2014

RealNetworks Announces Fourth Quarter and Full-Year 2011 Results

SEATTLE, Feb. 15, 2012 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the fourth quarter and fiscal year ended Dec. 31, 2011.

Quarterly Highlights:

  • Revenue of $80.2 million
  • Net loss of $(2.8) million or $(0.08) per share
  • Adjusted EBITDA of $3.8 million
  • Operating cash flow of $6.7 million

Full Year Highlights:

  • Revenue of $335.7 million
  • Net loss of $(27.1) million or $(0.79) per share
  • Adjusted EBITDA of $17.7 million
  • Cash and short term investments of $185.1 million as of Dec. 31, 2011

"We are clearly not satisfied with the company's 2011 performance and, as a result, we have an increased sense of urgency to refocus RealNetworks for growth and profitability," said Thomas Nielsen, President and CEO of RealNetworks. "We are already taking steps to simplify our existing businesses, restructure our company and unlock shareholder value. At the same time, we are developing and will acquire businesses that target large and fast growing addressable markets."

Fourth Quarter Results

For the fourth quarter of 2011, revenue was $80.2 million, a sequential decrease of 5% from the third quarter, and a decrease of 18% compared with the fourth quarter of 2010. Foreign currency exchange rate fluctuations positively affected 2011 fourth quarter revenue by approximately $0.3 million compared with the year-ago quarter. Revenue trends in each of RealNetworks' businesses in the fourth quarter of 2011 compared with the year-earlier quarter were: a 5% decrease in Emerging Products revenue to $12.0 million, a 20% decrease in Core Products revenue to $46.7 million and a 21% decrease in Games revenue to $21.6 million.  

Net loss for the fourth quarter of 2011 was $(2.8) million, or $(0.08) per share, compared with net income of $3.2 million, or $0.09 per share, in the fourth quarter of 2010. The loss for the quarter was affected by a $20.0 million impairment for deferred SaaS costs and a tax benefit of $22.7 million resulting from an expectation that we will generate taxable income in 2012 as a result of the sale of patents and other assets we announced in January 2012.  

Adjusted EBITDA for the fourth quarter of 2011 was $3.8 million, compared with $13.3 million for the fourth quarter of 2010.  A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of Dec. 31, 2011, RealNetworks had $185.1 million in unrestricted cash, cash equivalents and short-term investments compared with $334.3 million at Dec. 31, 2010, of which approximately $48.9 million is held in foreign jurisdictions.  The decline in cash was largely due to a $136.8 million special dividend paid to shareholders in August 2011.  In addition, RealNetworks had $47.4 million in restricted cash and available-for-sale securities at the end of the year.

Segment Operating Results




2011


2011


2010


Sequential


Yr/Yr




Q4


Q3


Q4


Change


Change

(in thousands)

Revenue












Core Products

$  46,693


$ 50,705


$ 58,030


-8%


-20%


Emerging Products

11,974


10,764


12,558


11%


-5%


Games

21,552


22,945


27,229


-6%


-21%


Corporate

-


-


-







Total  

$  80,219


$ 84,414


$ 97,817


-5%


-18%













Operating Income (loss)











Core Products

$ (10,733)


$   8,815


$ 12,500


-222%


-186%


Emerging Products

26


(2,033)


4,020


-101%


-99%


Games

228


1,589


1,788


-86%


-87%


Corporate

(13,198)


(11,854)


(12,329)


11%


7%



Total  

$ (23,677)


$ (3,483)


$   5,979


580%


-496%













Adjusted EBITDA











Core Products

$  11,382


$ 11,617


$ 15,523


-2%


-27%


Emerging Products

986


(1,711)


4,109


-158%


-76%


Games

883


2,275


2,452


-61%


-64%


Corporate

(9,411)


(8,094)


(8,811)


16%


7%



Total  

$    3,840


$   4,087


$ 13,273


-6%


-71%



Full Year Results

For 2011, revenue from RealNetworks' Core Products, Emerging Products and Games businesses was $335.7 million, a decrease of 8% compared with $366.0 million for 2010.  Total revenue for 2010 was $401.7 million, including first-quarter revenue from RealNetworks' music business of $35.7 million. Beginning in the second quarter of 2010, revenue and other operating results of RealNetworks' music business from its Rhapsody joint venture are not consolidated in RealNetworks' financial statements as a result of the restructuring of Rhapsody completed on March 31, 2010.  Foreign currency exchange rate fluctuations positively affected 2011 revenue by approximately $8.0 million compared with 2010.  Revenue trends in each of RealNetworks' businesses for the full year 2011 compared with 2010 were: a 12% increase in Emerging Products revenue to $46.6 million, a 10% decrease in Core Products revenue to $191.2 million and a 12% decrease in Games revenue to $97.9 million.

