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RealNetworks, Inc.$3.50($.06)(1.69%)

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 RealNetworks Announces First Quarter 2017 Results
   Wednesday, May 03, 2017 4:01:00 PM ET

-- Revenue stability, with year-over-year revenue growth for first quarter;

-- Reduced year-over-year operating expenses by $6.5 million in first quarter; and

-- Investing in key growth initiatives

RealNetworks, Inc. (RNWK ), a leader in digital media software and services, today announced results for the first quarter ended March 31, 2017.

For the first quarter of 2017, revenue was $30.6 million, up from $28.2 million in the first quarter of 2016. For the first quarter of 2017, the Company reduced its operating expenses by $6.5 million or 23% from the same period in 2016.

Net loss for the first quarter of 2017 was $(9.4) million or $(0.25) per share, compared to $(15.2) million or $(0.42) per share in the first quarter of 2016. Adjusted EBITDA for the first quarter of 2017 was a loss of $(4.4) million, compared to a loss of $(8.1) million in the first quarter of 2016. A reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.

"In Q1, we achieved our financial objectives while also investing in our key growth initiatives," said Rob Glaser, Chairman and CEO of RealNetworks. "We achieved stable revenue while also reducing our operating expenses by 23% from a year ago. At the same time, we’re growing our mobile games business, developing new Mobile Service offerings, and continuing to build partnerships and seed the ecosystem for our new RealMedia HD codec."

As of March 31, 2017, the Company had $66.3 million in unrestricted cash, cash equivalents and short-term investments, compared to $77.1 million as of December 31, 2016.

Business Outlook

For the second quarter of 2017, RealNetworks expects total revenue in the range of $28 million to $31 million and an adjusted EBITDA loss for the second quarter in the range of $(3.0) million to $(5.0) million.

Webcast and Conference Call Information

The company will host a conference call today to review results and discuss the company’s performance at 5 p.m. ET/2 p.m. PT. You may join the conference call by calling 888-831-6080 or +1-210-234-0017 (Passcode: 1ST QUARTER). A live webcast of the call will be available at http://investor.realnetworks.com/ and an on-demand webcast will be available approximately one hour following the conclusion of the conference call. A telephonic replay will be available until 11:59 p.m. PT, May 24, 2017 by calling 866-453-2318 or +1-203-369-1226 (Passcode: 532017).

For More Information

Investor Relations for RealNetworks +1-206-674-2700 IR@realnetworks.com

RNWK-F

About RealNetworks

RealNetworks creates innovative applications and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category in 1995 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. RealNetworks’ corporate information is located at www.realnetworks.com/about-us.

