2014

RealNetworks Announces Fourth Quarter And Full-Year 2012 Results

SEATTLE, Feb. 6, 2013 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the fourth quarter and fiscal year ended Dec. 31, 2012.

Quarterly Summary:

  • Revenue of $67.3 million
  • Net income of $3.1 million or $0.09 per diluted share
  • Adjusted EBITDA of $3.3 million

Full Year Summary:

  • Revenue of $258.8 million
  • Net income of $44.8 million or $1.28 per diluted share
  • Adjusted EBITDA loss of $(16.7) million
  • Cash and short term investments of $271.4 million as of Dec. 31, 2012

"We are pleased that we returned RealNetworks to profitability in the fourth quarter," said Rob Glaser, Chairman and interim CEO of RealNetworks. "Having said that, we still have considerable work to do to achieve sustained growth and profitability."

Fourth Quarter Results

For the fourth quarter of 2012, revenue was $67.3 million, a sequential increase of 14% from the third quarter, and a decrease of 16% compared with the fourth quarter of 2011. Revenue trends in each of RealNetworks' businesses in the fourth quarter of 2012 compared with the year-earlier quarter were: a 3% increase in Emerging Products revenue to $12.4 million, a 16% decrease in Core Products revenue to $39.2 million and a 27% decrease in Games revenue to $15.7 million.  

Net income for the fourth quarter of 2012 was $3.1 million, or $0.09 per diluted share, compared with net loss of $(2.8) million, or $(0.08) per share, in the fourth quarter of 2011. Income in the quarter was affected by restructuring expenses of $(4.4) million and an income tax benefit of $12.1 million. The loss for the year-ago quarter was affected by a $(20.0) million impairment charge for deferred SaaS costs and a tax benefit of $22.7 million

Adjusted EBITDA for the fourth quarter of 2012 was $3.3 million, compared with $3.8 million for the fourth quarter of 2011. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of Dec. 31, 2012, RealNetworks had $271.4 million in unrestricted cash, cash equivalents and short-term investments compared with $185.1 million as of Dec. 31, 2011, of which approximately $44.9 million is held in foreign jurisdictions. The increase in cash in 2012 was largely due to proceeds from the sale of patents and other assets to Intel Corp. for $120 million in the second quarter of the year, partially offset by cash used in operations and restructuring activities over the year. In addition, RealNetworks had $44.3 million in restricted cash and available-for-sale securities as of Dec. 31, 2012, compared with $47.4 million as of Dec. 31, 2011.

Segment Operating Results




2012


2012


2011




Q4


Q3


Q4




(in thousands)

Revenue







Core Products

$ 39,186


$ 34,078


$ 46,693


Emerging Products

12,370


10,134


11,974


Games

15,708


14,876


21,552


Corporate

-


-


-



Total

$ 67,264


$ 59,088


$ 80,219









Operating Income (loss)






Core Products

$ 6,334


$ 1,180


$(10,733)


Emerging Products

2,425


(152)


26


Games

(369)


(1,708)


228


Corporate

(15,278)


(22,495)


(13,198)



Total

$ (6,888)


$(23,175)


$(23,677)









Adjusted EBITDA






Core Products

$ 9,244


$ 3,736


$ 11,382


Emerging Products

2,732


158


986


Games

276


(894)


883


Corporate

(8,988)


(9,042)


(9,411)



Total

$ 3,264


$ (6,042)


$ 3,840

Full Year Results

For 2012, revenue was $258.8 million, a decrease of 23% compared with $335.7 million for 2011.  Foreign currency exchange rate fluctuations negatively affected 2012 revenue by approximately $5.6 million compared with 2011.  Revenue trends in each of RealNetworks' businesses for the full year 2012 compared with 2011 were: a 9% decrease in Emerging Products revenue to $42.6 million, a 22% decrease in Core Products revenue to $149.2 million and a 31% decrease in Games revenue to $67.1 million.

