RESULTS

SEATTLE - February 6, 2019 -

RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced results for the fourth quarter and full year ended December 31, 2018.

•
2018 revenue of $69.5 million, compared to $78.7 million in 2017
•
Commercializing four key growth initiatives: SAFR, Kontxt, RMHD and mobile games
•
Reduced 2018 operating expenses by 3% year-over-year
•
Subsequent to year-end, doubled stake to become 84% majority owner of Napster at compelling economic terms for RealNetworks
Management Commentary
“In 2018 we did not achieve our financial goals. Nonetheless, 2018 was a solid year strategically, in which we made progress on our key growth initiatives, especially SAFR, our world-class facial recognition platform,” said Rob Glaser, Chairman and CEO of RealNetworks. “2019 will also be an important year of commercial progress for SAFR, as well as our other key growth initiatives: Kontxt, our anti-spam and classification platform for messaging; RMHD, our video codec in China; and GameHouse, our casual mobile games business.”
Mr. Glaser added, “We are also delighted to welcome Napster more fully back into the RealNetworks family through our recent acquisition of an additional 42% stake, bringing our ownership to 84%. Bill Patrizio and his team have done an outstanding job of refocusing Napster around B2B and returning Napster to profitability. Through the first nine months of 2018, Napster generated over $14 million in operating income. The addition of Napster significantly increases our scale, with combined full-year revenue of over $200 million.”

Fourth Quarter 2018 Financial Highlights from Continuing Operations
•
Revenue was $16.6 million compared to $17.6 million in the prior quarter and $18.9 million in the prior year period.
•
Gross margin from continuing operations was 77%, up from 76% in the prior quarter and 74% in the prior year period.
•
Operating expenses were flat from the prior quarter and decreased by $0.3 million, or 1%, from the prior year period.
•
Net loss was $(6.9) million, or $(0.18) per share, compared to net loss of $(6.0) million, or $(0.16) per share, in the prior quarter and a net income of $0.4 million, or $0.01 per share, in the prior year period. In the prior year period, net income included the $4.5 million gain on the final receipt of cash from the 2015 sale of the Slingo and social casino business.
•
Adjusted EBITDA was a loss of $(4.1) million compared to a loss of $(3.4) million in the prior quarter and a loss of $(3.6) million in the prior year period. A reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.

Full Year 2018 Financial Highlights from Continuing Operations
•
Revenue was $69.5 million, down from $78.7 million in the prior year.




•
Operating expenses declined by $2.1 million, or 3%, from the prior year.
•
Net loss was $(25.0) million, or $(0.66) per share, compared to $(17.4) million, or $(0.47) per share in the prior year.
•
Adjusted EBITDA was a loss of $(16.3) million, compared to a loss of $(12.0) million in the prior year. A reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
•
At December 31, 2018, the Company had $35.6 million in unrestricted cash, cash equivalents and short-term investments, compared to $39.1 million at September 30, 2018.

Business Outlook

Following its acquisition of an additional 42% interest in Rhapsody International (dba Napster), RealNetworks will include 100% of Napster in its consolidated financial statements, which will include a 16% noncontrolling interest. As a result, as of the acquisition date forward, Napster is reflected in the Company’s financial outlook for the first quarter of 2019. The Company's outlook also accounts for one-time transaction related costs.


For the first quarter of 2019, RealNetworks expects to achieve the following results including noncontrolling interest:

•
Total revenue is expected to be in the range of $40.0 million to $43.0 million.
•
Adjusted EBITDA loss is expected to be in the range of $(5.0) million to $(8.0) million.



New Revenue Recognition Accounting Standard

As of January 1, 2018, we adopted Accounting Standards Codification 606 (Topic 606), Revenue from Contracts with Customers, which affects the accounting for our revenue. We adopted Topic 606 using the modified retrospective transition method, under which the prior periods presented have not been recast to reflect adoption of the new standard.

