SEATTLE, May 4, 2022
/PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), an emerging
leader in AI-based software and solutions, today announced its
financial results for the first quarter ended March 31, 2022.
- Revenue was $13.3 million, net
loss of $(5.2) million and Adjusted
EBITDA loss of $(3.8) million
- Launched SAFR SCAN, the company's first integrated
hardware-software product
- Appointed Mike Cooley as
President for KONTXT, Messaging, and Telecom
Management Commentary
"In March, we launched SAFR SCAN, a video door station for
access control which is the company's first integrated
hardware-software product in our 27-year history. SAFR SCAN
delivers excellent performance, security, and reliability at less
than half the price of previous competitive products. We're very
encouraged by the early feedback we're hearing from industry
partners and experts and we're excited to begin commercial
shipments later this quarter," said Rob
Glaser, Founder, Chairman, and Chief Executive Officer of
RealNetworks.
"A second major development I'm excited about is the appointment
of Mike Cooley as President for
KONTXT, Messaging, and Telecom. Mike has an outstanding track
record of growing and building businesses in the carrier market and
I believe he's the right person to drive growth and take KONTXT to
the next level."
First Quarter 2022 Financial Results
- Revenue was $13.3 million,
compared to $13.4 million in the
prior quarter and $15.9 million in
the prior year period.
- Net loss attributable to RealNetworks was $(5.2) million, or $(0.11) per diluted share, compared to a net loss
of $(1.8) million, or $(0.04) per diluted share, in the prior quarter
and a net loss of $(10.4) million, or
$(0.27) per diluted share, in the
prior year period.
- Adjusted EBITDA was a loss of $(3.8)
million compared to Adjusted EBITDA loss of $(3.7) million in the prior quarter and Adjusted
EBITDA loss of $(3.0) million in the
prior year period.
- Strong balance sheet with unrestricted cash and cash
equivalents of $21.8 million and no
debt as of March 31, 2022.
Business Outlook
For the second quarter ending June 30,
2022, RealNetworks expects to achieve the following
results:
- Total revenue is expected to be in the range of $11.0 million to $12.5
million.
- Adjusted EBITDA loss is expected to be in the range of
$(6.0) million to $(4.5) million.
Conference Call and Webcast Information
RealNetworks will host a conference call today to review its
results and discuss its performance at approximately 4:30 p.m. ET / 1:30 p.m.
PT. Participants can access the conference call by dialing
1-888-221-3881 (United States) or
1-646-828-8193 (international). A telephonic replay of the call
will also be available shortly after the completion of the call,
until 11:59 p.m. ET on Wednesday, May
18, 2022, by dialing 1-844-512-2921 (United States) or 1-412-317-6671
(international) and entering the replay pin number: 7077659.
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 rich history 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. Real's portfolio
includes SAFR, the world's premier computer vision platform for
live video; KONTXT, an industry leading NLP (Natural Language
Processing) platform for text and multi-media analysis; and
leveraging its digital media expertise, a mobile games business
focused on the large free-to-play segment. For information about
all of our 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)
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
our current expectations regarding our future growth,
profitability, and market position, our financial condition and
liquidity, our strategic focus and initiatives, product plans,
agreements with partners, Scener's current and future activities,
and certain remaining contingencies relating to the sale of
Napster. 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; issues with the use of AI; potential
outcomes and effects of claims and legal proceedings; risks
associated with key customer or strategic relationships and
business acquisitions and dispositions; challenges caused by the
COVID-19 pandemic; disruptions in the global financial markets,
including changes in consumer spending and impacts to credit
availability, and fluctuations in foreign currencies; volatility of
our stock price; material asset impairment; continued declines in
subscription revenue; difficulty recruiting and retaining key
personnel; regulatory, tax, accounting, and cross-border risks; and
risks related to our governance structure. More information about
potential risk factors that could affect our business and financial
results is included in RealNetworks' latest annual report on Form
10-K for year ended December 31,
2021, 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
Brian M. Prenoveau, CFA
MZ North America
561-489-5315
IR@realnetworks.com
RNWK-F
RealNetworks, Inc.
