WASHINGTON | 001-37745 | 91-1628146 | ||||||||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
¨ | 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)) |
Title of Each Class | Trading Symbol (s) | Name of Each Exchange on Which Registered | ||||||
Common Stock, Par Value $0.001 per share Preferred Share Purchase Rights | RNWK RNWK | The NASDAQ Stock Market The NASDAQ Stock Market |
Emerging growth company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Exhibit No. | Description | ||||
99.1 | |||||
99.2 | |||||
REALNETWORKS, INC. | ||||||||
By: | / S / Judd Lee | |||||||
Judd Lee | ||||||||
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||
Net revenue | $ | 16,554 | $ | 17,691 | $ | 50,461 | $ | 48,491 | |||||||||||||||
Cost of revenue | 4,062 | 4,292 | 12,429 | 13,022 | |||||||||||||||||||
Gross profit | 12,492 | 13,399 | 38,032 | 35,469 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 5,781 | 6,931 | 18,375 | 21,439 | |||||||||||||||||||
Sales and marketing | 5,130 | 5,644 | 15,969 | 17,501 | |||||||||||||||||||
General and administrative | 4,124 | 5,242 | 13,063 | 17,674 | |||||||||||||||||||
Restructuring and other charges | 307 | 691 | 1,097 | 1,587 | |||||||||||||||||||
Total operating expenses | 15,342 | 18,508 | 48,504 | 58,201 | |||||||||||||||||||
Operating loss | (2,850) | (5,109) | (10,472) | (22,732) | |||||||||||||||||||
Other income (expenses): | |||||||||||||||||||||||
Interest expense | (7) | — | (12) | — | |||||||||||||||||||
Interest income | 6 | — | 31 | 89 | |||||||||||||||||||
Gain (loss) on equity investments, net | (37) | — | (90) | 12,338 | |||||||||||||||||||
Other income (expenses), net | (104) | 85 | 63 | 197 | |||||||||||||||||||
Total other income (expenses), net | (142) | 85 | (8) | 12,624 | |||||||||||||||||||
Loss from continuing operations before income taxes | (2,992) | (5,024) | (10,480) | (10,108) | |||||||||||||||||||
Income tax expense | 316 | 233 | 606 | 515 | |||||||||||||||||||
Net loss from continuing operations | (3,308) | (5,257) | (11,086) | (10,623) | |||||||||||||||||||
Net loss from discontinued operations, net of tax | (1) | (997) | (2,466) | (3,872) | |||||||||||||||||||
Net loss | (3,309) | (6,254) | (13,552) | (14,495) | |||||||||||||||||||
Net loss attributable to noncontrolling interests of continuing operations | (77) | (54) | (196) | (106) | |||||||||||||||||||
Net income (loss) attributable to noncontrolling interests of discontinued operations | 6 | (232) | (364) | (752) | |||||||||||||||||||
Net loss attributable to RealNetworks | $ | (3,238) | $ | (5,968) | $ | (12,992) | $ | (13,637) | |||||||||||||||
Net loss from continuing operations attributable to RealNetworks | $ | (3,231) | $ | (5,203) | $ | (10,890) | $ | (10,517) | |||||||||||||||
Net loss from discontinued operations attributable to RealNetworks | (7) | (765) | (2,102) | (3,120) | |||||||||||||||||||
Net loss attributable to RealNetworks | $ | (3,238) | $ | (5,968) | $ | (12,992) | $ | (13,637) | |||||||||||||||
Net loss per share attributable to RealNetworks- Basic: | |||||||||||||||||||||||
Continuing operations | $ | (0.08) | $ | (0.14) | $ | (0.28) | $ | (0.28) | |||||||||||||||
Discontinued operations | — | (0.02) | (0.06) | (0.08) | |||||||||||||||||||
Net loss per share attributable to RealNetworks- Basic | $ | (0.08) | $ | (0.16) | $ | (0.34) | $ | (0.36) | |||||||||||||||
Net loss per share attributable to RealNetworks- Diluted: | |||||||||||||||||||||||
Continuing operations | $ | (0.08) | $ | (0.14) | $ | (0.28) | $ | (0.28) | |||||||||||||||
