EX-99.1 2 exhibit991erq3-19.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
REALNETWORKS ANNOUNCES THIRD QUARTER 2019 FINANCIAL RESULTS

SEATTLE — October 30, 2019 -

RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced its financial results for the third quarter ended September 30, 2019.

•
Third quarter revenue of $45.0 million compared to $44.2 million in the prior quarter; significant adjusted EBITDA loss improvement over the prior quarter
•
Expanded reach of SAFRTM through broadening network of partners, including NVIDIA
•
Games revenue up 30% year-over-year with a return to positive operating income driven by success of free-to-play casual mobile games, particularly Delicious World

Management Commentary

“In the third quarter, we continued to make solid progress with two key growth initiatives: our SAFR facial and object recognition platform and free-to-play casual mobile games,” said Rob Glaser, Chairman and CEO of RealNetworks. “For SAFR, we entered into new verticals through partnerships with systems integrators and GPU market leader, NVIDIA. We also gained traction in our commercialization efforts through collaborations with leading Video Management Systems.”

Mr. Glaser added, “In Games, our free-to-play casual mobile games continued to perform well and scale up. This is particularly true with Delicious World, which is on track to become our most successful casual game ever in terms of revenue and engagement even though it’s only been in global release for six months. These successes, along with our ongoing commitment to carefully manage our costs, have resulted in a significant improvement on the bottom line.”

Third Quarter 2019 Financial Highlights
•
Revenue was $45.0 million (inclusive of $27.3 million from Napster) compared to $44.2 million (inclusive of $28.6 million from Napster) in the prior quarter and $17.6 million in the prior year period.
•
Games revenue was $7.2 million, up 18% compared to $6.0 million in the prior quarter and up 30% compared to $5.5 million in the prior year period.
•
Gross profit margin was 42%, up from 38% in the prior quarter and down from 76% in the prior year period. Napster’s gross profit margin for the third quarter of 2019 was 19%, while RealNetworks’ gross profit margin without Napster was 76%.
•
Operating expenses decreased $1.4 million, or 5%, from the prior quarter and increased $6.7 million, or 37%, from the prior year period. Napster’s operating expenses were $6.5 million for the third quarter of 2019.
•
Net loss attributable to RealNetworks was $(6.0) million, or $(0.16) per share, compared to net loss of $(9.2) million, or $(0.24) per share, in the prior quarter and a net loss of $(6.0) million, or $(0.16) per share, in the prior year period.
•
Adjusted EBITDA was a loss of $(3.2) million compared to a loss of $(6.3) million in the prior quarter and a loss of $(3.3) million in the prior year period. A reconciliation of GAAP net income (loss) including noncontrolling interests to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
•
At September 30, 2019, the Company had $18.1 million in unrestricted cash and cash equivalents compared to $26.3 million at June 30, 2019.




•
In August 2019, RealNetworks and Napster entered into a loan agreement for a revolving line of credit for a maximum of $10.0 million to be used for working capital and general corporate purposes. As of September 30, 2019, $6.1 million remained available for borrowing.

Business Outlook

For the fourth quarter of 2019, RealNetworks expects to achieve the following results including noncontrolling interests:

•
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 $(2.0) million to $(5.0) million.

Conference Call and Webcast Information
The Company will host a conference call today to review results and discuss its performance shortly after 4:30 p.m. ET / 1:30 p.m. PT. Participants may join the conference call by dialing 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, November 20, 2019, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13694934.

A live webcast will be available on RealNetworks’ Investor Relations site under the Events & Presentations section at http://investor.realnetworks.com and will be archived online upon completion of the conference call.

About RealNetworks

Building on a legacy of digital media expertise and innovation, RealNetworks has created a new generation of products that employ best-in-class artificial intelligence and machine learning to enhance and secure our daily lives. SAFR (www.safr.com) is the world’s premier facial recognition platform for live video. Leading in real-world performance and accuracy as evidenced in testing by NIST, SAFR enables new applications for security, convenience, and analytics. Kontxt (www.kontxt.com) is the foremost platform for categorizing A2P messages to help mobile carriers build customer loyalty and drive new revenue through text message classification and antispam. For information about our other products, visit www.realnetworks.com.