Net income for the year was $44.8 million, or $1.28 per diluted share, compared with net loss of $(27.1) million, or $(0.79) per share, in 2011.  Net income in 2012 included restructuring charges of $(18.5) million, income tax expense of $(12.5) million and a net gain of $116.4 million from the sale of patents and other assets to Intel Corp. The year-ago loss included the $(20.0) million impairment for deferred SaaS costs and an income tax benefit of $17.3 million

In 2012, adjusted EBITDA was $(16.7) million compared with $17.7 million in 2011.  A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

Segment Reorganization

Beginning with the first quarter of 2013, RealNetworks is reorganizing its financial reporting to reflect changes in how we intend to manage the businesses and is changing the way we allocate operating expenses within the company to increase efficiency and accountability for financial and operational performance within each business. Therefore, starting with the first quarter of 2013, RealNetworks' 2013 financial results will reflect the new corporate organization with the following reporting segments: (1) the RealPlayer Group, which will include RealPlayer, SuperPass and mobile IP sales; (2) Mobile Entertainment, which will include the existing and evolving SaaS services of ringback tones, music on demand, and intercarrier messaging; professional services and systems integration; and Helix software; and (3) Games.

Additionally, going forward more of RealNetworks' corporate costs – such as finance, HR, legal and facilities – will be assigned to each business unit, although certain costs will be retained at the corporate level.  

Prior to reporting our first quarter 2013 results in May, RealNetworks expects to file a report on Form 8-K with a description of the new segments and historical results that reflect those new segments.  

Business Outlook

For the first quarter of 2013, RealNetworks expects total revenue of $50 million to $53 million, with all segments declining sequentially and year over year. We expect adjusted EBITDA for the quarter to be a loss of $(7) million to $(10) million.     

The foregoing forward-looking statements reflect RealNetworks' expectations as of Feb. 6, 2013.  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. 6.  The Webcast will be available at:  http://investor.realnetworks.com

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

Conference Call Details
5 p.m. ET / 2 p.m. PT
Dial in:
888-790-3162 Domestic
415-228-4854 International
Passcode: Fourth Quarter Earnings
Leader: Rob Glaser

Telephonic replay will be available until 8 p.m. ET, Feb. 20, 2013.
Replay dial in:
866-425-0182 Domestic
203-369-0874 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' 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 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 and strategic initiatives. 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, 




2012


2011


2012


2011


 (in thousands, except per share data) 









 Net revenue 

$ 67,264


$ 80,219


$ 258,842


$ 335,686









 Cost of revenue 

25,098


32,089


103,731


126,637









 Impairment of deferred costs 

-


19,962


-


19,962









 Gross profit 

42,166


28,168


155,111


189,087









Sale of patents and other technology assets, net of costs (A) 

-


-


116,353


-









 Operating expenses: 








 Research and development 

14,027


16,012


63,194


70,212

 Sales and marketing 

21,839


25,342


90,301


111,300

 General and administrative 

8,788


10,163


43,891


37,181

 Restructuring and other charges 

1,353


800


15,225


8,650

 Loss (gain) on excess office facilities 

3,047


(472)


3,290


(646)









 Total operating expenses 

49,054


51,845


215,901


226,697









 Operating income (loss) 

(6,888)


(23,677)


55,563


(37,610)









 Other income (expenses): 








 Interest income, net 

159


190


1,192


1,552

 Gain (loss) on sale of equity and other investments, net 

(216)


-


5,072


-

 Equity in net loss of Rhapsody investment 

(1,614)


(2,159)


(5,709)


(7,898)

 Other income (expense), net 

(433)


188


1,241


(473)









 Total other income (expense), net 

(2,104)


(1,781)


1,796


(6,819)









 Income (loss) before income taxes 

(8,992)


(25,458)


57,359


(44,429)

 Income tax (expense) benefit  

12,065


22,694


(12,518)


17,329









 Net income (loss) 

$   3,073


$ (2,764)


$   44,841


$ (27,100)









 Basic net income (loss) per share 

$     0.09


$    (0.08)


$       1.29


$      (0.79)

 Diluted net income (loss) per share 

$     0.09


$    (0.08)


$       1.28


$      (0.79)









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

35,250


34,258


34,873


34,185

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

35,450


34,258


35,122


34,185

















(A) On April 5, 2012, RealNetworks completed the sale of certain patents and other technology assets to Intel for a cash purchase of $120.0 million.