Discontinued operations | — | (0.02) | (0.06) | (0.08) | |||||||||||||||||||
Net loss per share attributable to RealNetworks- Diluted | $ | (0.08) | $ | (0.16) | $ | (0.34) | $ | (0.36) | |||||||||||||||
Shares used to compute basic net loss per share | 38,270 | 38,062 | 38,247 | 37,944 | |||||||||||||||||||
Shares used to compute diluted net loss per share | 38,270 | 38,062 | 38,247 | 37,944 |
September 30, 2020 | December 31, 2019 | ||||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 13,245 | $ | 8,472 | |||||||
Trade accounts receivable, net | 13,015 | 12,767 | |||||||||
Deferred costs, current portion | 364 | 537 | |||||||||
Prepaid expenses and other current assets | 3,552 | 4,428 | |||||||||
Current assets of discontinued operations | 89,547 | 28,376 | |||||||||
Total current assets | 119,723 | 54,580 | |||||||||
Equipment and software | 30,675 | 31,699 | |||||||||
Leasehold improvements | 2,720 | 3,071 | |||||||||
Total equipment, software, and leasehold improvements | 33,395 | 34,770 | |||||||||
Less accumulated depreciation and amortization | 31,459 | 32,350 | |||||||||
Net equipment, software, and leasehold improvements | 1,936 | 2,420 | |||||||||
Operating lease assets | 8,726 | 10,198 | |||||||||
Restricted cash equivalents | 4,630 | 4,880 | |||||||||
Other assets | 973 | 1,808 | |||||||||
Deferred costs, non-current portion | 71 | 388 | |||||||||
Deferred tax assets, net | 781 | 761 | |||||||||
Goodwill | 17,073 | 16,908 | |||||||||
Non-current assets of discontinued operations | — | 67,811 | |||||||||
Total assets | $ | 153,913 | $ | 159,754 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 3,398 | $ | 4,042 | |||||||
Accrued and other current liabilities | 25,272 | 17,495 | |||||||||
Deferred revenue, current portion | 2,302 | 2,003 | |||||||||
Current debt | 3,900 | — | |||||||||
Current liabilities of discontinued operations | 70,713 | 72,641 | |||||||||
Total current liabilities | 105,585 | 96,181 | |||||||||
Deferred revenue, non-current portion | 46 | 96 | |||||||||
Deferred tax liabilities, net | 1,076 | 1,076 | |||||||||
Long-term lease liabilities | 6,672 | 8,234 | |||||||||
Long-term debt | 2,883 | 3,900 | |||||||||
Other long-term liabilities | 2,243 | 10,151 | |||||||||
Non-current liabilities of discontinued operations | — | 1,843 | |||||||||
Total liabilities | 118,505 | 121,481 | |||||||||
Total shareholders' equity | 36,470 | 38,775 | |||||||||
Noncontrolling interests | (1,062) | (502) | |||||||||
Total equity | 35,408 | 38,273 | |||||||||
Total liabilities and equity | $ | 153,913 | $ | 159,754 |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
(in thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net loss from continuing operations | $ | (11,086) | $ | (10,623) | |||||||
Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities: | |||||||||||
Depreciation and amortization | 697 | 943 | |||||||||
Stock-based compensation | 1,093 | 2,420 | |||||||||
(Gain) loss on equity investments, net | 90 | (12,338) | |||||||||
Foreign currency (gain) loss | 25 | (150) | |||||||||
Fair value adjustments to contingent consideration liability | (200) | 700 | |||||||||
Net change in certain operating assets and liabilities | (652) | 739 | |||||||||
Net cash provided by (used in) operating activities- continuing operations | (10,033) | (18,309) | |||||||||
Net cash provided by (used in) operating activities- discontinued operations | (4,086) | (1,988) | |||||||||
Net cash provided by (used in) operating activities | (14,119) | (20,297) | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of equipment, software, and leasehold improvements | (261) | (831) | |||||||||