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

Forward-Looking Statements





This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to our current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our financial condition and liquidity, our strategic focus and initiatives, agreements with partners, and the growth and future prospects relating to our Napster segment. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. These statements reflect our expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results for RealNetworks, on a consolidated basis, to differ from the results predicted include: our ability to realize operating efficiencies, growth and other benefits from the implementation of our growth initiatives and restructuring efforts; cash usage and conservation, and the pursuit of additional funding sources; successful monetization of our products and services; competitive risks, including the emergence or growth of competing technologies, products and services; potential outcomes and effects of claims and legal proceedings; risks associated with key customer or strategic relationships and business acquisitions; disruptions in the global financial markets, including changes in consumer spending and impacts to credit availability; fluctuations in foreign currencies; and unique risk factors that relate to our Napster segment, such as risks stemming from its streaming music service and related music royalties. More information about potential risk factors that could affect our business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, its quarterly reports on Form 10-Q and in other reports and documents filed by RealNetworks from time to time with the Securities and Exchange Commission. The preparation of our financial statements and forward-looking financial guidance requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. RealNetworks assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

For More Information:
Investor Relations for RealNetworks
Kimberly Orlando, Addo Investor Relations
310-829-5400
IR@realnetworks.com
RNWK-F





RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
 
Quarter Ended
September 30,
 
Nine Months Ended
September 30,
 
 

2019
 
2018
 
2019
 
2018
 
 (in thousands, except per share data)
 
 
 
 
 
 
 
 
 Net revenue
$
44,993

 
$
17,579

 
$
128,713

 
$
52,953

 Cost of revenue
26,278

 
4,239

 
78,430

 
14,000

           Gross profit
18,715

 
13,340

 
50,283

 
38,953

 
 
 
 
 
 
 
 
 Operating expenses:
 
 


 

 

       Research and development
8,687

 
8,052

 
26,396

 
23,398

       Sales and marketing
8,470

 
4,998

 
24,972

 
15,878

       General and administrative
7,132

 
4,586

 
23,888

 
15,526

       Restructuring and other charges
691

 
632

 
1,587

 
1,320

       Lease exit and related benefit
—

 
—

 
—

 
(454
)
 
 
 
 
 
 
 
 
           Total operating expenses
24,980

 
18,268

 
76,843

 
55,668

 
 
 
 
 
 
 
 
 Operating loss
(6,265
)
 
(4,928
)
 
(26,560
)
 
(16,715
)
 
 
 
 
 
 
 
 
 Other income (expenses):
 
 
 
 
 
 
 
       Interest expense
(220
)
 
—

 
(429
)
 
—

       Interest income
—

 
72

 
117

 
270

       Gain (loss) on equity investment, net
—

 
—

 
12,338

 
—

       Equity in net loss of Napster
—

 
(737
)
 
—

 
(737
)
       Other income (expenses), net
541

 
(112
)
 
851

 
(195
)
 
 
 
 
 
 
 
 
           Total other income (expenses), net
321

 
(777
)
 
12,877

 
(662
)
 
 
 
 
 
 
 
 
 Income (loss) before income taxes
(5,944
)
 
(5,705
)
 
(13,683
)
 
(17,377
)
 Income tax expense
310

 
272

 
812

 
708

 
 
 
 
 
 
 
 
Net income (loss) including noncontrolling interests
(6,254
)
 
(5,977
)
 
(14,495
)
 
(18,085
)
Net income (loss) attributable to noncontrolling interests
(286
)
 
—

 
(858
)
 
—

Net income (loss) attributable to RealNetworks
$
(5,968
)
 
$
(5,977
)
 
$
(13,637
)
 
$
(18,085
)
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to RealNetworks- Basic:
$
(0.16
)
 
$
(0.16
)
 
$
(0.36
)
 
$
(0.48
)
Net income (loss) per share attributable to RealNetworks- Diluted:
$
(0.16
)
 
$
(0.16
)
 
$
(0.36
)
 
$
(0.48
)
 
 
 
 
 
 
 