Net loss for the year was $(27.1) million, or $(0.79) per share, compared with net income of $5.0 million, or $0.26 per share, in 2010.  Net loss in 2011 included restructuring charges of $(8.0) million, the $(20.0) million impairment for deferred SaaS costs in the fourth quarter and an income tax benefit of $17.3 million.  Net income in 2010 included a gain from the deconsolidation of Rhapsody of $10.9 million, an income tax benefit of $36.5 million resulting primarily from a $30.0 million cash refund from the IRS and restructuring charges of $(19.8) million.

In 2011, adjusted EBITDA was $17.7 million compared with $25.3 million in 2010.  A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

Business Outlook

For the first quarter of 2012, RealNetworks expects revenue of $65 million to $68 million. The company expects revenue from each of its current segments to decline sequentially and year-over-year. As a result of the decline in revenue, and a seasonal first-quarter sequential increase in expenses, RealNetworks expects adjusted EBITDA for the quarter to be negative, excluding the net effect of the sale of patent and other assets to Intel Corp. The company expects the patent sale to generate $120 million of cash and to close in the first quarter.  

Anticipating significant restructuring activities in 2012, which we expect will include acquisitions and divestitures as well as changes in RealNetworks' operating segments, RealNetworks is not providing full-year guidance for 2012.

The foregoing forward-looking statements reflect RealNetworks' expectations as of Feb. 15, 2012.  It is not RealNetworks' general practice to update these forward-looking statements until its next quarterly results announcement.

Webcast and Conference Call Information

The company will host an audio Webcast conference call to review results and discuss the company's operations for the fourth quarter at 5:00 p.m. ET on Feb. 15.  The Webcast will be available at:  http://investor.realnetworks.com

Webcast participants will need RealPlayer® to hear the webcast, which can be downloaded at www.real.com.

The on-demand Webcast will be available beginning approximately two hours following the conclusion of the live Webcast.

Conference Call Details
5:00 p.m. ET / 2:00 p.m. PT
Dial in:
888-323-9869 Domestic
517-308-9139 International
Passcode: Fourth Quarter Earnings
Leader: Thomas Nielsen

Telephonic replay will be available until 8 p.m. ET, Feb. 29, 2012.
Replay dial in:
866-415-8412 Domestic
203-369-0705 International

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 http://www.realnetworks.com/about-us

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 EBITDA and adjusted EBITDA by reporting segment, which management believes provide investors with useful information.  

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP operating income (loss) to adjusted EBITDA and to adjusted EBITDA by reporting segment.

The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the fourth quarter 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 for future revenue, adjusted EBITDA, plans to undertake, as well as results and benefits from its business restructuring activities, future acquisitions and strategic initiatives, and the completion and financial impacts of the sale of patents and other assets to Intel Corp., which is subject to customary regulatory approval and satisfaction of closing conditions.  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; RealNetworks' ability to realize operating efficiencies, growth and other benefits from the implementation of its strategic initiatives; 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; 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 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, RealPlayer and GameHouse 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
December 31,


Years Ended
December 31,




2011


2010


2011


2010




(in thousands, except per share data)











Net revenue



$               80,219


$                 97,817


$             335,686


$               401,733











Cost of revenue



32,089


35,705


126,637


144,723











Impairment of deferred costs



19,962


-


19,962


-











Gross profit



28,168


62,112


189,087


257,010











Operating expenses:










Research and development



16,012


19,180


70,212


100,955

Sales and marketing



25,342


27,013


111,300


118,543

Advertising with related party (A)



-


-


-


1,065

General and administrative



10,163


9,066


37,181


51,217

Restructuring and other charges



800


874


8,650


12,361

Loss (gain) on excess office facilities



(472)


-


(646)


7,396











Total operating expenses



51,845


56,133


226,697


291,537











Operating income (loss)



(23,677)


5,979


(37,610)