 RealNetworks, Inc. and Subsidiaries 

 Condensed Consolidated Balance Sheets 

 (Unaudited) 










 December 31, 


 December 31, 


2012


2011


 (in thousands) 

 ASSETS 





 Current assets: 




 Cash and cash equivalents  

$            163,198


$            106,333

 Short-term investments 

108,216


78,739

 Trade accounts receivable, net 

30,754


41,165

 Deferred costs, current portion 

825


1,424

 Prepaid expenses and other current assets 

19,871


21,902





 Total current assets 

322,864


249,563





 Equipment, software, and leasehold improvements, at cost: 



 Equipment and software 

98,041


104,352

 Leasehold improvements 

22,767


25,947

 Total equipment, software, and leasehold improvements 

120,808


130,299

 Less accumulated depreciation and amortization 

91,492


92,825





 Net equipment, software, and leasehold improvements 

29,316


37,474





 Restricted cash equivalents and investments 

10,000


10,168

 Equity method investments 

3,597


7,798

 Available for sale securities 

34,334


37,204

 Other assets 

3,153


2,954

 Deferred costs, non-current portion 

531


843

 Deferred tax assets, net, non-current portion 

4,911


18,419

 Other intangible assets, net 

3,275


7,169

 Goodwill 

6,309


6,198





 Total assets 

$            418,290


$            377,790





 LIABILITIES AND SHAREHOLDERS' EQUITY 





 Current liabilities: 




 Accounts payable 

$              19,013


$              17,151

 Accrued and other liabilities 

57,380


59,790

 Deferred revenue, current portion 

8,675


11,835





 Total current liabilities 

85,068


88,776





 Deferred revenue, non-current portion 

169


195

 Deferred rent 

2,250


2,944

 Deferred tax liabilities, net, non-current portion 

432


1,443

 Other long-term liabilities 

3,250


13,145





 Total liabilities 

91,169


106,503









 Shareholders' equity 

327,121


271,287





 Total liabilities and shareholders' equity  

$           418,290


$            377,790

 

 RealNetworks, Inc. and Subsidiaries 

 Condensed Consolidated Statements of Cash Flows 

 (Unaudited) 






 Years Ended December 31,  


2012


2011


 (in thousands) 





 Cash flows from operating activities: 




 Net income (loss) 

$                       44,841


$                     (27,100)

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




 Depreciation and amortization 

16,959


16,895

 Stock-based compensation 

8,123


11,747

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

2,509


(62)

 Equity in net loss of Rhapsody investment 

5,709


7,898

 Excess tax benefit from stock option exercises 

-


(74)

 Accrued loss (gain) on excess office facilities 

3,290


(646)

 Deferred income taxes, net 

20,324


(23,985)

 Gain on sale of patent and other technology assets, net of costs 

(116,353)


-

 Gain on sale of equity and other investments, net 

(5,072)


-

 Realized translation gain 

(1,966)


-

 Other 

-


114

 Net change in certain operating assets and liabilities 

(11,677)


14,505





 Net cash provided by (used in) operating activities 

(33,313)


(708)





 Cash flows from investing activities: 




 Purchases of equipment, software, and leasehold improvements 

(7,170)


(9,873)

 Proceeds from sale of patents and other technology assets, net of costs 

116,353


-

 Proceeds from sale of equity and other investments 

7,261


-

 Purchases of short-term investments 

(116,963)


(96,841)

 Proceeds from sales and maturities of short-term investments 

87,487


116,405

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

167


(179)

 Payment of acquisition costs, net of cash acquired 

-


(2,888)





 Net cash provided by (used in) investing activities 

87,135


6,624





 Cash flows from financing activities: 




 Proceeds from issuance of common stock (stock options and stock purchase plan) 

3,802


3,177

 Tax payments from shares withheld upon vesting of restricted stock 

(995)


-

 Excess tax benefit from stock option exercises 

-


74

 Payment of common stock cash dividend 

-


(136,793)





 Net cash provided by (used in) financing activities 

2,807


(133,542)





 Effect of exchange rate changes on cash and cash equivalents 

236


(2,059)





 Net increase (decrease) in cash and cash equivalents 

56,865


(129,685)





 Cash and cash equivalents, beginning of period 

106,333


236,018





 Cash and cash equivalents, end of period 

$                     163,198


$                     106,333

 

 RealNetworks, Inc. and Subsidiaries

 Supplemental Financial Information

 (Unaudited)














2012


 YTD


 Q4


 Q3


 Q2


 Q1




(in thousands)

 Net Revenue by Line of Business: 










 Core Products (A) 

$149,211


$39,186


$34,078


$38,250


$37,697

 Emerging Products (B) 

42,576


12,370


10,134


9,913


10,159

 Games (C)  