 
 Shares used to compute basic net income (loss) per share
38,062

 
37,618

 
37,944

 
37,549

 Shares used to compute diluted net income (loss) per share
38,062

 
37,618

 
37,944

 
37,549






RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
September 30,
2019
 
December 31,
2018
 
 (in thousands)
ASSETS
 Current assets:
 
 
 
 Cash and cash equivalents
$
18,101

 
$
35,561

 Short-term investments
—

 
24

 Trade accounts receivable, net
27,947

 
11,751

 Deferred costs, current portion
950

 
331

 Prepaid expenses and other current assets
18,931

 
5,911

 Total current assets
65,929

 
53,578

 
 
 
 
 Equipment and software
31,853

 
37,458

 Leasehold improvements
3,255

 
3,292

 Total equipment, software, and leasehold improvements
35,108

 
40,750

 Less accumulated depreciation and amortization
32,171

 
37,996

 Net equipment, software, and leasehold improvements
2,937

 
2,754

 
 
 
 
 Operating lease assets
12,499

 
—

 Restricted cash equivalents
5,374

 
1,630

 Other assets
2,842

 
3,997

 Deferred costs, non-current portion
957

 
528

 Deferred tax assets, net
831

 
851

 Other intangible assets, net
20,309

 
26

 Goodwill
65,154

 
16,955

 
 
 
 
 Total assets
$
176,832

 
$
80,319

 


 
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 Current liabilities:
 
 
 
 Accounts payable
$
4,692

 
$
3,910

 Accrued royalties, fulfillment and other current liabilities
92,529

 
11,312

 Commitment to Napster
—

 
2,750

 Deferred revenue, current portion
6,134

 
2,125

 Notes payable
3,599

 
—

 Total current liabilities
106,954

 
20,097

 
 
 
 
 Deferred revenue, non-current portion
139

 
268

 Deferred rent
—

 
986

 Deferred tax liabilities, net
1,225

 
1,168

 Long-term lease liabilities
9,486

 
—

 Long-term debt
3,900

 
—

 Other long-term liabilities
11,195

 
960

 
 
 
 
 Total liabilities
132,899

 
23,479

 
 
 
 
 Total shareholders' equity
44,036

 
56,840

 
 
 
 
Noncontrolling interests
(103
)
 
—

 
 
 
 
 Total equity
43,933

 
56,840

 
 
 
 
 Total liabilities and equity
$
176,832

 
$
80,319





RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended
September 30,
 
2019
 
2018
 
 (in thousands)
 
 Cash flows from operating activities:
 
 
 
 Net income (loss) including noncontrolling interests
$
(14,495
)
 
$
(18,085
)
 Adjustments to reconcile net income (loss) including noncontrolling interests to net cash used in operating activities:
 
 
 
Depreciation and amortization
4,397

 
1,738

Stock-based compensation
2,420

 
2,113

Equity in net loss of Napster
—

 
737

Deferred income taxes, net
—

 
5

(Gain) loss on equity investment, net
(12,338
)
 
—

Foreign currency (gain) loss
(804
)
 
—

Fair value adjustments to contingent consideration liability
700

 
—

Mark to market adjustment of warrants
—

 
78

Net change in certain operating assets and liabilities
(177
)
 
(2,214
)
  Net cash used in operating activities
(20,297
)
 
(15,628
)
 Cash flows from investing activities:


 
 
Purchases of equipment, software, and leasehold improvements
(1,068
)
 
(698
)
Proceeds from sales and maturities of short-term investments
24

 
7,607

Acquisition, net of cash acquired
12,260

 
(4,192
)
 Net cash provided by investing activities
11,216

 
2,717

 Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock (stock options and stock purchase plan)
144

 
114

Tax payments from shares withheld upon vesting of restricted stock
(289
)
 
(243
)
Proceeds from notes payable and revolving credit facility
31,337

 
—

Repayments of notes payable and revolving credit facility
(35,768
)
 
—

Payment of financing fees
(569
)
 
—

Other financing activities
900

 
—

 Net cash used in financing activities
(4,245
)
 
(129
)
 Effect of exchange rate changes on cash, cash equivalents and restricted cash
(390
)
 
(962
)
 Net increase (decrease) in cash, cash equivalents and restricted cash
(13,716
)
 
