RealNetworks Announces First Quarter 2009 Results
RealNetworks Announces First Quarter 2009 Results
John Chapple Named to Board of Directors
SEATTLE, May 7 /PRNewswire-FirstCall/ -- Digital entertainment services company RealNetworks(R), Inc. (NASDAQ:RNWK) today announced results for the first quarter ended March 31, 2009.
Quarterly Highlights: -- Revenue of $140.8 million -- Net loss of $(12.1) million or $(0.10) per share -- Adjusted EBITDA of $4.8 million -- Cash and short term investments of $376.5 million as of March 31, 2009
"In the midst of the deepest recession in decades, at RealNetworks we demonstrated our resiliency and delivered steady overall results," said Rob Glaser, RealNetworks' Chairman and CEO.
First Quarter Results
For the first quarter of 2009, revenue was $140.8 million, a decrease of 5%, compared with $147.6 million in the first quarter of 2008. Foreign currency exchange rate fluctuations negatively affected 2009 first quarter revenue by approximately $8.7 million compared with the year-ago quarter. Excluding the effects of these foreign exchange rate changes, revenue grew 1% year over year. Revenue trends in each of Real's businesses in the first quarter of 2009, including the effects of foreign currency exchange rate changes, compared with the year-earlier quarter were: a 16% increase in Music revenue to $44.1 million and a 3% increase in Games revenue to $32.8 million, offset by a 15% decrease in Technology Products and Solutions revenue to $43.6 million and a 23% decrease in Media Software and Services revenue to $20.3 million.
Net loss for the first quarter of 2009 was $(12.1) million, or $(0.10) per share, compared with net income of $2.4 million, or $0.02 per diluted share, in the first quarter of 2008. Adjusted EBITDA for the first quarter of 2009 was $4.8 million compared with $19.9 million in the first quarter of 2008. A reconciliation of GAAP net income to adjusted EBITDA is provided in the financial tables that accompany this release.
Gross margin was 60% in the first quarter of 2009 compared with 62% in the first quarter of 2008. Operating expenses for the first quarter of 2009 were $103.3 million, compared with $103.7 million in the first quarter of 2008. Operating expenses included $7.4 million and $7.3 million of related party advertising in Rhapsody America in the first quarter of 2009 and 2008, respectively.
Income tax provision was $1.5 million compared with $4.0 million in the year-earlier period. Interest income in the first quarter of 2009 was $1.2 million compared with $5.0 million in the year-earlier period.
As of March 31, 2009, Real had approximately $376.5 million in unrestricted cash, cash equivalents and short-term investments, of which nearly 90% is located in the U.S. In addition, Real has approximately $33.5 million in restricted cash and equity investments at March 31, 2009.
Business Outlook
Due to the high level of uncertainty regarding consumer spending, global economic trends, foreign currency exchange rate fluctuations and credit markets, RealNetworks is not providing quantitative guidance. The company expects 2009 to be a challenging year for consumer spending, online advertising and corporate infrastructure spending.
For the second quarter of 2009, Real expects overall revenue to decline year-over-year and to be flat to slightly down sequentially. Compared with the year-ago second quarter, the company expects second-quarter Music revenue to increase, and revenue in Games, Media Software and Services and Technology Products and Solutions to decline. Approximately 20% of Real's revenue is denominated in currencies other than the U.S. dollar, most notably the euro and Korean won. Based on current currency trends, Real expects revenues to be negatively affected by foreign currency rates in the second quarter.
The foregoing forward-looking statements reflect Real's expectations as of May 7, 2009. It is not Real's general practice to update these forward-looking statements until its next quarterly results announcement.
John Chapple Joins RealNetworks Board of Directors
RealNetworks also announced today that John Chapple has been appointed to the company's board of directors. Mr. Chapple brings to Real's board more than two decades of senior executive operating experience primarily with large telecommunications companies including Nextel Partners, where he served as CEO for eight years, and McCaw Cellular Communications. Mr. Chapple also serves on the board of directors of Yahoo! Inc. and Cbeyond, Inc., a voice and broadband Internet provider.