For additional details on the impact of the standard, see our Annual Report on Form 10-K for the year ended December 31, 2017, and our 2018 Quarterly Reports on Form 10-Q.
Conference Call and Webcast Information
The company will host a conference call today to review results and discuss the company's performance shortly after 4:30 p.m. ET/1:30 p.m. PT. You may join the conference call by calling 1-877-451-6152 (United States) or 1-201-389-0879 (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, February 27, 2019, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13686405.
A live webcast will be available on RealNetworks’ Investor Relations site under Events at http://investor.realnetworks.com and will be archived online upon completion of the conference call.

For More Information

Investor Relations for RealNetworks
Laura Bainbridge, Addo IR




310-829-5400
IR@realnetworks.com
RNWK-F


About RealNetworks

RealNetworks creates innovative technology products and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category 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. Find RealNetworks’ corporate information at www.realnetworks.com.

RealNetworks® and the company’s respective logos are trademarks, registered trademarks, or service marks of RealNetworks, Inc. Other products and company names mentioned are the trademarks of their respective owners.

About Non-GAAP Financial Measures
To supplement RealNetworks' consolidated financial information presented in accordance with GAAP in this press release, the company also discloses certain non-GAAP financial measures, including adjusted EBITDA and contribution margin by reportable segment, which management believes provide investors with useful information.
In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) from continuing operations to adjusted EBITDA and operating income (loss) by reportable segment to contribution margin by reportable segment.
The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the quarterly earnings materials. Please refer to Exhibit 99.2 (“Information Regarding Non-GAAP Financial Measures”) to the company's report on Form 8-K, which is being submitted today to the SEC.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to RealNetworks' current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our strategic focus and initiatives, agreements with partners, and the growth and future prospects relating to our Rhapsody d/b/a Napster 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 impact of Napster’s financial condition and results of operations upon consolidation with those of RealNetworks; the emergence of new entrants and competition in the market for digital media products and services; other competitive risks, including the growth of competing technologies, products and services; the potential outcomes and effects of claims and legal proceedings on RealNetworks' business, prospects, financial condition or results of operations; risks associated with key customer or strategic relationships, business acquisitions and the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; fluctuations in foreign currencies; and changes in RealNetworks' effective tax rate. More information about potential risk factors that could affect RealNetworks' business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, its quarterly reports on Form 10-Q and in other reports and documents filed by RealNetworks from time to time with the Securities and Exchange




Commission. The preparation of RealNetworks' financial statements and forward-looking financial guidance requires the company to make estimates and assumptions that affect the reported amount of assets and liabilities, and revenues and expenses during the reported period.  Actual results may differ materially from these estimates under different assumptions or conditions. The company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.






















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

 
 
Quarter Ended
December 31,
 
Year Ended
December 31,
 
 
 

 
2018
 
2017
 
2018
 
2017
 
 
 (in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 Net revenue
 
$
16,557

 
$
18,865

 
$
69,510

 
$
78,718

 Cost of revenue
 
3,727

 
4,965

 
17,727

 
23,164

           Gross profit
 
12,830

 
13,900

 
51,783

 
55,554

 
 
 
 
 
 
 
 
 
 Operating expenses:
 
 
 


 

 

       Research and development
 
7,391

 
7,625

 
30,789

 
29,710

       Sales and marketing
 
5,262

 
5,419

 
21,140

 
22,953

       General and administrative
 
5,180

 
5,358

 
20,706

 
20,996

       Restructuring and other charges
 
553

 
255

 
1,873

 
2,526

       Lease exit and related benefit
 
—

 
—

 
(454
)
 
—

 
 
 
 
 
 
 
 
 
           Total operating expenses
 
18,386

 
18,657

 
74,054

 
76,185

 
 
 
 
 
 
 
 
 
 Operating loss
 
(5,556
)
 
(4,757
)
 
(22,271
)
 
(20,631
)
 
 
 
 
 
 
 
 
 
 Other income (expenses):
 
 
 
 
 
 
 
 
       Interest income, net
 
74

 
83

 
344

 
436

       Gain (loss) on investments, net
 
—

 
4,500

 
—

 
4,500

       Equity in net loss of Napster
 
(20
)
 