Proceeds from sales and maturities of short-term investments | — | 24 | |||||||||
Acquisition, net of cash acquired | — | 12,260 | |||||||||
Net cash (used in) provided by investing activities- continuing operations | (261) | 11,453 | |||||||||
Net cash provided by (used in) investing activities- discontinued operations | (192) | (237) | |||||||||
Net cash provided by (used in) investing activities | (453) | 11,216 | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of common stock (stock options and stock purchase plan) | — | 144 | |||||||||
Proceeds from issuance of preferred stock | 10,000 | — | |||||||||
Tax payments from shares withheld upon vesting of restricted stock | (12) | (289) | |||||||||
Proceeds from notes payable and long-term debt | 2,876 | 3,900 | |||||||||
Payment of financing fees | — | (569) | |||||||||
Other financing activities | 2,106 | 900 | |||||||||
Net cash provided by (used in) financing activities- continuing operations | 14,970 | 4,086 | |||||||||
Net cash provided by (used in) financing activities- discontinued operations | 2,007 | (8,331) | |||||||||
Net cash provided by (used in) financing activities | 16,977 | (4,245) | |||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 32 | (390) | |||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 2,437 | (13,716) | |||||||||
Cash, cash equivalents and restricted cash, beginning of period | 22,179 | 37,191 | |||||||||
Cash, cash equivalents and restricted cash, end of period | 24,616 | 23,475 | |||||||||
Less: Cash, cash equivalents and restricted cash from discontinued operations | 6,741 | 6,724 | |||||||||
Cash and cash equivalents from continuing operations, end of period | $ | 17,875 | $ | 16,751 |
2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||
Net Revenue by Segment | |||||||||||||||||||||||||||||||||||||||||
Consumer Media (A) | $ | 2,543 | $ | 3,159 | $ | 3,495 | $ | 4,432 | $ | 3,632 | $ | 2,620 | $ | 2,486 | |||||||||||||||||||||||||||
Mobile Services (B) | 6,400 | 6,461 | 6,690 | 6,312 | 6,895 | 6,997 | 6,939 | ||||||||||||||||||||||||||||||||||
Games (C) | 7,611 | 7,465 | 6,637 | 6,567 | 7,164 | 6,048 | 5,710 | ||||||||||||||||||||||||||||||||||
Total net revenue | $ | 16,554 | $ | 17,085 | $ | 16,822 | $ | 17,311 | $ | 17,691 | $ | 15,665 | $ | 15,135 | |||||||||||||||||||||||||||
Net Revenue by Product | |||||||||||||||||||||||||||||||||||||||||
Consumer Media | |||||||||||||||||||||||||||||||||||||||||
- Software License (D) | $ | 642 | $ | 1,702 | $ | 2,020 | $ | 2,856 | $ | 1,987 | $ | 944 | $ | 735 | |||||||||||||||||||||||||||
- Subscription Services (E) | 892 | 898 | 929 | 992 | 1,028 | 1,040 | 1,088 | ||||||||||||||||||||||||||||||||||
- Product Sales (F) | 193 | 261 | 222 | 193 | 207 | 206 | 219 | ||||||||||||||||||||||||||||||||||
- Advertising & Other (G) | 816 | 298 | 324 | 391 | 410 | 430 | 444 | ||||||||||||||||||||||||||||||||||
Mobile Services | |||||||||||||||||||||||||||||||||||||||||
- Software License (H) | 931 | 972 | 831 | 657 | 888 | 957 | 599 | ||||||||||||||||||||||||||||||||||
- Subscription Services (I) | 5,469 | 5,489 | 5,859 | 5,655 | 6,007 | 6,040 | 6,340 | ||||||||||||||||||||||||||||||||||
Games | |||||||||||||||||||||||||||||||||||||||||
- Subscription Services (J) | 2,705 | 2,730 | 2,770 | 3,007 | 3,056 | 3,073 | 2,985 | ||||||||||||||||||||||||||||||||||
- Product Sales (K) | 3,874 | 3,712 | 2,978 | 2,580 | 3,078 | 2,177 | 1,988 | ||||||||||||||||||||||||||||||||||
- Advertising & Other (L) | 1,032 | 1,023 | 889 | 980 | 1,030 | 798 | 737 | ||||||||||||||||||||||||||||||||||