67,055


15,708


14,876


17,363


19,108

  Total net revenue 

$258,842


$67,264


$59,088


$65,526


$66,964











 Core Products Revenue by Product: 










 SaaS (D) 

$  90,239


$22,793


$20,697


$23,286


$23,463

 Systems Integration / Professional Services (E) 

2,933


1,295


247


965


426

 Technology Licensing (F) 

28,381


8,906


6,079


7,189


6,207

 Consumer Subscriptions (G) 

27,658


6,192


7,055


6,810


7,601

 Total Core Products net revenue 

$149,211


$39,186


$34,078


$38,250


$37,697











 Net Revenue by Geography: 










 United States 

$117,844


$28,315


$29,101


$28,614


$31,814

 Rest of world 

140,998


38,949


29,987


36,912


35,150

 Total net revenue 

$258,842


$67,264


$59,088


$65,526


$66,964











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










Addressable subscribers of mobile operators under contract (H)



675,000


700,000


725,000


725,000

SaaS subscribers (I)



27,450


26,500


30,600


30,500

Monthly SaaS ARPU (in cents) (J)



$    0.19


$    0.17


$    0.16


$    0.15

ICM delivered in billions (K)



171


173


162


166

Consumer subscribers (L)



300


350


350


400
























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 

$335,686


$80,219


$84,414


$83,752


$87,301











 Core Products Revenue by Product: 










 SaaS (D) 

$119,378


$28,255


$30,381


$30,216


$30,526

 Systems Integration / Professional Services (E) 

6,843


771


3,844


388


1,840

 Technology Licensing (F) 

28,429


9,246


6,250


6,508


6,425

 Consumer Subscriptions (G) 

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 (H)



725,000


700,000


775,000


775,000

SaaS subscribers (I)



30,050


34,000


34,550


35,900

Monthly SaaS ARPU (in cents) (J)



$    0.19


$    0.17


$    0.18


$    0.18

ICM delivered in billions (K)



165


162


157


151

Consumer subscribers (L)



425


500


475


500











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.







Core Products Revenue by Product:





(D) 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.







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







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







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







Product Metrics:






(H) 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.







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







(J) 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.







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







(L) Consumer subscribers primarily includes our SuperPass and GamePass products.

 

 RealNetworks, Inc. and Subsidiaries 

 Segment Results of Operations 

 (Unaudited) 














2012


2011


2012


2011



 Q4 


 Q3 


 Q4 


 YTD 


 YTD 



 (in thousands) 

Core Products





















Net revenue


$ 39,186


$ 34,078


$ 46,693


$149,211


$191,240

Cost of revenue


17,964


17,323


20,867


70,796


83,696

Impairment of deferred costs


-


-


19,329


-


19,329

Gross profit


21,222


16,755


6,497


78,415


88,215












Gross margin


54%


49%


14%


53%


46%












Operating expenses


14,888


15,575


17,230


64,960


75,188

Operating income (loss)  


$   6,334


$   1,180


$(10,733)


$  13,455


$  13,027












 Adjusted EBITDA  


$   9,244


$   3,736


$ 11,382


$  24,008


$  43,159












Emerging Products




















Net revenue


$ 12,370


$ 10,134


$ 11,974


$  42,576


$  46,590

Cost of revenue


2,019


2,041


3,448


7,965


11,879

Impairment of deferred costs


-


-


633


-


633

Gross profit


10,351


8,093


7,893


34,611


34,078












Gross margin


84%


80%


66%


81%


73%












Operating expenses


7,926


8,245


7,867


30,809


36,011

Operating income (loss)  


$   2,425


$     (152)


$       26


$    3,802


$   (1,933)












 Adjusted EBITDA  

$   2,732


$      158


$      986


$    4,910


$     (206)












Games 






















Net revenue


$ 15,708


$ 14,876


$ 21,552


$  67,055


$  97,856

Cost of revenue


4,444


4,936


6,875


21,613


30,646

Gross profit


11,264


9,940


14,677


45,442


67,210












Gross margin


72%


67%


68%


68%


69%












Operating expenses


11,633


11,648


14,449


49,804


60,633

Operating income (loss)  


$     (369)


$  (1,708)


$      228


$   (4,362)


$    6,577












 Adjusted EBITDA  

$      276


$     (894)


$      883


$   (1,561)