(2,894
)
 
(757
)
 
(3,991
)
       Other income (expense), net
 
92

 
(217
)
 
(103
)
 
(506
)
 
 
 
 
 
 
 
 
 
           Total other income (expense), net
 
146

 
1,472

 
(516
)
 
439

 
 
 
 
 
 
 
 
 
 Loss from continuing operations before income taxes
 
(5,410
)
 
(3,285
)
 
(22,787
)
 
(20,192
)
 Income tax expense (benefit)
 
1,494

 
(3,732
)
 
2,202

 
(2,778
)
 
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
(6,904
)
 
447

 
(24,989
)
 
(17,414
)
Net income from discontinued operations, net of tax
 
—

 
392

 
—

 
1,109

 Net income (loss)
 
$
(6,904
)
 
$
839

 
$
(24,989
)
 
$
(16,305
)
 
 
 
 
 
 
 
 
 
Net income (loss) per share - Basic:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.18
)
 
$
0.01

 
$
(0.66
)
 
$
(0.47
)
Discontinued operations
 
—

 
0.01

 
—

 
0.03

Net income (loss) per share - Basic
 
$
(0.18
)
 
$
0.02

 
$
(0.66
)
 
$
(0.44
)
Net income (loss) per share - Diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.18
)
 
$
0.01

 
$
(0.66
)
 
$
(0.47
)
Discontinued operations
 
—

 
0.01

 
—

 
0.03

Net income (loss) per share - Diluted
 
$
(0.18
)
 
$
0.02

 
$
(0.66
)
 
$
(0.44
)
 
 
 
 
 
 
 
 
 
 Shares used to compute basic net income (loss) per share
 
37,680

 
37,315

 
37,582

 
37,163

 Shares used to compute diluted net income (loss) per share
 
37,680

 
37,383

 
37,582

 
37,163






RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
December 31,
2018
 
December 31,
2017
 
 (in thousands)
ASSETS
 Current assets:
 
 
 
 Cash and cash equivalents
$
35,561

 
$
51,196

 Short-term investments
24

 
8,779

 Trade accounts receivable, net
11,751

 
12,689

 Deferred costs, current portion
331

 
426

 Prepaid expenses and other current assets
5,911

 
3,715

Current assets of discontinued operations
—

 
17,456

 Total current assets
53,578

 
94,261

 
 
 
 
 Equipment and software
37,458

 
46,417

 Leasehold improvements
3,292

 
3,536

 Total equipment, software, and leasehold improvements
40,750

 
49,953

 Less accumulated depreciation and amortization
37,996

 
46,093

 Net equipment, software, and leasehold improvements
2,754

 
3,860

 
 
 
 
 Restricted cash equivalents
1,630

 
2,400

 Other assets
3,997

 
5,588

 Deferred costs, non-current portion
528

 
955

 Deferred tax assets, net
851

 
1,047

 Other intangible assets, net
26

 
325

 Goodwill
16,955

 
13,060

 
 
 
 
 Total assets
$
80,319

 
$
121,496

 


 
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 Current liabilities:
 
 
 
 Accounts payable
$
3,910

 
$
3,785

 Accrued and other current liabilities
11,312

 
12,365

 Commitment to Napster
2,750

 
2,750

 Deferred revenue, current portion
2,125

 
3,097

Current liabilities of discontinued operations
—

 
17,107

 Total current liabilities
20,097

 
39,104

 
 
 
 
 Deferred revenue, non-current portion
268

 
443

 Deferred rent
986

 
982

 Deferred tax liabilities, net
1,168

 
19

 Other long-term liabilities
960

 
1,775

 
 
 
 
 Total liabilities
23,479

 
42,323

 
 
 
 
 
 
 
 
 Shareholders' equity
56,840

 
79,173

 
 
 
 
 Total liabilities and shareholders' equity
$
80,319

 
$
121,496







RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Year Ended
December 31,
 
2018
 
2017
 
 (in thousands)
 