(34,527)











Other income (expenses):










Interest income, net



190


412


1,552


2,417

Equity in net loss of Rhapsody and other equity method investments (B)



(2,159)


(2,595)


(7,898)


(14,164)

Gain (loss) on sale of equity investments, net



-


41


-


(9)

Gain on deconsolidation of Rhapsody  



-


-


-


10,929

Other income (expense), net



188


144


(473)


1,031











Total other income (expense), net



(1,781)


(1,998)


(6,819)


204











Income (loss) before income taxes



(25,458)


3,981


(44,429)


(34,323)

Income tax (expense) benefit  



22,694


(787)


17,329


36,451











Net income (loss)



(2,764)


3,194


(27,100)


2,128

Net loss attributable to the noncontrolling interest in Rhapsody (C)



-


-


-


2,910

Net income (loss) attributable to common shareholders



$               (2,764)


$                   3,194


$             (27,100)


$                   5,038











Basic net income (loss) per share available to common shareholders



$                 (0.08)


$                     0.09


$                 (0.79)


$                     0.26

Diluted net income (loss) per share available to common shareholders



$                 (0.08)


$                     0.09


$                 (0.79)


$                     0.26











Shares used to compute basic net income (loss) per share available to common shareholders



34,258


33,963


34,185


33,894

Shares used to compute diluted net income (loss) per share available to common shareholders



34,258


34,033


34,185


34,013





















(A) Consists of advertising purchased by Rhapsody from MTV Networks (MTVN).  MTVN had a 49% ownership interest in Rhapsody prior to the restructuring transactions that occurred on March 31, 2010.  See note (B) for more details regarding the restructuring and the related deconsolidation.


(B) On March 31, 2010, we completed the restructuring of Rhapsody which resulted in our ownership decreasing to approximately 47% of the outstanding equity in Rhapsody and no longer having operating control.  Since the restructuring was completed on the last day of the quarter ended March 31, 2010, our statement of operations for the first quarter of 2010 includes results from Rhapsody's operations. Beginning with the quarter ended June 30, 2010, Rhapsody's revenue or other operating results are no longer consolidated within our financial statements and we are not recording any operating or other financial results for our Music segment. We now report our share of Rhapsody's income or losses as "Equity in net loss of Rhapsody and other equity method investments" in "Other income (expenses)".


(C) Net loss attributable to the noncontrolling interest in Rhapsody reflects MTVN's 49% ownership share in the losses of Rhapsody prior to the restructuring transactions that occurred on March 31, 2010.



RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)




December 31,


December 31,


2011


2010


(in thousands)

ASSETS





Current assets:




Cash and cash equivalents  

$                         106,333


$                         236,018

Short-term investments

78,739


98,303

Trade accounts receivable, net

41,165


48,324

Deferred costs, current portion

1,424


9,173

Related party receivable - Rhapsody (A)

-


351

Prepaid expenses and other current assets

21,902


30,441





Total current assets

249,563


422,610





Equipment, software, and leasehold improvements, at cost:




Equipment and software

104,352


144,623

Leasehold improvements

25,947


25,367

Total equipment, software, and leasehold improvements

130,299


169,990

Less accumulated depreciation and amortization

92,825


126,619





Net equipment, software, and leasehold improvements

37,474


43,371





Restricted cash equivalents and investments

10,168


10,000

Equity method investments

7,798


15,486

Available for sale securities

37,204


27,541

Other assets

2,954


3,316

Deferred costs, non-current portion

843


18,401

Deferred tax assets, net, non-current portion

18,419


12,805

Other intangible assets, net

7,169


6,952

Goodwill

6,198


4,960





Total assets

$                         377,790


$                         565,442





LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:




Accounts payable

$                           17,151


$                           30,413

Accrued and other liabilities

59,194


85,702

Deferred revenue, current portion

11,835


19,036

Accrued loss on excess office facilities, current portion

596


1,144





Total current liabilities

88,776


136,295





Deferred revenue, non-current portion

195


460

Accrued loss on excess office facilities, non-current portion

2,151


3,380

Deferred rent

2,944


3,514

Deferred tax liabilities, net, non-current portion

1,443


1,049

Other long-term liabilities

10,994


7,999





Total liabilities

106,503


152,697









Shareholders' equity

271,287


412,745





Total liabilities and shareholders' equity  

$                         377,790


$                         565,442





(A) Related party receivable reflects amounts Rhapsody International, formed on March 31, 2010, owed RealNetworks.




RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)






Years Ended December 31,


2011


2010


(in thousands)





Cash flows from operating activities:




Net income (loss)

$       (27,100)


$     2,128

Adjustments to reconcile net income (loss) to net cash used in operating activities:




Depreciation and amortization

16,895


23,401

Stock-based compensation

11,747


12,203

Loss (gain) on disposal of equipment, software, and leasehold improvements

(62)


(41)

Equity in net loss of Rhapsody and other equity method investments

7,898


14,164

Gain on deconsolidation of Rhapsody  

-


(10,929)

Excess tax benefit from stock option exercises

(74)


(48)

Accrued loss (gain) on excess office facilities

(646)


5,670

Deferred income taxes, net

(23,985)


622

Other

114


460

Net change in certain operating assets and liabilities, net of acquisitions, disposals and deconsolidation of Rhapsody

14,505


(78,752)





Net cash used in operating activities

(708)


(31,122)





Cash flows from investing activities:




Purchases of equipment, software, and leasehold improvements

(9,873)


(12,904)

Purchases of short-term investments

(96,841)


(116,831)

Proceeds from sales and maturities of short-term investments

116,405


126,398

Payment of acquisition costs, net of cash acquired

(2,888)


(5,806)

Sale of Exomi, net of cash received

-


49

Payment in connection with the restructuring of Rhapsody

-


(18,000)

Repayment of temporary funding on deconsolidation of Rhapsody

-


5,869

Decrease (increase) in restricted cash equivalents and investments, net

(179)


3,700





Net cash provided by (used in) investing activities

6,624


(17,525)





Cash flows from financing activities:




Net proceeds from sales of common stock under employee stock purchase




plan and exercise of stock options

3,177


2,678

Net proceeds from sales of interest in Rhapsody

-


1,213

Excess tax benefit from stock option exercises

74


48

Payment of common stock cash dividend

(136,793)


-





Net cash (used in) provided by financing activities

(133,542)


3,939





Effect of exchange rate changes on cash and cash equivalents

(2,059)


3,696





Net increase (decrease) in cash and cash equivalents

(129,685)


(41,012)





Cash and cash equivalents, beginning of period

236,018


277,030





Cash and cash equivalents, end of period

$      106,333


$ 236,018



RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)
















2011



YTD


Q4


Q3


Q2


Q1





(in thousands)

Net Revenue by Line of Business:











Core Products (A)


$ 191,240


$ 46,693


$ 50,705


$ 45,735


$   48,107

Emerging Products (B)


46,590


11,974


10,764


12,717


11,135

Games (C)  


97,856


21,552


22,945


25,300


28,059

Total net revenue excluding music


335,686


80,219


84,414


83,752


87,301

Music  (D)


-


-


-


-


-

 Total net revenue including music


$ 335,686


$ 80,219


$ 84,414


$ 83,752


$   87,301












Core Products Revenue by Product:











SaaS (E)


$ 119,378


$ 28,255


$ 30,381


$ 30,216


$   30,526

Systems Integrations / Professional Services (F)


6,843


771


3,844


388


1,840

Technology Licensing (G)


28,429


9,246


6,250


6,508


6,425

Consumer Subscriptions (H)


36,590


8,421


10,230


8,623


9,316

Total Core Products net revenue


$ 191,240


$ 46,693


$ 50,705


$ 45,735


$   48,107












Net Revenue by Geography:











United States


$ 162,720


$ 37,298


$ 38,969


$ 41,984


$   44,469

Rest of world


172,966


42,921


45,445


41,768


42,832












Total net revenue


$ 335,686


$ 80,219


$ 84,414


$ 83,752


$   87,301












Product Metrics (subscribers and ICM presented as greater than):











Addressable subscribers of mobile operators under contract (I)




725,000


700,000


775,000


775,000

SaaS subscribers (J)




30,050


34,000


34,550


35,900

Monthly SaaS ARPU (in cents) (K)




$     0.19


$     0.17


$     0.18


$       0.18

ICM delivered in billions (L)




165


162


157


151

Consumer subscribers(M)




425


500


475


500
















2010



YTD


Q4


Q3


Q2


Q1





(in thousands)

