SEATTLE, Feb. 6, 2019 /PRNewswire/ -- 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
"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.
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
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.
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.
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