Mr. Chapple fills the vacancy on Real's board resulting from the resignation of Jeremy Jaech, which is also being announced today. Previously, Real had announced that Mr. Jaech would not be running for a new term on Real's board this year. Real anticipates nominating Mr. Chapple to serve a full term at Real's 2009 annual shareholders meeting later this year.
"We are delighted to have John Chapple join our board," said Mr. Glaser. "John's intellect, experience, and track record of creating substantial value will serve us well in the months and years ahead. I also want to thank Jeremy Jaech for his seven years of outstanding service on our board, and wish him well as CEO of Verdiem."
"It is both an honor and tremendously exciting to join the RealNetworks board," said Mr. Chapple. "Real is a fascinating company with a world-class management team and board of directors. I am looking forward to participating in the next stage of the company's growth."
Mr. Chapple has served as president of Hawkeye Investments LLC, a privately owned equity firm investing primarily in telecommunications and real estate ventures, since October 2006. Prior to forming Hawkeye, Mr. Chapple served as president, chief executive officer and chairman of the board of Nextel Partners from January 1998 to June 2006, when the company was purchased by Sprint Communications for $6.5 billion. From 1995 to 1997, Mr. Chapple was the president and chief operating officer of Orca Bay Sports and Entertainment in Vancouver, B.C., a professional sports and entertainment company, which at the time owned and operated Vancouver's National Basketball Association and National Hockey League sports franchises. From 1988 to 1995, he served as executive vice president of operations for McCaw Cellular Communications and subsequently AT&T Wireless Services following the merger of those companies.
Webcast and Conference Call Information
The company will host a webcast and conference call today at 5:00pm (Eastern)/ 2:00pm (Pacific). The live webcast featuring slides and audio will be available at http://investor.realnetworks.com/. Listeners must use RealPlayer(R) to listen to the conference call, which can be downloaded for free at www.real.com. The on-demand webcast will be available approximately two hours following the conclusion of the live webcast.
Conference Call Details 5:00 p.m. (Eastern) / 2:00 p.m. (Pacific) Dial In: 800-857-5305 Domestic 773-681-5857 International Passcode: First Quarter Earnings Leader: Rob Glaser Telephonic replay will be available until 8:00 p.m. (Eastern), May 21, 2009. Dial In: 866-353-3016 Domestic 203-369-0082 International About Real Networks
RealNetworks, Inc. delivers digital entertainment services to consumers via PC, portable music player, home entertainment system and mobile phone. Real created the streaming media category in 1995 and has continued to lead the market with pioneering products and services, including: RealPlayer(R), the first mainstream media player to enable one-click downloading and recording of Internet video; the award-winning Rhapsody(R) digital music service, which delivers more than 1 billion songs per year; RealArcade(R), one of the largest casual games destinations on the Web; and a variety of mobile entertainment services, such as ringback tones, offered to consumers through leading wireless carriers around the world. RealNetworks' corporate information is located at http://investor.realnetworks.com/.
About Non-GAAP Financial Measures
To supplement RealNetworks' condensed consolidated financial statements presented in accordance with GAAP in this press release, the company also discloses certain non-GAAP financial measures, including adjusted revenue, adjusted EBITDA excluding impairments, adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses, 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, to adjusted EBITDA excluding impairments, and to adjusted EBITDA by reporting segment; GAAP cost of revenue to adjusted cost of revenue; and GAAP operating expenses to adjusted operating expenses for the relevant periods.