(14,002
)
 Cash, cash equivalents and restricted cash, beginning of period
37,191

 
53,596

 Cash, cash equivalents and restricted cash, end of period
$
23,475

 
$
39,594










RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
 
2019
 
2018
 
 Q3
 
 Q2
 
Q1
 
 Q4
 
 Q3
 
 Q2
 
 Q1
 
 (in thousands)
Net Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Media (A)
$
3,632

 
$
2,620

 
$
2,486

 
$
4,068

 
$
4,733

 
$
3,884

 
$
5,483

Mobile Services (B)
6,895

 
6,997

 
6,939

 
6,899

 
7,348

 
6,719

 
8,704

Games (C)
7,164

 
6,048

 
5,710

 
5,590

 
5,498

 
5,121

 
5,463

Napster (D)
27,302

 
28,583

 
24,337

 
—

 
—

 
—

 
—

     Total net revenue
$
44,993

 
$
44,248

 
$
39,472

 
$
16,557

 
$
17,579

 
$
15,724

 
$
19,650

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Product
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
- Software License (E)
$
1,987

 
$
944

 
$
735

 
$
2,049

 
$
2,746

 
$
1,808

 
$
3,337

- Subscription Services (F)
1,028

 
1,040

 
1,088

 
1,153

 
1,232

 
1,225

 
1,285

- Product Sales (G)
207

 
206

 
219

 
257

 
281

 
299

 
340

- Advertising & Other (H)
410

 
430

 
444

 
609

 
474

 
552

 
521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
- Software License (I)
888

 
957

 
599

 
514

 
520

 
469

 
1,335

- Subscription Services (J)
6,007

 
6,040

 
6,340

 
6,385

 
6,828

 
6,250

 
7,369

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
- Subscription Services (K)
3,056

 
3,073

 
2,985

 
3,014

 
2,745

 
2,689

 
2,693

- Product Sales (L)
3,078

 
2,177

 
1,988

 
2,013

 
2,279

 
1,953

 
2,402

- Advertising & Other (M)
1,030

 
798

 
737

 
563

 
474

 
479

 
368

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Napster
 
 
 
 
 
 
 
 
 
 
 
 
 
- Subscription Services (N)
27,302

 
28,583

 
24,337

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Total net revenue
$
44,993

 
$
44,248

 
$
39,472

 
$
16,557

 
$
17,579

 
$
15,724

 
$
19,650

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
$
22,015

 
$
21,322

 
$
18,970

 
$
7,697

 
$
9,026

 
$
7,646

 
$
11,434

Rest of world
22,978

 
22,926

 
20,502

 
8,860

 
8,553

 
8,078

 
8,216

     Total net revenue
$
44,993

 
$
44,248

 
$
39,472

 
$
16,557

 
$
17,579

 
$
15,724

 
$
19,650

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
(A) The Consumer Media segment primarily includes revenue from the licensing of our portfolio of video codec technologies. Also included is RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software to consumers, and consumer subscriptions such as RealPlayer Plus and SuperPass.
(B) The Mobile Services segment primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.
(C) The Games segment primarily includes revenue from sales of mobile and PC games, online games subscription services, player purchases of in-game virtual goods, and advertising on games sites and social network sites.
(D) The Napster segment primarily includes revenue from subscription music offerings from on-demand streaming services and conditional downloads. Napster revenues are included in our consolidated results from the January 18, 2019 acquisition date forward.
Net Revenue by Product
 
 
 
 
 
 
 
 
 
 
 
 
 
(E) Software licensing revenue within Consumer Media includes revenues from licenses of our video codec technologies.
(F) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.
(G) Product sales within Consumer Media includes sales of RealPlayer Plus software to consumers.
(H) Advertising & other revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.
(I) Software license revenue within Mobile Services includes revenue from our integrated RealTimes platform and our facial recognition platform, SAFR.
(J) Subscription services revenue within Mobile Services includes revenue from ringback tones and our messaging platform services, as well as from related professional services provided to mobile carriers.
(K) Subscription services revenue within Games includes revenue from online games subscriptions.
(L) Product sales revenue within Games includes revenue from retail and wholesale games-related revenue, sales of mobile games, and player purchases of in-game virtual goods.
(M) Advertising & other revenue within Games includes advertising on games sites and social network sites.
(N) Subscription services revenue within Napster includes music tracks by way of on-demand streaming and conditional downloads offered directly to end consumers and distribution partners.