Total net revenue | $ | 16,554 | $ | 17,085 | $ | 16,822 | $ | 17,311 | $ | 17,691 | $ | 15,665 | $ | 15,135 | |||||||||||||||||||||||||||
Net Revenue by Geography | |||||||||||||||||||||||||||||||||||||||||
United States | $ | 11,855 | $ | 10,742 | $ | 10,214 | $ | 10,153 | $ | 10,588 | $ | 9,480 | $ | 9,503 | |||||||||||||||||||||||||||
Rest of world | 4,699 | 6,343 | 6,608 | 7,158 | 7,103 | 6,185 | 5,632 | ||||||||||||||||||||||||||||||||||
Total net revenue | $ | 16,554 | $ | 17,085 | $ | 16,822 | $ | 17,311 | $ | 17,691 | $ | 15,665 | $ | 15,135 | |||||||||||||||||||||||||||
Net Revenue by Segment | |||||||||||||||||||||||||||||||||||||||||
(A) The Consumer Media segment primarily includes revenue from the licensing of our portfolio of video codec technologies. Also included is RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software to consumers, and consumer subscriptions such as RealPlayer Plus and SuperPass. | |||||||||||||||||||||||||||||||||||||||||
(B) The Mobile Services segment primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers. | |||||||||||||||||||||||||||||||||||||||||
(C) The Games segment primarily includes revenue from player purchases of in-game virtual goods within our free-to-play games, mobile and PC games, online games subscription services, and advertising on games sites and social network sites. | |||||||||||||||||||||||||||||||||||||||||
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 and our facial recognition platform, SAFR. | |||||||||||||||||||||||||||||||||||||||||
(I) 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. | |||||||||||||||||||||||||||||||||||||||||
(J) Subscription services revenue within Games includes revenue from online games subscriptions. | |||||||||||||||||||||||||||||||||||||||||
(K) Product sales revenue within Games includes revenue from player purchases of in-game virtual goods, retail and wholesale games-related revenue, sales of mobile games. | |||||||||||||||||||||||||||||||||||||||||
(L) Advertising & other revenue within Games includes advertising on games sites and social network sites. | |||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||
Q3 | Q2 | Q3 | YTD | YTD | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Consumer Media | |||||||||||||||||||||||||||||
Net revenue | $ | 2,543 | $ | 3,159 | $ | 3,632 | $ | 9,197 | $ | 8,738 | |||||||||||||||||||
Cost of revenue | 593 | 519 | 705 | 1,723 | 2,341 | ||||||||||||||||||||||||
Gross profit | 1,950 | 2,640 | 2,927 | 7,474 | 6,397 | ||||||||||||||||||||||||
Gross margin | 77 | % | 84 | % | 81 | % | 81 | % | 73 | % | |||||||||||||||||||
Operating expenses | 2,092 | 2,204 | 2,692 | 6,754 | 8,688 | ||||||||||||||||||||||||
Operating income (loss), a GAAP measure | $ | (142) | $ | 436 | $ | 235 | $ | 720 | $ | (2,291) | |||||||||||||||||||
Depreciation and amortization | 17 | 15 | 34 | 45 | 144 | ||||||||||||||||||||||||
Contribution margin, a non-GAAP measure | $ | (125) | $ | 451 | $ | 269 | $ | 765 | $ | (2,147) | |||||||||||||||||||
Mobile Services | |||||||||||||||||||||||||||||
Net revenue | $ | 6,400 | $ | 6,461 | $ | 6,895 | $ | 19,551 | $ | 20,831 | |||||||||||||||||||
Cost of revenue | 1,511 | 1,782 | 1,721 | 4,989 | 5,634 | ||||||||||||||||||||||||
Gross profit | 4,889 | 4,679 | 5,174 | 14,562 | 15,197 | ||||||||||||||||||||||||
Gross margin | 76 | % | 72 | % | 75 | % | 74 | % | 73 | % | |||||||||||||||||||
Operating expenses | 5,577 | 5,682 | 7,143 | 18,847 | 22,142 | ||||||||||||||||||||||||