The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the first quarter earnings materials, available in 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 Real's current expectations for future revenue, future affects of foreign currency exchange rates, and future trends in consumer and corporate infrastructure spending and online advertising. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. Actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: fluctuations in foreign currencies, particularly changes in the US dollar relative to the euro and the Korean won; development and consumer acceptance of legal online music distribution services generally and RealNetworks' content services in particular because these are relatively new and unproven business models and markets; the potential that Real will be unable to continue to enter into commercially attractive agreements with third parties for the provision of compelling content for its subscription service offerings and the distribution of Real's carrier application services; the emergence of new entrants and competition in the market for digital media subscription offerings and online music sales; 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; the potential outcomes and effects of claims and legal proceedings on our business, prospects, financial condition or results of operations; risks associated with the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; risks inherent in strategic relationships, especially with competitors, and technology and service integration efforts; and risks relating to the ability of Real's strategic partners to generate subscribers for Real's digital content services. 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 the reported amounts of 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, Rhapsody, RealPlayer and RealArcade 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.
RealNetworks, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Quarters Ended March 31, ---- ---- 2009 2008 ---- ---- (in thousands, except per share data) Net revenue $140,773 $147,563 Cost of revenue 56,021 55,393 ------ ------ Gross profit 84,752 92,170 ------ ------ Operating expenses: Research and development 28,559 25,006 Sales and marketing 43,685 53,596 Advertising with related party (A) 7,423 7,340 General and administrative 22,831 17,084 Restructuring and other charges 794 686 --- --- Total operating expenses 103,292 103,712 ------- ------- Operating loss (18,540) (11,542) ------- ------- Other income (expenses): Interest income, net 1,183 4,958 Equity in net loss of investments (655) (91) Gain on sale of equity investment, net 137 - Gain on sale of interest in Rhapsody America (B) - 3,726 Other income (expense), net 855 768 --- --- Total other income (expense), net 1,520 9,361 ----- ----- Loss before income taxes (17,020) (2,181) Income taxes (1,549) (4,008) ------ ------ Net loss (18,569) (6,189) Net loss attributable to the noncontrolling interest in Rhapsody America (C) 6,433 8,615 ----- ----- Net income (loss) attributable to common shareholders $(12,136) $2,426 ======== ====== Basic net income (loss) per share available to common shareholders $(0.10) $0.02 Diluted net income (loss) per share available to common shareholders $(0.10) $0.02 Shares used to compute basic net income (loss) per share available to common shareholders 134,380 142,491 Shares used to compute diluted net income (loss) per share available to common shareholders 134,380 154,736 (A) Consists of advertising purchased by Rhapsody America from MTV Networks (MTVN). MTVN has a 49% ownership interest in Rhapsody America. (B) Consists of gains realized from MTVN's note payments to Rhapsody America. Effective January 1, 2009, the Company adopted SFAS No. 160 Non-controlling Interests in Consolidated Financial Statements, an amendment to ARB No. 51 (SFAS 160) which requires the appreciation of gains on the sale of non-controlling interest to be recorded as an equity transaction. (C) Noncontrolling interest in Rhapsody America reflects MTVN's 49% ownership share in the losses of Rhapsody America. RealNetworks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, 