RealNetworks Holds Annual Analyst Meeting and Reaffirms Second Quarter and 2005 Financial Guidance

RealNetworks Holds Annual Analyst Meeting and Reaffirms Second Quarter and 2005 Financial Guidance

SEATTLE, June 2 /PRNewswire-FirstCall/ -- RealNetworks(R), Inc. (NASDAQ:RNWK), the leading creator of digital media services and software, today will hold its Analyst Meeting in New York. Real will reaffirm guidance for the second quarter and full year 2005.

"Digital media is a rapidly growing global industry, and Real is well-positioned to benefit from market expansion," said Rob Glaser, Chairman and CEO of RealNetworks. "We have a diverse business, with leading products in digital music, games and video -- as well as a strong technology platform -- and we are committed to profitable growth in 2005 and beyond."

For the second quarter of 2005, Real expects net revenue of $79 million to $81 million and earnings per share of $0.00 to $0.01. This guidance includes approximately $1.5 million of revenue related to a legacy systems license agreement, which is substantially completed as of the end of the second quarter. Real's guidance also includes $4.7 million, or $0.02 per share, of estimated expenses related to antitrust litigation, reflecting both increased European Commission activity as well as a higher level of discovery activity in its U.S. case. This guidance also includes a gain associated with the sale of MusicNet currently estimated to be approximately $7.3 million and approximately $7 million of incremental marketing expense primarily associated with the launch of the new Rhapsody(R) product line. Excluding antitrust litigation expenses, Real expects earnings per share of $0.02 to $0.03 for the second quarter of 2005.

For 2005, Real expects revenues of $323 million to $333 million, which represents a 21 percent to 25 percent growth rate over 2004 results. Real also stated its three-year target of at least 20 percent annualized revenue growth. For the full-year of 2005, Real expects earnings per share of $0.02 to $0.04 per share. Excluding antitrust litigation expenses, Real expects earnings per share of $0.10 to $0.12 per share. Real expects full-year EBITDA, excluding antitrust litigation expenses, to be between $25 million and $28 million. In addition, Real expects that antitrust litigation expenses for the full year will be approximately $16 million, or $0.08 per share.

EBITDA excluding antitrust litigation expenses is a non-GAAP alternative to net income as a measure of operating results, and a reconciliation of net income to EBITDA less antitrust expenses is as follows:

A reconciliation of GAAP net income guidance for 2005 to EBITDA excluding antitrust litigation is as follows: Ranges for Year Ending December 31, 2005 (in thousands)

Net Income in accordance with GAAP $ 4,000 7,000 Antitrust litigation 16,000 16,000 Interest, taxes, depreciation and amortization 5,000 5,000 EBITDA excluding antitrust litigation $25,000 28,000

EBITDA excluding litigation expenses is derived by subtracting net interest income from GAAP net income, and adding expenses related to taxes, depreciation, amortization, stock compensation and antitrust litigation expense (the reconciliation does not detail the individual effects of interest, taxes, depreciation, amortization and stock compensation on the reconciliation of net income to EBITDA less antitrust expense because of uncertainty regarding these individual components).

Webcast Information:

Where: RealNetworks will host a live audio webcast with slides available at www.realnetworks.com/company/investor/index.html. Listeners will need RealPlayer(R) in order to hear to the webcast, which can be downloaded for free at www.real.com.

When: The live webcast will take place from 1:00 p.m. to approximately 5:45 p.m. Eastern Time. An on-demand webcast will be available within 24 hours following the conclusion of the live webcast and will be archived on Real's web site.

About RealNetworks

RealNetworks, Inc. is the leading creator of digital media services and software including Rhapsody(R), RealPlayer 10, and casual PC-based and mobile games. With more than one million subscribers, the company is the market leader in premium music subscription services. Consumers can access and experience audio/video programming and download RealNetworks' consumer software at http://www.real.com/ . Broadcasters, network operators, media companies and enterprises use RealNetworks' products and services to create and deliver digital media to PCs, mobile phones and consumer electronics devices. RealNetworks' corporate information is located at http://www.realnetworks.com/company .

Forward Looking Statements

This release may contain forward-looking statements that involve risks and uncertainties, including statements relating to: (a) Real's future revenues, expenses, margins, profitability, net income, earnings per share, EBITDA and other measures of results of operation; (b) the scalability of Real's financial model; (c) Real's leadership in the digital media marketplace; (d) the prospects for future growth; (e) antitrust litigation expenses; and (f) marketing expenses. Actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ from the results predicted include: development and consumer acceptance of legal online music distribution services; risks associated with the sustained adoption and use of RealNetworks' services by customers; the potential that we will be unable to continue to enter into commercially attractive agreements with third parties for the provision of compelling content for our subscription service offerings; risks associated with consumer adoption of devices that support portable subscription content; the risk that the costs of our antitrust litigation will be greater than we anticipate; the emergence of new entrants in the market for digital media subscription offerings and on-line music sales; the impact on our gross margins from content costs and from the mix of subscribers to subscription offerings with higher content costs than others; competitive risks, including competing technologies, products and services, and the competitive activities of our larger competitors, some of which have strong ties to streaming media users through other products; risks associated with the introduction of new products and services; and risks associated with acquisitions that we may undertake in the future. Additional information concerning factors that could cause our actual results to differ materially from those contained in the forward-looking statements can be found in RealNetworks' filings with the Securities and Exchange Commission ("SEC"), including but not limited to the most recent reports on Forms 10-Q and 10-K, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Copies of filings made with the SEC are available through the SEC's electronic data gather analysis and retrieval system (EDGAR) at www.sec.gov. RealNetworks assumes no obligation to update the forward-looking statements included in this document.

NOTE: RealNetworks, RealAudio, RealVideo, Helix, Rhapsody, RealArcade, GameHouse and RealPlayer are trademarks or registered trademarks of RealNetworks, Inc. All other companies or products listed herein are trademarks or registered trademarks of their respective owners.

Source: RealNetworks, Inc.

CONTACT: media, Jeremy Pemble, +1-206-892-6614, or jpemble@real.com, or investors, Roy Goodman, +1-206-892-6841, or rgoodman@real.com, both of RealNetworks

Web site: http://www.realnetworks.com/company/investor/index.html

Web site: http://www.realnetworks.com/company

Web site: http://www.realnetworks.com/

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