and Subsidiaries
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
|
Quarter Ended March 31,
|
|
|
2022
|
|
2021
|
|
|
|
|
|
(in thousands, except
per share data)
|
|
|
|
|
Net
revenue
|
$
13,276
|
|
$
15,888
|
Cost of
revenue
|
2,736
|
|
3,679
|
Gross profit
|
10,540
|
|
12,209
|
|
|
|
|
Operating
expenses:
|
|
|
|
Research and
development
|
5,798
|
|
6,238
|
Sales and
marketing
|
4,582
|
|
5,137
|
General and
administrative
|
4,827
|
|
4,898
|
Fair value adjustments to contingent consideration
liability
|
—
|
|
(1,040)
|
Restructuring
and other charges
|
290
|
|
3,171
|
|
|
|
|
Total operating expenses
|
15,497
|
|
18,404
|
|
|
|
|
Operating
loss
|
(4,957)
|
|
(6,195)
|
|
|
|
|
Other income
(expenses):
|
|
|
|
Interest
expense
|
(22)
|
|
(95)
|
Interest
income
|
7
|
|
13
|
Loss on equity
and other investments, net
|
(189)
|
|
(4,272)
|
Other income,
net
|
19
|
|
104
|
|
|
|
|
Total other expenses, net
|
(185)
|
|
(4,250)
|
|
|
|
|
Loss before income
taxes
|
(5,142)
|
|
(10,445)
|
Income tax
expense
|
83
|
|
109
|
|
|
|
|
Net loss
|
(5,225)
|
|
(10,554)
|
Net loss attributable
to noncontrolling interests
|
—
|
|
(106)
|
Net loss attributable
to RealNetworks
|
$
(5,225)
|
|
$
(10,448)
|
|
|
|
|
Net loss per share
attributable to RealNetworks- Basic
|
$
(0.11)
|
|
$
(0.27)
|
|
|
|
|
Net loss per share
attributable to RealNetworks- Diluted
|
$
(0.11)
|
|
$
(0.27)
|
|
|
|
|
Shares used to
compute basic net loss per share
|
47,276
|
|
38,502
|
Shares used to
compute diluted net loss per share
|
47,276
|
|
38,502
|
RealNetworks, Inc.
and Subsidiaries
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
|
March 31,
2022
|
|
December 31,
2021
|
|
(in thousands)
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
21,775
|
|
$
27,109
|
Trade accounts
receivable, net
|
8,182
|
|
9,556
|
Deferred costs,
current portion
|
28
|
|
49
|
Investments
|
—
|
|
1,755
|
Prepaid expenses
and other current assets
|
5,456
|
|
3,166
|
Total current assets
|
35,441
|
|
41,635
|
|
|
|
|
Equipment and
software
|
28,246
|
|
29,464
|
Leasehold
improvements
|
2,085
|
|
2,750
|
Total equipment,
software, and leasehold improvements
|
30,331
|
|
32,214
|
Less accumulated
depreciation and amortization
|
28,958
|
|
30,744
|
Net equipment,
software, and leasehold improvements
|
1,373
|
|
1,470
|
|
|
|
|
Operating lease
assets
|
4,135
|
|
3,992
|
Restricted cash
equivalents
|
1,630
|
|
1,630
|
Other
assets
|
2,716
|
|
2,878
|
Deferred tax
assets, net
|
709
|
|
727
|
Goodwill
|
16,875
|
|
16,976
|
|
|
|
|
Total assets
|
$
62,879
|
|
$
69,308
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
2,272
|
|
$
2,578
|
Accrued and other
current liabilities
|
12,487
|
|
13,286
|
Deferred revenue,
current portion
|
3,437
|
|
2,614
|
Total current liabilities
|
18,196
|
|
18,478
|
|
|
|
|
Deferred revenue,
non-current portion
|
34
|
|
183
|
Deferred tax
liabilities, net
|
1,115
|
|
1,132
|
Long-term lease
liabilities
|
2,393
|
|
2,300
|
Other long-term
liabilities
|
22
|
|
1,142
|
|
|
|
|
Total liabilities
|
21,760
|
|
23,235
|
|
|
|
|
|
|
|
|
Total equity
|
41,119
|
|
46,073
|
|
|
|
|
Total liabilities and
equity
|
$
62,879
|
|
$
69,308
|
RealNetworks, Inc.