2009 2008 ---- ---- (in thousands) ASSETS Current assets: Cash and cash equivalents $211,709 $232,968 Short-term investments 164,785 137,766 Trade accounts receivable, net 61,837 70,201 Deferred costs, current portion 6,948 4,026 Prepaid expenses and other current assets 31,004 34,599 ------ ------ Total current assets 476,283 479,560 ------- ------- Equipment, software, and leasehold improvements, at cost: Equipment and software 138,004 135,788 Leasehold improvements 30,758 30,719 ------ ------ Total equipment, software, and leasehold improvements 168,762 166,507 Less accumulated depreciation and amortization 107,913 103,500 ------- ------- Net equipment, software, and leasehold improvements 60,849 63,007 Restricted cash equivalents and investments 14,767 14,742 Equity investments 18,754 18,582 Other assets 3,992 3,775 Deferred costs, non-current portion 6,854 6,120 Deferred tax assets, net, non-current portion 8,980 9,236 Other intangible assets, net 15,747 18,727 Goodwill 170,618 175,264 ------- ------- Total assets $776,844 $789,013 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $48,540 $36,575 Accrued and other liabilities 111,679 118,688 Deferred revenue, current portion 39,421 39,835 Related party payable (A) 7,598 13,155 Accrued loss on excess office facilities, current portion 4,251 4,317 ----- ----- Total current liabilities 211,489 212,570 Deferred revenue, non-current portion 2,087 1,961 Accrued loss on excess office facilities, non-current portion 1,909 2,893 Deferred rent 4,589 4,614 Deferred tax liabilities, net, non-current portion 866 1,379 Other long-term liabilities 11,521 11,660 ------ ------ Total liabilities 232,461 235,077 Noncontrolling interest in Rhapsody America (B) 5,427 378 Shareholders' equity 538,956 553,558 ------- ------- Total liabilities and shareholders' equity $776,844 $789,013 ======== ======== (A) Related party payable reflects amounts owed to MTVN. (B) Noncontrolling interest in Rhapsody America reflects MTVN's 49% ownership interest in the net assets of Rhapsody America. RealNetworks, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Quarters Ended March 31, --------------- 2009 2008 ---- ---- (in thousands) Cash flows from operating activities: Net income (loss) attributable to common shareholders $(12,136) $2,426 Adjustments to reconcile net income (loss) attributable to common shareholders to net cash provided by (used in) operating activities: Depreciation and amortization 7,776 12,971 Stock-based compensation 5,222 5,489 (Gain) loss on disposal of equipment, software, and leasehold improvements (33) 75 Equity in net loss of investments 655 91 Gain on sale of equity investment, net (137) - Excess tax benefit from stock option exercises (9) (50) Accrued restructuring and other charges (2,951) - Accrued loss on excess office facilities (1,050) (841) Deferred income taxes, net (212) (939) Noncontrolling interest in Rhapsody America (6,433) (8,615) Gain on sale of interest in Rhapsody America - (3,726) Other 10 32 Net change in certain operating assets and liabilities, net of acquisitions 13,259 (18,202) ------ ------- Net cash provided by (used in) operating activities 3,961 (11,289) ----- ------- Cash flows from investing activities: Purchases of equipment, software, and leasehold improvements (3,042) (7,203) Purchases of short-term investments (52,415) (49,798) Proceeds from sales and maturities of short-term investments 25,396 68,838 Proceeds from the sales of equity investments 137 350 Purchases of equity investments (2,000) - Payment of acquisition costs, net of cash acquired (3,154) (6,011) Decrease in restricted cash equivalents and investments, net (25) (9) --- -- Net cash provided by (used in) investing activities (35,103) 6,167 ------- ----- Cash flows from financing activities: Net proceeds from sales of common stock under employee stock purchase plan and exercise of stock options 12 1,072 Net proceeds from sales of interest in Rhapsody America 12,667 7,406 Excess tax benefit from stock option exercises 9 50 --- --- Net cash provided by financing activities 12,688 8,528 ------ ----- Effect of exchange rate changes on cash and cash equivalents (2,805) (1,366) ------ ------ Net increase (decrease) in cash and cash equivalents (21,259) 2,040 Cash and cash equivalents, beginning of period 232,968 476,697 ------- ------- Cash and cash equivalents, end of period $211,709 $478,737 ======== ======== RealNetworks, Inc. and Subsidiaries Supplemental Financial Information (Unaudited) 2009 2008 ---- ---- Q1 Q4 Q3 Q2 Q1 ---- ---- ---- ---- ---- (in thousands) Net Revenue by Line of Business: Consumer products and services (A) $97,194 $100,282 $100,322 $101,353 $96,286 Technology products and solutions (B) 43,579 52,362 51,633 51,295 51,277 ------ ------ ------ ------ ------ Total net revenue $140,773 $152,644 $151,955 $152,648 $147,563 ======== ======== ======== ======== ======== Consumer Products and Services: Subscriptions (C) $59,052 $57,853 $57,776 $55,658 $55,193 Media properties (D) 15,536 18,337 19,946 23,472 18,702 E-commerce and other (E) 22,606 24,092 22,600 22,223 22,391 ------ ------ ------ ------ ------ Total consumer products and services revenue $97,194 $100,282 $100,322 $101,353 $96,286 ======= ======== ======== ======== ======= Consumer Products and Services: Music (F) $44,053 $43,882 $41,591 $37,170 $38,079 Media software and services (G) 20,318 22,695 24,531 29,238 26,409 Games (H) 32,823 33,705 34,200 34,945 31,798 ------ ------ ------ ------ ------ Total consumer products and services revenue $97,194 $100,282 $100,322 $101,353 $96,286 ======= ======== ======== ======== ======= Net Revenue by Geography: United States $96,666 $101,369 $102,363 $100,898 $99,169 Rest of world 44,107 51,275 49,592 51,750 48,394 ------ ------ ------ ------ ------ Total net revenue $140,773 $152,644 $151,955 $152,648 $147,563 ======== ======== ======== ======== ======== Subscribers (presented as greater than) *: Total subscribers (I) 36,450 34,100 32,650 35,000 32,200 Technology products and solutions application services subscribers (J) 33,850 31,500 29,950 32,450 29,500 Music subscribers: Consumer music subscribers: Rhapsody subscribers 800 775 750 600 600 Radio subscribers 1,200 1,225 1,250 1,225 1,275 ----- ----- ----- ----- ----- Total consumer music subscribers 2,000 2,000 2,000 1,825 1,875 Technology products and solutions application services music subscribers (K) 900 875 850 800 800 --- --- --- --- --- Total Music Subscribers** 2,900 2,875 2,850 2,625 2,675 * Total music subscribers includes subscribers from our technology products and solutions application subscription services, such as music- on-demand, as well as our consumer music services, such as Rhapsody and Premium Radio. Although music-on-demand subscribers are included in the technology products and solutions application services subscribers and total music subscribers, these subscribers are only counted once as part of our total subscribers. ** Prior periods have been changed to reflect current period presentation. Totals may not equal due to rounding convention. (A) Revenue is derived from consumer digital media subscription services, RealPlayer Plus and related products, sales and distribution of third party software products, content such as games and music and advertising. (B) Revenue is derived from carrier application services such as ringback tones and music-on-demand, media delivery system software, support and maintenance services, broadcast hosting services and consulting services. (C) Revenue is derived from consumer digital media subscription services including: SuperPass, RadioPass, Rhapsody, GamePass and FunPass. (D) Revenue is derived from advertising and through the distribution of third party products. (E) Revenue is derived from RealPlayer Plus and related products, sales of third party software products, and content such as games and music. (F) Revenue is derived from Rhapsody and RadioPass subscription services and sales of music content, advertising generated from our music and music related websites and the distribution of third party products. (G) Revenue is derived from SuperPass subscriptions, RealPlayer Plus and related products, sales and distribution of third-party software products and advertising related to our non-game and non-music related web properties. (H) Revenue is derived from