 Cash flows from operating activities:
 
 
 
 Net loss
$
(24,989
)
 
$
(16,305
)
 Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
2,135

 
2,936

Stock-based compensation
2,508

 
3,675

Equity in net loss of Napster
757

 
3,991

Deferred income taxes, net
1,170

 
(3,871
)
Loss (gain) on investments, net
—

 
(4,500
)
Fair value of warrants granted in 2015 and 2017, net of subsequent mark to market adjustments in 2018 and 2017
124

 
(216
)
Net change in certain operating assets and liabilities
(926
)
 
(7,060
)
  Net cash used in operating activities
(19,221
)
 
(21,350
)
 Cash flows from investing activities:


 
 
Purchases of equipment, software, and leasehold improvements
(765
)
 
(734
)
Purchases of short-term investments
—

 
(13,905
)
Proceeds from sales and maturities of short-term investments
8,755

 
48,457

Acquisition, net of cash acquired
(4,192
)
 
—

Advance to Napster
—

 
(1,500
)
Proceeds from the sale of Slingo and social casino business
—

 
4,500

 Net cash provided by investing activities
3,798

 
36,818

 Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock (stock options and stock purchase plan)
199

 
239

Tax payments from shares withheld upon vesting of restricted stock
(261
)
 
(356
)
 Net cash used in financing activities
(62
)
 
(117
)
 Effect of exchange rate changes on cash, cash equivalents and restricted cash
(920
)
 
1,824

 Net increase (decrease) in cash, cash equivalents and restricted cash
(16,405
)
 
17,175

 Cash, cash equivalents and restricted cash, beginning of period
53,596

 
36,421

 Cash, cash equivalents and restricted cash, end of period
$
37,191

 
$
53,596










RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
 
2018
 
2017
 
 YTD
 
 Q4
 
 Q3
 
 Q2
 
Q1
 
 YTD
 
 Q4
 
 Q3
 
 Q2
 
 Q1
 
 (in thousands)
Net Revenue by Line of Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Media (A)
$
18,168

 
$
4,068

 
$
4,733

 
$
3,884

 
$
5,483

 
$
22,569

 
$
5,752

 
$
4,197

 
$
6,951

 
$
5,669

Mobile Services (B)
29,670

 
6,899

 
7,348

 
6,719

 
8,704

 
30,752

 
7,155

 
7,678

 
7,720

 
8,199

Games (C)
21,672

 
5,590

 
5,498

 
5,121

 
5,463

 
25,397

 
5,958

 
6,682

 
6,934

 
5,823

     Total net revenue
$
69,510

 
$
16,557

 
$
17,579

 
$
15,724

 
$
19,650

 
$
78,718

 
$
18,865

 
$
18,557

 
$
21,605

 
$
19,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Product
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Software License (D)
$
9,940

 
$
2,049

 
$
2,746

 
$
1,808

 
$
3,337

 
$
13,643

 
$
3,595

 
$
2,012

 
$
4,741

 
$
3,295

- Subscription Services (E)
4,895

 
1,153

 
1,232

 
1,225

 
1,285

 
5,891

 
1,362

 
1,434

 
1,531

 
1,564

- Product Sales (F)
1,177

 
257

 
281

 
299

 
340

 
1,310

 
350

 
322

 
261

 
377

- Advertising & Other (G)
2,156

 
609

 
474

 
552

 
521

 
1,725

 
445

 
429

 
418

 
433

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Software License (H)
2,838

 
514

 
520

 
469

 
1,335

 
2,337

 
388

 
688

 
642

 
619

- Subscription Services (I)
26,832

 
6,385

 
6,828

 
6,250

 
7,369

 
28,415

 
6,767

 
6,990

 
7,078

 
7,580

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Subscription Services (J)
11,141