Net Revenue by Line of Business:











Core Products (A)


$ 212,845


$ 58,030


$ 51,870


$ 51,742


$   51,203

Emerging Products (B)


41,761


12,558


8,778


8,997


11,428

Games (C)  


111,394


27,229


25,784


28,145


30,236

Total net revenue excluding music


366,000


97,817


86,432


88,884


92,867

Music  (D)


35,733


-


-


-


35,733

 Total net revenue including music


$ 401,733


$ 97,817


$ 86,432


$ 88,884


$ 128,600












Core Products Revenue by Product:











SaaS (E)


$ 133,543


$ 35,656


$ 31,885


$ 32,388


$   33,614

Systems Integrations / Professional Services (F)


6,706


4,388


953


998


367

Technology Licensing (G)


30,751


7,632


7,473


7,736


7,910

Consumer Subscriptions (H)


41,845


10,354


11,559


10,620


9,312

Total Core Products net revenue


$ 212,845


$ 58,030


$ 51,870


$ 51,742


$   51,203












Net Revenue by Geography:











United States


$ 227,823


$ 48,048


$ 46,874


$ 48,351


$   84,550

Rest of world


173,910


49,769


39,558


40,533


44,050












Total net revenue


$ 401,733


$ 97,817


$ 86,432


$ 88,884


$ 128,600












Product Metrics (subscribers and ICM presented as greater than):











Addressable subscribers of mobile operators under contract (I)




700,000


700,000


675,000


650,000

SaaS subscribers (J)




36,700


37,500


37,600


37,950

Monthly SaaS ARPU (in cents) (K)




$     0.20


$     0.16


$     0.16


$       0.16

ICM delivered in billions (L)




136


134


128


120

Consumer subscribers(M)




550


600


600


575












Net Revenue by Line of Business:

(A)  The Core Products segment primarily includes revenue from SaaS services, system integration and professional services to carriers and mobile handset companies, sales of technology licenses of our software products such as Helix for handsets, consumer subscriptions such as SuperPass and our international radio subscription services.


(B)  The Emerging Products segment primarily includes revenue from RealPlayer and related products, such as the distribution of third party software products, advertising on RealPlayer websites and sales of RealPlayerPlus software licenses to consumers.


(C)  The Games segment primarily includes revenue from sales of games licenses, online games subscription services, advertising on game sites and social network sites, games syndication services, microtransactions from online and social games and sales of mobile games.


(D)  On March 31, 2010, we completed the restructuring of Rhapsody, which resulted in our ownership decreasing to approximately 47% of the outstanding equity in Rhapsody and our loss of operating control over Rhapsody.  Beginning with the quarter ended June 30, 2010, Rhapsody's revenue or other operating results are no longer consolidated within our financial statements and we are not recording any operating or other financial results for our Music segment.  We now report our share of Rhapsody's income or losses as "Equity in net loss of Rhapsody and other equity method investments" in "Other income (expense)".


Core Products Revenue by Product:

(E)  Software as a Service (SaaS) revenue includes revenue from music on demand (MOD), video on demand (VOD), ringtones, ringback tones (RBT) and intercarrier messaging services provided to network service providers, who are largely mobile phone networks.


(F)  Systems Integrations / Professional Services revenue includes professional services, other than those associated with software sales, provided to mobile carriers and handset manufacturers.


(G)  Technology Licensing includes revenue from sales of software and other intellectual property licenses such as Helix server licenses and Helix software licenses for handsets.


(H)  Consumer Subscriptions includes revenue from SuperPass as well as our international radio subscription services.


Product Metrics:

(I)  Total subscribers reported at the end of the quarter of mobile carriers that offer one or more of our SaaS services, other than intercarrier messaging services, to their customers.


(J)  SaaS subscribers include RBT, MOD and VOD services, measured at the end of the quarter.


(K)  Monthly SaaS ARPU (Average Revenue Per User) is calculated by dividing (a) the total quarterly revenue from SaaS subscription services, including RBT, MOD, VOD, by (b) the number of SaaS subscribers at the end of the quarter, and dividing the resulting quotient by three.


(L)  ICM (Intercarrier message) represents the total number of messages delivered across our messaging platform during the quarter.