game subscription services, sales of games, advertising generated from our games and game-related websites and the distribution of third-party products. (I) Total subscribers include technology products and solutions application services and consumer subscription services including: ringback tones, music-on-demand, video-on-demand, Rhapsody, Rhapsody- to-Go, RadioPass, SuperPass, and GamePass. (J) Technology products and solutions application service subscribers include: ringback tones, music-on-demand and video-on-demand. (K) Technology products and solutions application services music subscribers include music-on-demand. RealNetworks, Inc. and Subsidiaries Supplemental Financial Information (Unaudited) Reconciliation of GAAP net income (loss) attributable to common shareholders to adjusted EBITDA excluding impairments and adjusted EBITDA is as follows: Quarters Ended ---------------- March December September June March 31, 31, 30, 30, 31, 2009 2008 2008 2008 2008 ---- ---- ---- ---- ---- (in thousands) Net income (loss) attributable to common shareholders $(12,136) $(240,499) $(4,500) $(1,305) $2,426 Interest income, net (1,183) (2,255) (2,865) (3,375) (4,958) Stock-based compensation 5,222 6,056 5,955 6,031 5,489 Loss (gain) on equity investments, net (137) 12 - (222) - Conversion of WiderThan stock options to a cash equivalent 17 11 16 26 89 Depreciation and amortization (net of noncontrolling interest effect) 5,726 5,784 6,165 6,186 6,282 Acquisitions related intangible asset amortization (net of noncontrolling interest effect) 1,768 1,872 5,752 6,171 6,315 Impairment of long-lived assets (net of noncontrolling interest effect) - 190,347 - - - Impairment of deferred costs and prepaid royalties - 19,666 - - - Restructuring and other charges 794 6,147 - - 686 Pro forma gain on sale of interest in Rhapsody America 4,010 6,568 - - - Expenses (benefit) related to antitrust litigation: Income - - - - - Expenses - 179 174 202 202 Charitable contributions - - - - - Income taxes 1,549 17,392 728 3,700 4,008 ----- ------ --- ----- ----- Adjusted EBITDA excluding impairments $5,630 $11,280 $11,425 $17,414 $20,539 ------ ------- ------- ------- ------- Impairments: Impairment of deferred costs and prepaid royalties - (19,666) - - - Restructuring and other charges (794) (6,147) - - (686) ---- ------ --- --- ---- Adjusted EBITDA $4,836 $(14,533) $11,425 $17,414 $19,853 ====== ======== ======= ======= ======= RealNetworks, Inc. and Subsidiaries Segment Results of Operations (Unaudited) Quarter Ended March 31, 2009 ---------------------------- Music MSS Games TPS Grand (A) (B) (C) (D) Other Total ----- ---- ----- ---- ----- ------ (in thousands) Net revenue $44,053 $20,318 $32,823 $43,579 $- $140,773 Cost of revenue 27,300 3,707 8,564 16,450 - 56,021 ------ ----- ----- ------ --- ------ Gross profit 16,753 16,611 24,259 27,129 - 84,752 ------ ------ ------ ------ --- ------ Gross margin 38% 82% 74% 62% - 60% Operating expenses: Advertising with related party 7,423 - - - - 7,423 Restructuring and other charges 301 67 305 121 - 794 Other operating expenses 22,093 19,882 26,846 26,216 38 95,075 ------ ------ ------ ------ --- ------ Total operating expenses 29,817 19,949 27,151 26,337 38 103,292 ------ ------ ------ ------ --- ------- Income (loss) from operations (13,064) (3,338) (2,892) 792 (38) (18,540) ------- ------ ------ --- --- ------- Other income (expenses): Interest income, net - - - - 1,183 1,183 Equity in net loss of investments - - - - (655) (655) Gain on sale of equity investments, net - - - - 137 137 Gain on sale of interest in Rhapsody America (E) - - - - - - Other income (expenses), net - - - - 855 855 --- --- --- --- --- --- Total other income (expenses), net - - - - 1,520 1,520 --- --- --- --- ----- ----- Income (loss) before income taxes (13,064) (3,338) (2,892) 792 1,482 (17,020) Income taxes - - - - (1,549) (1,549) --- --- --- --- ------ ------ Net income (loss) (13,064) (3,338) (2,892) 792 (67) (18,569) Net income (loss) attributable to noncontrolling interest in Rhapsody America 6,433 - - - - 6,433 ----- --- --- --- --- ----- Net income (loss) attributable to common shareholders $(6,631) $(3,338) $(2,892) $792 $(67) $(12,136) ======= ======= ======= ==== ==== ======== Reconciliation of segment GAAP net income (loss) attributable to common shareholders to segment adjusted EBITDA is as follows: Net income (loss) attributable to common shareholders $(6,631) $(3,338) $(2,892) $792 $(67) $(12,136) Income taxes - - - - 1,549 1,549 Interest income, net - - - - (1,183) (1,183) Stock-based compensation 865 698 1,397 2,262 - 5,222 Conversion of WiderThan stock options to a cash equivalent - - - 17 - 17 Acquisitions related intangible asset amortization (F) 278 - 144 1,346 - 1,768 Pro forma gain on sale of interest in Rhapsody America 4,010 - - - - 4,010 Gain on sale of equity investments, net - - - - (137) (137) Depreciation and amortization (F) 1,102 819 951 2,854 - 5,726 Expenses (benefit) related to antitrust litigation: Income - - - - - - Expenses - - - - - - Charitable contributions - - - - - - --- --- --- --- --- --- Adjusted EBITDA $(376) $(1,821) $(400) $7,271 $162 $4,836 ===== ======= ===== ====== ==== ====== Quarter Ended March 31, 2008 ---------------------------- Music MSS Games TPS Grand (A) (B) (C) (D) Other Total ----- ---- ----- ---- ----- ------ (in thousands) Net revenue $38,079 $26,409 $31,798 $51,277 - $147,563 Cost of revenue 21,519 3,976 8,637 21,261 - 55,393 ------ ----- ----- ------ --- ------ Gross profit 16,560 22,433 23,161 30,016 - 92,170 ------ ------ ------ ------ --- ------ Gross margin 43% 85% 73% 59% - 62% Operating expenses: Advertising with related party 7,340 - - - - 7,340 Restructuring and other charges 635 12 30 9 - 686 Other operating expenses 25,631 14,731 22,901 32,186 237 95,686 ------ ------ ------ ------ --- ------ Total operating expenses 33,606 14,743 22,931 32,195 237 103,712 ------ ------ ------ ------ --- ------- Income (loss) from operations (17,046) 7,690 230 (2,179) (237) (11,542) ------- ----- --- ------ ---- ------- Other income (expenses): Interest income, net - - - - 4,958 4,958 Equity in net loss of investments - - - - (91) (91) Gain on sale of interest in Rhapsody America (E) 3,726 - - - - 3,726 Other income (expenses), net - - - - 768 768 --- --- --- --- --- --- Total other income (expenses), net 3,726 - - - 5,635 9,361 ----- --- --- --- ----- ----- Income (loss) before income taxes (13,320) 7,690 230 (2,179) 5,398 (2,181) Income taxes - - - - (4,008) (4,008) --- --- --- --- ------ ------ Net income (loss) (13,320) 7,690 230 (2,179) 1,390 (6,189) Net income (loss) attributable to noncontrolling interest in Rhapsody America 8,615 - - - - 8,615 ----- --- --- --- --- ----- Net income (loss ) attributable to common shareholders $(4,705) $7,690 $230 $(2,179) $1,390 $2,426 ======= ====== ==== ======= ====== ====== Reconciliation of segment GAAP net income (loss) attributable to common shareholders to segment adjusted EBITDA is as follows: Net income (loss) attributable to common shareholders $(4,705) $7,690 $230 $(2,179) $1,390 $2,426 Income taxes - - - - 4,008 4,008 Interest income, net - - - - (4,958) (4,958) Stock-based compensation 1,079 713 1,123 2,574 - 5,489 Conversion of WiderThan stock options to a cash equivalent - - - 89 - 89 Acquisitions related intangible asset amortization (F) 384 - 805 5,126 - 6,315 Depreciation and amortization (F) 1,410 1,303 738 2,831 - 6,282 Expenses (benefit) related to antitrust litigation: Income - - - - - - Expenses - - - - 202 202 Charitable contributions - - - - - - --- --- --- --- --- --- Adjusted EBITDA $(1,832) $9,706 $2,896 $8,441 $642 $19,853 ======= ====== ====== ====== ==== ======= Note: Cost of revenue and operating expenses of the segments shown above include costs directly attributable to those segments and an allocation of general and administrative and other common or shared costs. (A) The Music segment primarily includes revenue and related costs from: Rhapsody America's Rhapsody and Radiopass subscription services; sales of digital music content through the Rhapsody service and the RealPlayer music store; and advertising from music websites. (B) The Media Software and Services (MSS) segment primarily includes revenue and related costs from: the SuperPass premium subscription service; RealPlayer Plus and related products; sales