and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
(in thousands)
|
|
Cash flows from
operating activities:
|
|
|
|
Net
loss
|
$
(5,225)
|
|
$
(10,554)
|
Adjustment to reconcile net loss to net cash used in
operating activities:
|
|
|
|
Depreciation and
amortization
|
190
|
|
204
|
Stock-based
compensation
|
695
|
|
836
|
Loss on equity and other
investments, net
|
189
|
|
4,272
|
Loss on impairment of operating
lease assets
|
—
|
|
2,461
|
Foreign currency
gain
|
(3)
|
|
(103)
|
Fair value adjustments to
contingent consideration liability
|
—
|
|
(1,040)
|
Net change in certain operating
assets and liabilities
|
(819)
|
|
(3,052)
|
Net cash used in
operating activities
|
(4,973)
|
|
(6,976)
|
Cash flows from
investing activities:
|
|
|
|
Purchases of equipment, software, and leasehold
improvements
|
(101)
|
|
(56)
|
Net cash used in
investing activities
|
(101)
|
|
(56)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance of common stock (stock
options)
|
—
|
|
468
|
Tax
payments from shares withheld upon vesting of restricted
stock
|
(19)
|
|
(110)
|
Net cash provided by
(used in) financing activities
|
(19)
|
|
358
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash
|
(241)
|
|
(251)
|
Net decrease in cash,
cash equivalents and restricted cash
|
(5,334)
|
|
(6,925)
|
Cash, cash equivalents,
and restricted cash, beginning of period
|
28,739
|
|
25,570
|
Cash, cash equivalents,
and restricted cash, end of period
|
$
23,405
|
|
$
18,645
|
RealNetworks, Inc. and
Subsidiaries
Supplemental Financial
Information
(Unaudited)
|
|
|
|
2022
|
|
2021
|
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
|
(in
thousands)
|
Net Revenue by
Segment
|
|
|
|
|
|
|
|
|
|
Consumer Media
(A)
|
|
$
2,111
|
|
$
2,168
|
|
$
2,763
|
|
$
2,061
|
|
$
3,309
|
Mobile Services
(B)
|
|
5,640
|
|
5,680
|
|
5,772
|
|
6,356
|
|
5,980
|
Games (C)
|
|
5,525
|
|
5,554
|
|
5,797
|
|
6,144
|
|
6,599
|
Total net
revenue
|
|
$
13,276
|
|
$
13,402
|
|
$
14,332
|
|
$
14,561
|
|
$
15,888
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Product
|
|
|
|
|
|
|
|
|
|
|
Consumer
Media
|
|
|
|
|
|
|
|
|
|
|
- Software License
(D)
|
|
$
987
|
|
$
854
|
|
$
1,506
|
|
$
841
|
|
$
1,875
|
- Subscription Services
(E)
|
|
742
|
|
768
|
|
779
|
|
793
|
|
818
|
- Product Sales
(F)
|
|
163
|
|
268
|
|
270
|
|
330
|
|
438
|
- Advertising &
Other (G)
|
|
219
|
|
278
|
|
208
|
|
97
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Services
|
|
|
|
|
|
|
|
|
|
|
- Software License
(H)
|
|
1,531
|
|
1,616
|
|
1,459
|
|
1,931
|
|
1,391
|
- Subscription Services
(I)
|
|
4,109
|
|
4,064
|
|
4,313
|
|
4,425
|
|
4,589
|
|
|
|
|
|
|
|
|
|
|
|
Games
|
|
|
|
|
|
|
|
|
|
|
- Subscription Services
(J)
|
|
2,219
|
|
2,286
|
|
2,361
|
|
2,431
|
|
2,528
|
- Product Sales
(K)
|
|
2,377
|
|
2,453
|
|
2,612
|
|
2,830
|
|
3,163
|
- Advertising &
Other (L)
|
|
929
|
|
815
|
|
824
|
|
883
|
|
908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
revenue
|
|
$
13,276
|
|
$
13,402
|
|
$
14,332
|
|
$
14,561
|
|
$
15,888
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by
Geography
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
8,187
|
|
$
8,126
|
|
$
9,227
|
|
$
9,209
|
|
$
9,932
|
Rest of
world
|
|
5,089
|
|
5,276
|
|
5,105
|
|
5,352
|
|
5,956
|
Total net
revenue
|
|
$
13,276
|
|
$
13,402
|
|
$
14,332
|
|
$
14,561
|
|
$
15,888
|
|
|
|
|
|
|
|
|
|
|
|
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 facial
recognition platform, SAFR, and our integrated RealTimes
platform.