 
3,014

 
2,745

 
2,689

 
2,693

 
11,024

 
2,707

 
2,708

 
2,781

 
2,828

- Product Sales (K)
8,647

 
2,013

 
2,279

 
1,953

 
2,402

 
13,806

 
3,086

 
3,851

 
4,007

 
2,862

- Advertising & Other (L)
1,884

 
563

 
474

 
479

 
368

 
567

 
165

 
123

 
146

 
133

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Total net revenue
$
69,510

 
$
16,557

 
$
17,579

 
$
15,724

 
$
19,650

 
$
78,718

 
$
18,865

 
$
18,557

 
$
21,605

 
$
19,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
$
35,803

 
$
7,697

 
$
9,026

 
$
7,646

 
$
11,434

 
$
40,833

 
$
10,120

 
$
10,084

 
$
10,889

 
$
9,740

Rest of world
33,707

 
8,860

 
8,553

 
8,078

 
8,216

 
37,885

 
8,745

 
8,473

 
10,716

 
9,951

     Total net revenue
$
69,510

 
$
16,557

 
$
17,579

 
$
15,724

 
$
19,650

 
$
78,718

 
$
18,865

 
$
18,557

 
$
21,605

 
$
19,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Line of Business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(A) The Consumer Media division 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 division primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.
(C) The Games division primarily includes revenue from sales of mobile and PC games, online games subscription services, and advertising on games sites and social network sites.
Net Revenue by Product
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(D) Software licensing revenue within Consumer Media includes revenues from licenses of our video codec technologies.
(E) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.
(F) Product sales within Consumer Media includes sales of RealPlayer Plus software to consumers.
(G) Advertising & other revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.
(H) Software license revenue within Mobile Services includes revenue from our integrated RealTimes platform.
(I) Subscription services revenue within Mobile Services includes revenue from ringback tones and our intercarrier messaging services, as well as from related professional services provided to mobile carriers.
(J) Subscription services revenue within Games includes revenue from online games subscriptions.
(K) Product sales revenue within Games includes revenue from retail and wholesale games-related revenue and sales of mobile games.
(L) Advertising & other revenue within Games includes advertising on games sites and social network sites.




RealNetworks, Inc. and Subsidiaries
Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin
(Unaudited)



 
 
2018
 
2017
 
2018
 
2017
 
 
Q4
 
Q3
 
Q4
 
YTD
 
YTD
 
 
 (in thousands)
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
4,068

 
$
4,733

 
$
5,752

 
$
18,168

 
$
22,569

Cost of revenue
 
882

 
955

 
915

 
3,858

 
4,460

   Gross profit
 
3,186

 
3,778

 
4,837

 
14,310

 
18,109

 
 
 
 
 
 
 
 
 
 
 
   Gross margin
 
78
%
 
80
%
 
84
%
 
79
%
 
80
%
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
3,614

 
3,448

 
3,573

 
14,419

 
14,530

Operating income (loss), a GAAP measure
 
$
(428
)
 
$
330

 
$
1,264

 
$
(109
)
 
$
3,579

Depreciation and amortization
 
49

 
49

 
42

 
195

 
410

 
 
 
 
 
 
 
 
 
 
 
  Contribution margin, a non-GAAP measure
 
$
(379
)
 
$
379

 
$
1,306

 
$
86

 
$
3,989

 
 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
6,899

 
$
7,348

 
$
7,155

 
$
29,670

 
$
30,752

Cost of revenue
 
2,121

 
2,052

 
2,271

 
8,623

 
10,021

   Gross profit
 
4,778

 
5,296

 
4,884

 
21,047

 
20,731

 
 
 
 
 
 
 
 
 
 
 
   Gross margin
 
69
%
 
72
%
 
68
%
 
71
%
 
67
%
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
6,906

 
6,825

 
6,709

 
28,066

 
27,970

Operating income (loss), a GAAP measure
 
$
(2,128
)
 
$
(1,529
)
 
$
(1,825
)
 
$
(7,019
)
 
$
(7,239
)
Acquisitions related intangible asset amortization
 
69

 
70

 
89

 
322

 
574

Depreciation and amortization
 
116

 
165

 
174

 
616

 
732

 
 
 
 
 
 