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

 
2019
 
2018
 
2019
 
2018
 
Q3
 
Q2
 
Q3
 
YTD
 
YTD
 
 (in thousands)
Consumer Media
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
$
3,632

 
$
2,620

 
$
4,733

 
$
8,738

 
$
14,100

Cost of revenue
705

 
803

 
955

 
2,341

 
2,976

Gross profit
2,927

 
1,817

 
3,778

 
6,397

 
11,124

 
 
 
 
 
 
 
 
 
 
Gross margin
81
%
 
69
%
 
80
%
 
73
%
 
79
%
 
 
 
 
 
 
 
 
 
 
Operating expenses
2,692

 
2,877

 
3,448

 
8,688

 
10,805

Operating income (loss), a GAAP measure
$
235

 
$
(1,060
)
 
$
330

 
$
(2,291
)
 
$
319

Depreciation and amortization
34

 
56

 
49

 
144

 
146

 
 
 
 
 
 
 
 
 
 
Contribution margin, a non-GAAP measure
$
269

 
$
(1,004
)
 
$
379

 
$
(2,147
)
 
$
465

 
 
 
 
 
 
 
 
 
 
Mobile Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
$
6,895

 
$
6,997

 
$
7,348

 
$
20,831

 
$
22,771

Cost of revenue
1,721

 
1,865

 
2,052

 
5,634

 
6,502

Gross profit
5,174

 
5,132

 
5,296

 
15,197

 
16,269

 
 
 
 
 
 
 
 
 
 
Gross margin
75
%
 
73
%
 
72
%
 
73
%
 
71
%
 
 
 
 
 
 
 
 
 
 
Operating expenses
7,143

 
7,438

 
6,825

 
22,142

 
21,160

Operating income (loss), a GAAP measure
$
(1,969
)
 
$
(2,306
)
 
$
(1,529
)
 
$
(6,945
)
 
$
(4,891
)
Acquisitions related intangible asset amortization
—

 
—

 
70

 
—

 
253

Depreciation and amortization
81

 
106

 
165

 
418

 
500

 
 
 
 
 
 
 
 
 
 
Contribution margin, a non-GAAP measure
$
(1,888
)
 
$
(2,200
)
 
$
(1,294
)
 
$
(6,527
)
 
$
(4,138
)
 
 
 
 
 
 
 
 
 
 
Games
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
$
7,164

 
$
6,048

 
$
5,498

 
$
18,922

 
$
16,082

Cost of revenue
1,934

 
1,655

 
1,228

 
5,259

 
4,501

Gross profit
5,230

 
4,393

 
4,270

 
13,663

 
11,581

 
 
 
 
 
 
 
 
 
 
Gross margin
73
%
 
73
%
 
78
%
 
72
%
 
72
%
 
 
 
 
 
 
 
 
 
 
Operating expenses
5,151

 
5,288

 
5,447

 
15,476

 
15,459

Operating income (loss), a GAAP measure
$
79

 
$
(895
)
 
$
(1,177
)
 
$
(1,813
)
 
$
(3,878
)
Acquisitions related intangible asset amortization
4

 
—

 
23

 
27

 
43

Depreciation and amortization
89

 
84

 
91

 
256

 
402

 
 
 
 
 
 
 
 
 
 
Contribution margin, a non-GAAP measure
$
172

 
$
(811
)
 
$
(1,063
)
 
$
(1,530
)
 
$
(3,433
)
 
 
 
 
 
 
 
 
 
 
Napster
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
$
27,302

 
$
28,583

 
$
—

 
$
80,222

 
$
—

Cost of revenue
21,986

 
23,026

 
—

 
65,408

 
—

Gross profit
5,316

 
5,557

 
—

 
14,814

 
—

 
 
 
 
 
 
 
 
 
 
Gross margin
19
%
 
19
%
 
—
%
 
18
%
 
—
%
 
 
 