RealNetworks and RealTimes are trademarks or registered trademarks of RealNetworks, Inc. or its subsidiaries. All other companies or products listed herein are trademarks or registered 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) 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 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 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
                                                            March 31,
                                                            2017            2016
                                                            (in thousands, except per
                                                            share data)
Net revenue                                                 $     30,576    $     28,230
Cost of revenue                                             17,293          15,172
Gross profit                                                13,283          13,058
Operating expenses:
Research and development                                    7,349           9,319
Sales and marketing                                         7,155           9,225
General and administrative                                  5,303           8,077
Restructuring and other charges                             1,564           385
Lease exit and related charges                              --              831
Total operating expenses                                    21,371          27,837
Operating income (loss)                                     (8,088)         (14,779)
Other income (expenses):
Interest income, net                                        128             117
Gain (loss) on investments, net                             --              3
Equity in net loss of Rhapsody                              (748)           --
Other income (expense), net                                 (226)           (287)
Total other income (expense), net                           (846)           (167)
Income (loss) before income taxes                           (8,934)         (14,946)
Income tax expense (benefit)                                490             225
Net income (loss)                                           $     (9,424)   $     (15,171)
Basic net income (loss) per share                           $     (0.25)    $     (0.42)
Diluted net income (loss) per share                         $     (0.25)    $     (0.42)
Shares used to compute basic net income (loss) per share    37,030          36,520
Shares used to compute diluted net income (loss) per share  37,030          36,520
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
                                                      March 31,      December 31,
                                                      2017           2016
                                                      (in thousands)
ASSETS
Current assets:
Cash and cash equivalents                             $    38,498    $    33,721
Short-term investments                                27,778         43,331
Trade accounts receivable, net                        26,833         22,162
Deferred costs, current portion                       541            760
Prepaid expenses and other current assets             4,843          4,910
Total current assets                                  98,493         104,884
Equipment and software                                44,640         46,231
Leasehold improvements                                3,330          3,317
Total equipment, software, and leasehold improvements 47,970         49,548
Less accumulated depreciation and amortization        43,181         44,294
Net equipment, software, and leasehold improvements   4,789          5,254
Restricted cash equivalents and investments           2,700          2,700
Other assets                                          2,412          1,742
Deferred costs, non-current portion                   1,071          1,246
Deferred tax assets, net                              836            816
Other intangible assets, net                          729            938
Goodwill                                              12,915         12,857
Total assets                                          $    123,945   $    130,437
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                      $    19,432    $    18,225
Accrued and other current liabilities                 15,425         15,425
Commitment to Rhapsody                                --             1,500
Deferred revenue, current portion                     3,918          3,430
Total current liabilities                             38,775         38,580
Deferred revenue, non-current portion                 724            240
Deferred rent                                         679            748
Deferred tax liabilities, net                         87             87
Other long-term liabilities                           1,890          2,201
Total liabilities                                     42,155         41,856
Shareholders’ equity                                  81,790         88,581
Total liabilities and shareholders’ equity            $    123,945   $    130,437
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
                                                                                                               Quarter ended March 31,
                                                                                                               2017                    2016
                                                                                                               (in thousands)
Cash flows from operating activities:
Net income (loss)                                                                                              $          (9,424)      $          (15,171)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization                                                                                  921                     2,598
Stock-based compensation                                                                                       1,434                   3,171
Equity in net loss of Rhapsody                                                                                 748                     --
Deferred income taxes, net                                                                                     (20)                    (128)
Loss (gain) on investments, net                                                                                --                      (3)
Fair value of warrants granted in 2015 and 2017, net of subsequent mark to market adjustments in 2017 and 2016 (471)                   44
Net change in certain operating assets and liabilities                                                         (2,598)                 (1,722)
Net cash provided by (used in) operating activities                                                            (9,410)                 (11,211)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements                                                   (207)                   (828)
Purchases of short-term investments                                                                            (6,142)                 (17,876)
Proceeds from sales and maturities of short-term investments                                                   21,695                  23,401
Decrease (increase) in restricted cash equivalents and investments, net                                        --                      (210)
Advance to Rhapsody                                                                                            (1,500)                 --
Net cash provided by (used in) investing activities                                                            13,846                  4,487
Cash flows from financing activities:
Proceeds from issuance of common stock (stock options and stock purchase plan)                                 34                      16
Tax payments from shares withheld upon vesting of restricted stock                                             (181)                   (787)
Net cash provided by (used in) financing activities                                                            (147)                   (771)
Effect of exchange rate changes on cash and cash equivalents                                                   488                     719
Net increase (decrease) in cash and cash equivalents                                                           4,777                   (6,776)
Cash and cash equivalents, beginning of year                                                                   33,721                  47,315
Cash and cash equivalents, end of year                                                                         $          38,498       $          40,539
RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
                                 2017         2016
                                 Q1           Q4           Q3           Q2           Q1
                                 (in thousands)
Net Revenue by Line of Business
Consumer Media (A)               $   5,669    $   6,443    $   6,482    $   6,400    $   5,726
Mobile Services (B)              19,084       18,833       17,683       17,297       16,465
Games (C)                        5,823        6,177        6,886        6,037        6,039
Total net revenue                $   30,576   $   31,453   $   31,051   $   29,734   $   28,230
Net Revenue by Product
Consumer Media
- License (D)                    $   3,672    $   4,252    $   4,136    $   3,914    $   3,104
- Subscriptions (E)              1,564        1,671        1,931        1,871        1,975
- Media Properties (F)           433          520          415          615          647
Mobile Services
- SaaS (G)                       18,987       18,726       17,141       17,208       16,220
- Technology License & Other (H) 97           107          542          89           245
Games
- License (I)                    2,862        3,178        3,683        2,793        2,761
- Subscriptions (J)              2,828        2,836        3,005        3,024        3,029
- Media Properties (K)           133          163          198          220          249
Total net revenue                $   30,576   $   31,453   $   31,051   $   29,734   $   28,230
Net Revenue by Geography
United States                    $   9,740    $   10,125   $   10,642   $   10,355   $   10,383
Rest of world                    20,836       21,328       20,409       19,379       17,847
Total net revenue                $   30,576   $   31,453   $   31,051   $   29,734   $   28,230
Net Revenue by Line of Business
(A) The Consumer Media division primarily includes revenue from RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, 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 games, sales of games licenses, online games subscription services, advertising on games sites and social network sites, and microtransactions from online games.
Net Revenue by Product
(D) Licensing revenue within Consumer Media includes sales of intellectual property licenses and RealPlayer Plus software licenses to consumers.
(E) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.
(F) Media Properties revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.
(G) SaaS revenue within Mobile Services includes revenue from music on demand, ringback tones, intercarrier messaging services, and RealTimes.
(H) Technology licensing and other revenue within Mobile Services includes revenue from professional services provided to mobile carriers.
(I) Licensing revenue within Games includes retail games-related revenue and sales of mobile games.
(J) Subscriptions revenue within Games includes revenue from online games subscriptions as well as microtransactions from mobile games.
(K) Media Properties 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)
                                                    2017              2016
                                                    Q1                Q4                Q1
                                                    (in thousands)
Consumer Media
Net revenue                                         $      5,669      $      6,443      $      5,726
Cost of revenue                                     1,405             1,589             2,417
Gross profit                                        4,264             4,854             3,309
Gross margin                                        75             %  75             %  58             %
Operating expenses                                  4,010             4,459             5,376
Operating income (loss), a GAAP measure             $      254        $      395        $      (2,067)
Depreciation and amortization                       167               239               1,303
Contribution margin, a non-GAAP measure             $      421        $      634        $      (764)
Mobile Services
Net revenue                                         $      19,084     $      18,833     $      16,465
Cost of revenue                                     13,914            13,679            10,917
Gross profit                                        5,170             5,154             5,548
Gross margin                                        27             %  27             %  34             %
Operating expenses                                  8,119             7,786             9,794
Operating income (loss), a GAAP measure             $      (2,949)    $      (2,632)    $      (4,246)
Acquisitions related intangible asset amortization  196               198               308
Depreciation and amortization                       203               290               422
Contribution margin, a non-GAAP measure             $      (2,550)    $      (2,144)    $      (3,516)
Games
Net revenue                                         $      5,823      $      6,177      $      6,039
Cost of revenue                                     1,937             2,054             1,845
Gross profit                                        3,886             4,123             4,194
Gross margin                                        67             %  67             %  69             %
Operating expenses                                  4,947             4,975             5,295
Operating income (loss), a GAAP measure             $      (1,061)    $      (852)      $      (1,101)
Acquisitions related intangible asset amortization  27                27                25
Depreciation and amortization                       141               146               179
Contribution margin, a non-GAAP measure             $      (893)      $      (679)      $      (897)
Corporate
Cost of revenue                                     $      37         $      36         $      (7)
Gross profit                                        (37)              (36)              7
Gross margin                                        N/A               N/A               N/A
Operating expenses                                  4,295             3,244             7,372
Operating income (loss), a GAAP measure             $      (4,332)    $      (3,280)    $      (7,365)
Other income (expense), net                         (226)             (128)             (287)
Depreciation and amortization                       187               260               361
Restructuring and other charges                     1,564             192               385
Stock-based compensation                            1,434             867               3,171
Lease exit and related charges                      --                48                831
Contribution margin, a non-GAAP measure             $      (1,373)    $      (2,041)    $      (2,904)
RealNetworks, Inc. and Subsidiaries
Reconciliation of Net income (loss) to adjusted EBITDA, a non-GAAP measure
(Unaudited)
                                                    2017                        2016
                                                    Q1                          Q4              Q1
                                                    (in thousands)
Reconciliation of GAAP Net income (loss) to adjusted EBITDA:
Net income (loss)                                   $            (9,424)        $     (9,976)   $     (15,171)
Income tax expense (benefit)                        490                         203             225
Interest income, net                                (128)                       (133)           (117)
Gain (loss) on investments, net                     --                          (2,495)         (3)
Equity in net loss of Rhapsody                      748                         5,904           --
Acquisitions related intangible asset amortization  223                         225             333
Depreciation and amortization                       698                         935             2,265
Restructuring and other charges                     1,564                       192             385
Stock-based compensation                            1,434                       867             3,171
Lease exit and related charges                      --                          48              831
Adjusted EBITDA, a non-GAAP measure                 $            (4,395)        $     (4,230)   $     (8,081)

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-first-quarter-2017-results-300450899.html

SOURCE RealNetworks, Inc.

https://rt.prnewswire.com/rt.gif?NewsItemId=SF77788&Transmission_Id=201705031601PR_NEWS_USPR_____SF77788&DateId=20170503



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