and distribution of third-party software products; and all advertising other than that related directly to our Music and Games businesses. (C) The Games segment primarily includes revenue and related costs from: the sale of individual games on our websites RealArcade.com, GameHouse.com and Zylom.com; the sales of games subscription services; advertising through our games websites; the sale of games through the syndication on partner sites, and sales of games through wireless carriers. (D) The Technology Products and Solutions (TPS) segment includes revenue and related costs from: sales of ringback tones, music-on-demand, video-on-demand, messaging, and information services; sales of media delivery system software, including Helix system software and related authoring and publishing tools, both directly to customers and indirectly through original equipment manufacturer channels; support and maintenance services sold to customers who purchase software products; broadcast hosting services; and consulting and professional services that are offered to customers. (E) Comprises gains realized from MTVN's note payments to Rhapsody America. Effective January 1, 2009, the Company adopted SFAS 160 which requires the appreciation of gains on the sale of non- controlling interest to be recorded as an equity transaction. (F) Net of noncontrolling interest effect. RealNetworks, Inc. and Subsidiaries Supplemental Financial Information (Unaudited) Quarter Ended March 31, 2009 ------------------------------ Acquisitions Related WiderThan Intang- Options Anti- Stock- ible Converted trust Based Asset to a Cash Liti- As Compen- Amorti- Equiva- gation Reported sation zation(A) lent Related Adjusted (in thousands) Expenses in accordance with GAAP Cost of revenue $56,021 $(630) $(546) $(1) $- $54,844 Operating expenses: Research and development $28,559 $(1,824) $- $(5) $- $26,730 Sales and marketing 43,685 (1,066) (1,222) (11) - 41,386 General and administrative 22,831 (1,702) - - - 21,129 ------ ------ --- --- --- ------ Adjusted operating expenses, net $95,075 $(4,592) $(1,222) $(16) $- $89,245 ======= ======= ======= ==== === ======= Quarter Ended March 31, 2009 ------------------------------ Acquisitions Related WiderThan Intang- Options Anti- Stock- ible Converted trust Based Asset to a Cash Liti- As Compen- Amorti- Equiva- gation Reported sation zation(A) lent Related Adjusted (in thousands) Expenses in accordance with GAAP Cost of revenue $55,393 $(234) $(2,315) $(21) $- $52,823 Operating expenses: Research and development $25,006 $(1,913) $- $(46) $- $23,047 Sales and marketing 53,596 (1,908) (4,000) (22) - 47,666 General and administrative 17,084 (1,434) - - (202) 15,448 ------ ------ --- --- ---- ------ Adjusted operating expenses, net $95,686 $(5,255) $(4,000) $(68) $(202) $86,161 ======= ======= ======= ==== ===== ======= (A) - Net of noncontrolling interest effect. RealNetworks, Inc. and Subsidiaries Earnings Per Share Reconciliation (Unaudited) Quarters Ended March 31, ---- ---- 2009 2008 ---- ---- (in thousands, except per share data) Net income (loss) attributable to common shareholders $(12,136) $2,426 Less accretion of MTVN's preferred return in Rhapsody America (1,434) - ------ --- Net income (loss)available to common shareholders $(13,570) $2,426 ======== ====== Shares used to compute basic net income (loss) per share available to common shareholders 134,380 142,491 Dilutive potential common shares: Stock options and restricted stock - 1,495 Convertible debt - 10,750 --- ------ Shares used to compute diluted net income (loss) per share available to common shareholders 134,380 154,736 Basic net income (loss) per share available to common shareholders $(0.10) $0.02 Diluted net income (loss) per share available to common shareholders $(0.10) $0.02 RNWK-F
First Call Analyst:
FCMN Contact:
Source: RealNetworks, Inc.
CONTACT: Press, Bill Hankes, +1-206-892-6614, bhankes@real.com, or
Financial, Marj Charlier, +1-206-892-6718, mcharlier@real.com, both of
RealNetworks, Inc.
Web Site: http://www.realnetworks.com/
Profile: International Entertainment
posted by EntertainmentNews @ 1:04 PM
0 comments
0 Comments:
Post a Comment
<< Home