 
 
 
 
 
 
 
Operating expenses
6,472

 
6,638

 
—

 
18,642

 
—

Operating income (loss), a GAAP measure
$
(1,156
)
 
$
(1,081
)
 
$
—

 
$
(3,828
)
 
$
—

Acquisitions related intangible asset amortization
1,126

 
1,129

 
—

 
3,198

 
—

Depreciation and amortization
72

 
69

 
—

 
256

 
—

 
 
 
 
 
 
 
 
 
 
Contribution margin, a non-GAAP measure
$
42

 
$
117

 
$
—

 
$
(374
)
 
$
—

 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(68
)
 
$
(67
)
 
$
4

 
$
(212
)
 
$
21

Gross profit
68

 
67

 
(4
)
 
212

 
(21
)
 
 
 
 
 
 
 
 
 
 
Gross margin
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
Operating expenses
3,522

 
4,116

 
2,548

 
11,895

 
8,244

Operating income (loss), a GAAP measure
$
(3,454
)
 
$
(4,049
)
 
$
(2,552
)
 
$
(11,683
)
 
$
(8,265
)
Other income (expense), net
541

 
183

 
(112
)
 
851

 
(195
)
Foreign currency (gain) loss
(489
)
 
(164
)
 
78

 
(804
)
 
98

Depreciation and amortization
32

 
33

 
109

 
98

 
394

Fair value adjustments to contingent consideration liability
400

 
300

 
—

 
700

 
—

Restructuring and other charges
691

 
729

 
632

 
1,587

 
1,320

Stock-based compensation
503

 
533

 
499

 
2,420

 
2,113

Lease exit and related benefit
—

 
—

 
—

 
—

 
(454
)
 
 
 
 
 
 
 
 
 
 
Contribution margin, a non-GAAP measure (1)
$
(1,776
)
 
$
(2,435
)
 
$
(1,346
)
 
$
(6,831
)
 
$
(4,989
)
(1)2018 Corporate contribution margin was revised to exclude the impact of realized and unrealized foreign currency (gain) loss incurred in each respective period. Foreign currency (gain) loss is reported in Other income (expense), net, in our consolidated statement of operations.





RealNetworks, Inc. and Subsidiaries
Reconciliation of Net income (loss) including noncontrolling interests to adjusted EBITDA, a non-GAAP measure
(Unaudited)
 
2019
 
2018
 
2019
 
2018
 
Q3
 
Q2
 
Q3
 
 YTD
 
 YTD
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP Net income (loss) including noncontrolling interests to adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) including noncontrolling interests
$
(6,254
)
 
$
(9,455
)
 
$
(5,977
)
 
$
(14,495
)
 
$
(18,085
)
Income tax expense (benefit)
310

 
244

 
272

 
812

 
708

Interest expense
220

 
43

 
—

 
429

 
—

Interest income
—

 
(40
)
 
(72
)
 
(117
)
 
(270
)
(Gain) loss on equity investment, net

—

 
—

 
—

 
(12,338
)
 
—

Foreign currency (gain) loss
(489
)
 
(164
)
 
78

 
(804
)
 
98

Equity in net loss of Napster
—

 
—

 
737

 
—

 
737

Acquisitions related intangible asset amortization
1,130

 
1,129

 
93

 
3,225

 
296

Depreciation and amortization
308

 
348

 
414

 
1,172

 
1,442

Fair value adjustments to contingent consideration liability
400

 
300

 
—

 
700

 
—

Restructuring and other charges
691

 
729

 
632

 
1,587

 
1,320

Stock-based compensation
503

 
533

 
499

 
2,420

 
2,113

Lease exit and related benefit
—

 
—

 
—

 
—

 
(454
)
   Adjusted EBITDA, a non-GAAP measure (1)
$
(3,181
)

$
(6,333
)
 
$
(3,324
)
 
$
(17,409
)
 
$
(12,095
)
(1)2018 adjusted EBITDA was revised to exclude the impact of realized and unrealized foreign currency (gain) loss incurred in each respective period. Foreign currency (gain) loss is reported in Other income (expense), net, in our consolidated statement of operations.