(M)  Consumer subscribers primarily includes our SuperPass and GamePass products. We repurchased our international radio subscription services from Rhapsody as part of the restructuring that occurred on March 31, 2010, and as a result, subscribers to our international radio services are included beginning in the quarter ended June 30, 2010.



RealNetworks, Inc. and Subsidiaries

Segment Results of Operations

(Unaudited)














2011

2010

2011


2010



Q4


Q3


Q4


YTD


YTD



(in thousands)

Core Products






















Net revenue


$          46,693


$          50,705


$          58,030


$     191,240


$     212,845

Cost of revenue


20,867


22,492


25,679


83,696


83,733

Impairment of Def Costs


19,329


-


-


19,329


-

Gross profit


6,497


28,213


32,351


88,215


129,112












Gross margin


14%


56%


56%


46%


61%












Operating expenses


17,230


19,398


19,851


75,188


86,217

Operating income (loss)  


$        (10,733)


$            8,815


$          12,500


$       13,027


$       42,895












Adjusted EBITDA  


$          11,382


$          11,617


$          15,523


$       43,159


$       56,306












Emerging Products






















Net revenue


$          11,974


$          10,764


$          12,558


$       46,590


$       41,761

Cost of revenue


3,448


3,913


1,179


11,879


7,123

Impairment of Def Costs


633


-


-


633


-

Gross profit


7,893


6,851


11,379


34,078


34,638












Gross margin


66%


64%


91%


73%


83%












Operating expenses


7,867


8,884


7,359


36,011


28,053

Operating income (loss)  


$                 26


$          (2,033)


$            4,020


$       (1,933)


$         6,585












Adjusted EBITDA  


$               986


$          (1,711)


$            4,109


$          (206)


$         7,157












Games






















Net revenue


$          21,552


$          22,945


$          27,229


$       97,856


$     111,394

Cost of revenue


6,875


7,197


7,861


30,646


29,071

Gross profit


14,677


15,748


19,368


67,210


82,323












Gross margin


68%


69%


71%


69%


74%












Operating expenses


14,449


14,159


17,580


60,633


78,275

Operating income (loss)  


$               228


$            1,589


$            1,788


$         6,577


$         4,048












Adjusted EBITDA  


$               883


$            2,275


$            2,452


$         9,246


$         8,970












Music






















Net revenue


$                  -


$                  -


$                  -


$              -


$       35,733

Cost of revenue


-


-


-


-


21,864

Gross profit


-


-


-


-


13,869












Gross margin


N/A


N/A


N/A


N/A


39%












Operating expenses


-


-


-


-


13,911

Operating income (loss)  


$                  -


$                  -


$                  -


$              -


$            (42)












Adjusted EBITDA  


$                  -


$                  -


$                  -


$              -


$         4,214












Corporate






















Net revenue


$                  -


$                  -


$                  -


$              -


$               -

Cost of revenue


899


(1,786)


986


416


2,932

Gross profit


(899)


1,786


(986)


(416)


(2,932)












Gross margin


N/A


N/A


N/A


N/A


N/A












Operating expenses


12,299


13,640


11,343


54,865


85,081

Operating income (loss)  


$        (13,198)


$        (11,854)


$        (12,329)


$     (55,281)


$     (88,013)












Adjusted EBITDA  


$          (9,411)


$          (8,094)


$          (8,811)


$     (34,508)


$     (51,345)












Total






















Net revenue


$          80,219


$          84,414


$          97,817


$     335,686


$     401,733

Cost of revenue


32,089


31,816


35,705


126,637


144,723

Impairment of Def Costs


19,962


-


-


19,962


-

Gross profit


28,168


52,598


62,112


189,087


257,010












Gross margin


35%


62%


63%


56%


64%












Operating expenses


51,845


56,081


56,133


226,697


291,537

Operating income (loss)  


$        (23,677)


$          (3,483)


$            5,979


$     (37,610)


$     (34,527)












Adjusted EBITDA  


$            3,840


$            4,087


$          13,273


$       17,691


$       25,302



RealNetworks, Inc. and Subsidiaries

Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment

(Unaudited)














2011


2010


2011


2010



Q4


Q3


Q4


YTD


YTD



(in thousands)

Core Products






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:




















Operating income (loss)


$           (10,733)