 
 
 
 
 
Contribution margin, a non-GAAP measure
 
$
(1,943
)
 
$
(1,294
)
 
$
(1,562
)
 
$
(6,081
)
 
$
(5,933
)
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
$
5,590

 
$
5,498

 
$
5,958

 
$
21,672

 
$
25,397

Cost of revenue
 
1,622

 
1,228

 
1,868

 
6,123

 
8,710

   Gross profit
 
3,968

 
4,270

 
4,090

 
15,549

 
16,687

 
 
 
 
 
 
 
 
 
 
 
   Gross margin
 
71
%
 
78
%
 
69
%
 
72
%
 
66
%
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
4,865

 
5,447

 
5,293

 
20,324

 
20,401

Operating income (loss), a GAAP measure
 
$
(897
)
 
$
(1,177
)
 
$
(1,203
)
 
$
(4,775
)
 
$
(3,714
)
Acquisitions related intangible asset amortization
 
23

 
23

 
18

 
66

 
97

Depreciation and amortization
 
82

 
91

 
163

 
484

 
630

 
 
 
 
 
 
 
 
 
 
 
   Contribution margin, a non-GAAP measure
 
$
(792
)
 
$
(1,063
)
 
$
(1,022
)
 
$
(4,225
)
 
$
(2,987
)
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
$
(898
)
 
$
4

 
$
(89
)
 
$
(877
)
 
$
(27
)
   Gross profit
 
898

 
(4
)
 
89

 
877

 
27

 
 
 
 
 
 
 
 
 
 
 
   Gross margin
 
N/A
 
N/A

 
N/A

 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
3,001

 
2,548

 
3,082

 
11,245

 
13,284

Operating income (loss), a GAAP measure
 
$
(2,103
)
 
$
(2,552
)
 
$
(2,993
)
 
$
(10,368
)
 
$
(13,257
)
Other income (expense), net
 
92

 
(112
)
 
(217
)
 
(103
)
 
(506
)
Depreciation and amortization
 
58

 
109

 
48

 
452

 
493

Restructuring and other charges
 
553

 
632

 
255

 
1,873

 
2,526

Stock-based compensation
 
395

 
499

 
630

 
2,508

 
3,675

Lease exit and related benefit
 
—

 
—

 
—

 
(454
)
 
—

 
 
 
 
 
 
 
 
 
 
 
   Contribution margin, a non-GAAP measure
 
$
(1,005
)
 
$
(1,424
)
 
$
(2,277
)
 
$
(6,092
)
 
$
(7,069
)
 
 
 
 
 
 
 
 
 
 
 











RealNetworks, Inc. and Subsidiaries
Reconciliation of Net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure
(Unaudited)
 
 
2018
 
2017
 
2018
 
2017
 
 
 Q4
 
 Q3
 
 Q4
 
 YTD
 
 YTD
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
$
(6,904
)
 
$
(5,977
)
 
$
447

 
$
(24,989
)
 
$
(17,414
)
Income tax expense (benefit)
 
1,494

 
272

 
(3,732
)
 
2,202

 
(2,778
)
Interest income, net
 
(74
)
 
(72
)
 
(83
)
 
(344
)
 
(436
)
(Gain) loss on investments, net
 
—

 
—

 
(4,500
)
 
—

 
(4,500
)
Equity in net loss of Napster
 
20

 
737

 
2,894

 
757

 
3,991

Acquisitions related intangible asset amortization
 
92

 
93

 
107

 
388

 
671

Depreciation and amortization
 
305

 
414

 
427

 
1,747

 
2,265

Restructuring and other charges
 
553

 
632

 
255

 
1,873

 
2,526

Stock-based compensation
 
395

 
499

 
630

 
2,508

 
3,675

Lease exit and related benefit
 
—

 
—

 
—

 
(454
)
 
—

   Adjusted EBITDA, a non-GAAP measure
 
$
(4,119
)

$
(3,402
)
 
$
(3,555
)
 
$
(16,312
)
 
$
(12,000
)