Operating income (loss), a GAAP measure | $ | (688) | $ | (1,003) | $ | (1,969) | $ | (4,285) | $ | (6,945) | |||||||||||||||||||
Depreciation and amortization | 88 | 102 | 81 | 288 | 418 | ||||||||||||||||||||||||
Contribution margin, a non-GAAP measure | $ | (600) | $ | (901) | $ | (1,888) | $ | (3,997) | $ | (6,527) | |||||||||||||||||||
Games | |||||||||||||||||||||||||||||
Net revenue | $ | 7,611 | $ | 7,465 | $ | 7,164 | $ | 21,713 | $ | 18,922 | |||||||||||||||||||
Cost of revenue | 1,955 | 1,958 | 1,934 | 5,707 | 5,259 | ||||||||||||||||||||||||
Gross profit | 5,656 | 5,507 | 5,230 | 16,006 | 13,663 | ||||||||||||||||||||||||
Gross margin | 74 | % | 74 | % | 73 | % | 74 | % | 72 | % | |||||||||||||||||||
Operating expenses | 5,152 | 4,976 | 5,151 | 15,051 | 15,476 | ||||||||||||||||||||||||
Operating income (loss), a GAAP measure | $ | 504 | $ | 531 | $ | 79 | $ | 955 | $ | (1,813) | |||||||||||||||||||
Acquisitions related intangible asset amortization | — | — | 4 | — | 27 | ||||||||||||||||||||||||
Depreciation and amortization | 71 | 66 | 89 | 275 | 256 | ||||||||||||||||||||||||
Contribution margin, a non-GAAP measure | $ | 575 | $ | 597 | $ | 172 | $ | 1,230 | $ | (1,530) | |||||||||||||||||||
Corporate | |||||||||||||||||||||||||||||
Cost of revenue | $ | 3 | $ | 4 | $ | (68) | $ | 10 | $ | (212) | |||||||||||||||||||
Gross profit | (3) | (4) | 68 | (10) | 212 | ||||||||||||||||||||||||
Gross margin | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Operating expenses | 2,521 | 2,747 | 3,522 | 7,852 | 11,895 | ||||||||||||||||||||||||
Operating income (loss), a GAAP measure | $ | (2,524) | $ | (2,751) | $ | (3,454) | $ | (7,862) | $ | (11,683) | |||||||||||||||||||
Other income (expense), net | (104) | (71) | 85 | 63 | 197 | ||||||||||||||||||||||||
Foreign currency (gain) loss | 143 | 92 | (33) | 25 | (150) | ||||||||||||||||||||||||
Depreciation and amortization | 28 | 30 | 32 | 89 | 98 | ||||||||||||||||||||||||
Fair value adjustments to contingent consideration liability | — | 100 | 400 | (200) | 700 | ||||||||||||||||||||||||
Restructuring and other charges | 307 | 704 | 691 | 1,097 | 1,587 | ||||||||||||||||||||||||
Stock-based compensation | 390 | 323 | 503 | 1,093 | 2,420 | ||||||||||||||||||||||||
Contribution margin, a non-GAAP measure | $ | (1,760) | $ | (1,573) | $ | (1,776) | $ | (5,695) | $ | (6,831) |
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||
Q3 | Q2 | Q3 | YTD | YTD | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA: | |||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (3,308) | $ | (3,162) | $ | (5,257) | $ | (11,086) | $ | (10,623) | |||||||||||||||||||
Income tax expense (benefit) | 316 | 265 | 233 | 606 | 515 | ||||||||||||||||||||||||
Interest expense | 7 | 5 | — | 12 | — | ||||||||||||||||||||||||
Interest income | (6) | (19) | — | (31) | (89) | ||||||||||||||||||||||||
(Gain) loss on equity investments, net | 37 | 53 | — | 90 | (12,338) | ||||||||||||||||||||||||
Foreign currency (gain) loss | 143 | 92 | (33) | 25 | (150) | ||||||||||||||||||||||||
Acquisitions related intangible asset amortization | — | — | 4 | — | 27 | ||||||||||||||||||||||||
Depreciation and amortization | 204 | 213 | 236 | 697 | 916 | ||||||||||||||||||||||||
Fair value adjustments to contingent consideration liability | — | 100 | 400 | (200) | 700 | ||||||||||||||||||||||||
Restructuring and other charges | 307 | 704 | 691 | 1,097 | 1,587 | ||||||||||||||||||||||||
Stock-based compensation | 390 | 323 | 503 | 1,093 | 2,420 | ||||||||||||||||||||||||
Adjusted EBITDA, a non-GAAP measure | $ | (1,910) | $ | (1,426) | $ | (3,223) | $ | (7,697) | $ | (17,035) |