|
(I) Subscription
services revenue within Mobile Services includes revenue from our
messaging products, including Metcalf intercarrier messaging
services and KONTXT, as well as ringback tones and 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,
as well as 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)
|
|
|
2022
|
|
2021
|
|
|
Q1
|
|
Q4
|
|
Q1
|
|
(in thousands)
|
Consumer Media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
2,111
|
|
$
2,168
|
|
$ 3,309
|
Cost of
revenue
|
|
388
|
|
423
|
|
478
|
Gross profit
|
|
1,723
|
|
1,745
|
|
2,831
|
|
|
|
|
|
|
|
Gross margin
|
|
82 %
|
|
80 %
|
|
86 %
|
|
|
|
|
|
|
|
Operating
expenses
|
|
1,472
|
|
1,399
|
|
2,201
|
Operating income, a
GAAP measure
|
|
$ 251
|
|
$ 346
|
|
$
630
|
Depreciation and
amortization
|
|
16
|
|
(15)
|
|
16
|
|
|
|
|
|
|
|
Contribution margin, a non-GAAP measure
|
|
$ 267
|
|
$ 331
|
|
$
646
|
|
|
|
|
|
|
|
Mobile Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
5,640
|
|
$
5,680
|
|
$ 5,980
|
Cost of
revenue
|
|
1,045
|
|
1,429
|
|
1,492
|
Gross profit
|
|
4,595
|
|
4,251
|
|
4,488
|
|
|
|
|
|
|
|
Gross margin
|
|
81 %
|
|
75 %
|
|
75 %
|
|
|
|
|
|
|
|
Operating
expenses
|
|
6,666
|
|
5,932
|
|
6,145
|
Operating loss, a GAAP
measure
|
|
$
(2,071)
|
|
$
(1,681)
|
|
$ (1,657)
|
Depreciation and
amortization
|
|
84
|
|
78
|
|
84
|
|
|
|
|
|
|
|
Contribution margin, a non-GAAP measure
|
|
$
(1,987)
|
|
$
(1,603)
|
|
$ (1,573)
|
|
|
|
|
|
|
|
Games
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
5,525
|
|
$
5,554
|
|
$ 6,599
|
Cost of
revenue
|
|
1,295
|
|
1,521
|
|
1,705
|
Gross profit
|
|
4,230
|
|
4,033
|
|
4,894
|
|
|
|
|
|
|
|
Gross margin
|
|
77 %
|
|
73 %
|
|
74 %
|
|
|
|
|
|
|
|
Operating
expenses
|
|
3,999
|
|
4,672
|
|
5,098
|
Operating income
(loss), a GAAP measure
|
|
$ 231
|
|
$ (639)
|
|
$
(204)
|
Depreciation and
amortization
|
|
61
|
|
58
|
|
76
|
|
|
|
|
|
|
|
Contribution margin, a non-GAAP measure
|
|
$ 292
|
|
$ (581)
|
|
$
(128)
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
$
8
|
|
$
13
|
|
$
4
|
Gross profit
|
|
(8)
|
|
(13)
|
|
(4)
|
|
|
|
|
|
|
|
Gross margin
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
Operating
expenses
|
|
3,360
|
|
538
|
|
4,960
|
Operating loss, a GAAP
measure
|
|
$
(3,368)
|
|
$ (551)
|
|
$ (4,964)
|
Other income (expense),
net
|
|
19
|
|
(43)
|
|
104
|
Foreign currency (gain)
loss
|
|
(3)
|
|
40
|
|
(103)
|
Depreciation and
amortization
|
|
29
|
|
29
|
|
28
|
Fair value adjustments
to contingent consideration liability
|
|
—
|
|
—
|
|
(1,040)
|
Restructuring and other
charges
|
|
290
|
|
(1,777)
|
|
3,171
|
Stock-based
compensation
|
|
695
|
|
435
|
|
836
|
|
|
|
|
|
|
|
Contribution margin, a non-GAAP measure
|
|
$
(2,338)
|
|
$
(1,867)
|
|
$ (1,968)
|
RealNetworks, Inc.
and Subsidiaries
Reconciliation of
Net loss to adjusted EBITDA, a non-GAAP measure
(Unaudited)
|
|
|
|
2022
|
|
2021
|
|
|
Q1
|
|
Q4
|
|
Q1
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Reconciliation of GAAP Net loss to adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ (5,225)
|
|
$ (1,785)
|
|
$
(10,554)
|
Income tax
expense
|
|
83
|
|
346
|
|
109
|
Interest
expense
|
|
22
|
|
22
|
|
95
|
Interest
income
|
|
(7)
|
|
(7)
|
|
(13)
|
Loss on equity and
other investments, net
|
|
189
|
|
(1,143)
|
|
4,272
|
Foreign currency (gain)
loss
|
|
(3)
|
|
40
|
|
(103)
|
Depreciation and
amortization
|
|
190
|
|
149
|
|
204
|
Fair value adjustments
to contingent consideration liability
|
|
—
|
|
—
|
|
(1,040)
|
Restructuring and other
charges
|
|
290
|
|
(1,777)
|
|
3,171
|
Stock-based
compensation
|
|
695
|
|
435
|
|
836
|
Adjusted
EBITDA, a non-GAAP measure
|
|
$ (3,766)
|
|
$ (3,720)
|
|
$ (3,023)
|
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SOURCE RealNetworks, Inc.