$    9,246












Corporate






















Net revenue


$        -


$        -


$        -


$         -


$         -

Cost of revenue


671


944


899


3,357


416

Gross profit


(671)


(944)


(899)


(3,357)


(416)












Gross margin


 N/A 


 N/A 


 N/A 


 N/A 


 N/A 












Gain on sale of patents and other
technology assets, net of costs

-


-


-


116,353


-

Operating expenses


14,607


21,551


12,299


70,328


54,865

Operating income (loss)  


$(15,278)


$(22,495)


$(13,198)


$  42,668


$ (55,281)












 Adjusted EBITDA  


$  (8,988)


$  (9,042)


$  (9,411)


$ (44,061)


$ (34,508)












Total






















Net revenue


$ 67,264


$ 59,088


$ 80,219


$258,842


$335,686

Cost of revenue


25,098


25,244


32,089


103,731


126,637

Impairment of deferred costs


-


-


19,962


-


19,962

Gross profit


42,166


33,844


28,168


155,111


189,087












Gross margin


63%


57%


35%


60%


56%












Gain on sale of patents and other
technology assets, net of costs

-


-


-


116,353


-

Operating expenses


49,054


57,019


51,845


215,901


226,697

Operating income (loss)  


$  (6,888)


$(23,175)


$(23,677)


$  55,563


$ (37,610)












 Adjusted EBITDA  


$   3,264


$  (6,042)


$   3,840


$ (16,704)


$  17,691












 

 RealNetworks, Inc. and Subsidiaries 

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

 (Unaudited) 














2012


2011


2012


2011



 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) 


$   6,334


$    1,180


$ (10,733)


$  13,455


$  13,027

Acquisitions related intangible asset amortization 


809


796


789


3,193


2,806

Depreciation and amortization 


2,101


1,760


1,997


7,360


7,997

Impairment of deferred costs


-


-


19,329


-


19,329

 Adjusted EBITDA  


$   9,244


$    3,736


$  11,382


$  24,008


$  43,159












Emerging Products















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












Operating income (loss)  


$   2,425


$      (152)


$         26


$   3,802


$   (1,933)

Acquisitions related intangible asset amortization 


62


62


79


282


211

Depreciation and amortization 


245


248


248


826


883

Impairment of deferred costs


-


-


633


-


633

 Adjusted EBITDA  


$   2,732


$       158


$       986


$   4,910


$      (206)












Games 















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












Operating income (loss)  


$     (369)


$   (1,708)


$       228


$  (4,362)


$    6,577

Acquisitions related intangible asset amortization 


-


171


229


587


996

Depreciation and amortization 


645


643


426


2,214


1,673

 Adjusted EBITDA  


$      276


$      (894)


$       883


$  (1,561)


$    9,246












Corporate















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












Operating income (loss)  


$ (15,278)


$ (22,495)


$ (13,198)


$  42,668


$ (55,281)

Other income (expense), net


(433)


248


188


1,241


(473)

Depreciation and amortization 


619


636


608


2,497


2,329

Restructuring and other charges


1,353


10,724


800


15,225


8,650

Stock-based compensation


1,704


1,602


2,663


7,371


10,913

Gain on sale of patents and other technology assets, net of costs


-


-


-


(116,353)


-

Loss (Gain) on excess office facilities


3,047


243


(472)


3,290


(646)

 Adjusted EBITDA  


$  (8,988)


$   (9,042)


$   (9,411)


$ (44,061)


$ (34,508)












 Total  















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















Operating income (loss)  


$  (6,888)


$ (23,175)


$ (23,677)


$  55,563


$ (37,610)

Other income (expense), net


(433)


248


188


1,241


(473)

Acquisitions related intangible asset amortization


871


1,029


1,097


4,062


4,013

Depreciation and amortization


3,610


3,287


3,279


12,897


12,882

Loss (Gain) on excess office facilities


3,047


243


(472)


3,290


(646)

Restructuring and other charges


1,353


10,724


800


15,225


8,650

Stock-based compensation


1,704


1,602


2,663


7,371


10,913

Impairment of deferred costs


-


-


19,962


-


19,962

Gain on sale of patents and other technology assets, net of costs


-


-


-


(116,353)


-

 Adjusted EBITDA  


$   3,264


$   (6,042)


$    3,840


$ (16,704)


$  17,691

SOURCE RealNetworks, Inc.



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