$               8,815


$         12,500


$           13,027


$       42,895

Acquisitions related intangible asset amortization


789


833


705


2,806


3,991

Depreciation and amortization


1,997


1,969


2,318


7,997


9,420

Impairment of deferred costs


19,329


-


-


19,329


-

Adjusted EBITDA  


$             11,382


$             11,617


$         15,523


$           43,159


$       56,306












Emerging Products






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:




















Operating income (loss)  


$                    26


$             (2,033)


$           4,020


$           (1,933)


$         6,585

Acquisitions related intangible asset amortization


79


79


-


211


-

Depreciation and amortization


248


243


89


883


572

Impairment of deferred costs


633


-


-


633


-

Adjusted EBITDA  


$                  986


$             (1,711)


$           4,109


$              (206)


$         7,157












Games






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:




















Operating income (loss)  


$                  228


$               1,589


$           1,788


$             6,577


$         4,048

Acquisitions related intangible asset amortization


229


257


263


996


510

Depreciation and amortization


426


429


401


1,673


4,412

Adjusted EBITDA  


$                  883


$               2,275


$           2,452


$             9,246


$         8,970












Music






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:




















Operating income (loss)  


$                     -


$                     -


$                -


$                  -


$            (42)

Net loss attributable to noncontrolling interest in Rhapsody


-


-


-


-


2,910

Acquisitions related intangible asset amortization (A)


-


-


-


-


58

Depreciation and amortization (A)


-


-


-


-


690

Pro forma gain on sale of interest in Rhapsody America


-


-


-


-


598

Adjusted EBITDA  


$                     -


$                     -


$                -


$                  -


$         4,214












Corporate






















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:




















Operating income (loss)  


$           (13,198)


$           (11,854)


$       (12,329)


$         (55,281)


$     (88,013)

Other income (expense), net


188


(228)


144


(473)


1,031

Depreciation and amortization


608


593


577


2,329


3,677

Restructuring and other charges


800


438


874


8,650


12,361

Stock-based compensation


2,663


2,957


1,923


10,913


12,203

Loss (gain) on excess office facilities


(472)


-


-


(646)


7,396

Adjusted EBITDA  


$             (9,411)


$             (8,094)


$         (8,811)


$         (34,508)


$     (51,345)












Total  






















Reconciliation of GAAP operating income (loss) to adjusted EBITDA:






















Operating income (loss)  


$           (23,677)


$             (3,483)


$           5,979


$         (37,610)


$     (34,527)

Net loss attributable to noncontrolling interest in Rhapsody


-


-


-


-


2,910

Other income (expense), net


188


(228)


144


(473)


1,031

Acquisitions related intangible asset amortization (A)


1,097


1,169


968


4,013


4,559

Depreciation and amortization (A)


3,279


3,234


3,385


12,882


18,771

Loss (gain) on excess office facilities


(472)


-


-


(646)


7,396

Pro forma gain on sale of interest in Rhapsody America


-


-


-


-


598

Restructuring and other charges


800


438


874


8,650


12,361

Stock-based compensation


2,663


2,957


1,923


10,913


12,203

Impairment of deferred costs


19,962


-


-


19,962


-

Adjusted EBITDA  


$               3,840


$               4,087


$         13,273


$           17,691


$       25,302












(A)  Net of noncontrolling interest effect.



RealNetworks, Inc. and Subsidiaries




Earnings Per Share Reconciliation




(Unaudited)





























Quarters Ended
December 31,


Years Ended
December 31,


2011


2010


2011


2010


(in thousands, except per share data)









Net income (loss) attributable to common shareholders

$              (2,764)


$                3,194


$               (27,100)


$                5,038

Less termination of MTVN's preferred return in Rhapsody  

-


-


-


3,700

Net income (loss) available to common shareholders

$              (2,764)


$                3,194


$               (27,100)


$                8,738

















Shares used to compute basic net income (loss) per share available to common shareholders

34,258


33,963


34,185


33,894

Dilutive stock options and restricted stock  

-


70


-


119

Shares used to compute diluted net income (loss) per share available to common shareholders

34,258


34,033


34,185


34,013









Basic net income (loss) per share available to common shareholders

$                (0.08)


$                  0.09


$                   (0.79)


$                  0.26

Diluted net income (loss) per share available to common shareholders

$                (0.08)


$                  0.09


$                   (0.79)


$                  0.26



SOURCE RealNetworks, Inc.



RELATED LINKS
http://www.realnetworks.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.