RealNetworks Announces Third Quarter 2011 Results

Nov 03, 2011, 16:00 ET from RealNetworks, Inc.

SEATTLE, Nov. 3, 2011 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the third quarter ended Sept. 30, 2011.

Quarterly Highlights:

  • Revenue of $84.4 million
  • Net loss of $(5.2) million or $(0.15) per share
  • Adjusted EBITDA of $4.1 million
  • Cash and short term investments of $183.1 million as of Sept. 30, 2011
  • Dividend of $1.00 per share and 1-for-4 reverse stock split in third quarter

"During the quarter, we made progress on our key initiatives, including developing new products and renewing contracts for our SaaS business with mobile carriers, building our social games business and getting ready to launch a new version of RealPlayer in mid-November," said Mike Lunsford, interim CEO of RealNetworks.

"As we announced earlier this week, Thomas Nielsen will be joining us as CEO next week.  I look forward to assisting him in the coming months as he implements the new strategy and vision for the company," Lunsford continued.

Third Quarter Results

For the third quarter of 2011, revenue was $84.4 million, a decrease of 2% compared with the third quarter of 2010 and a sequential increase of less than 1% from the second quarter. Foreign currency exchange rate fluctuations positively affected third quarter revenue by about $4.4 million compared with the year-earlier quarter. Revenue trends in each of RealNetworks' businesses in the third quarter of 2011 compared with the year-earlier quarter were: a 23% increase in Emerging Products revenue to $10.8 million, a 2% decrease in Core Products revenue to $50.7 million, and an 11% decrease in Games revenue to $22.9 million.

Net loss for the third quarter of 2011 was $(5.2) million, or $(0.15) per share, compared with net income of $24.5 million, or $0.72 per share, in the third quarter of 2010.  Third quarter 2011 results included a $4.2 million benefit from a change in estimates in accrued royalties. Net income for the third quarter of 2010 included an income tax benefit of $33.9 million resulting primarily from a $30 million cash refund from the IRS. Adjusted EBITDA for the third quarter of 2011 was $4.1 million, compared with $5.7 million for the third 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 Sept 30, 2011, RealNetworks had $183.1 million in unrestricted cash, cash equivalents and short-term investments compared with $327.9 million at June 30, 2011. RealNetworks paid a special dividend of $1.00 per share, or a total of approximately $137 million, to shareholders in August of 2011. In addition, RealNetworks had $48.8 million in restricted cash and available-for-sale securities, not including its equity interest in the Rhapsody joint venture, at Sept. 30, 2011.  

Segment Operating Results

2011

2011

2010

Sequential  

Yr/Yr

Q3

Q2

Q3

Change

Change

(in thousands)

Revenue

Core Products

$ 50,705

$ 45,735

$ 51,870

11%

-2%

Emerging Products

10,764

12,717

8,778

-15%

23%

Games

22,945

25,300

25,784

-9%

-11%

Corporate

-

-

-

Total  

$ 84,414

$ 83,752

$ 86,432

1%

-2%

Operating Income (loss)

Core Products

$   8,815

$   7,208

$   9,868

22%

-11%

Emerging Products

(2,033)

370

1,643

-649%

-224%

Games

1,589

2,049

2,413

-22%

-34%

Corporate

(11,854)

(14,411)

(18,074)

-18%

-34%

Total  

$ (3,483)

$ (4,784)

$ (4,150)

-27%

-16%

Adjusted EBITDA

Core Products

$ 11,617

$   9,900

$ 13,309

17%

-13%

Emerging Products

(1,711)

707

1,771

-342%

-197%

Games

2,275

2,748

2,885

-17%

-21%

Corporate

(8,094)

(11,133)

(12,265)

-27%

-34%

Total  

$   4,087

$   2,222

$   5,700

84%

-28%

Business Outlook

For the fourth quarter of 2011, RealNetworks expects total revenue to decline sequentially and year-over-year.  RealNetworks expects revenue in Emerging Products to increase sequentially and be flat year-over-year; revenue in Core Products will decline sequentially and year-over-year; revenue in Games will be flat sequentially and decline year-over-year.  RealNetworks expects adjusted EBITDA for the fourth quarter to be positive but decline sequentially, which indicates a significant decline compared with year-ago fourth-quarter adjusted EBITDA.

For the full year, excluding Music, RealNetworks expects an approximate 9% decline in 2011 revenue compared with 2010, approximately one-third of which is due to the elimination or de-emphasis of products and services that generate low-profit or unprofitable revenue.  RealNetworks expects 2011 adjusted EBITDA and adjusted EBITDA margin to decline compared with 2010, in spite of cost savings from restructuring efforts, due largely to the projected revenue decline.

The foregoing forward-looking statements reflect RealNetworks' expectations as of Nov. 3, 2011.  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 third quarter at 5:00 p.m. ET on Nov. 3. 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:

800-857-5305 Domestic

773-681-5857 International

Passcode: Third Quarter

Leader: Mike Lunsford

Telephonic replay will be available until 8 p.m. ET, Nov. 17, 2011.

Replay dial in:

800-945-5760 Domestic

402-220-3547 International

For More Information:

Marj Charlier, RealNetworks, 206-892-6718 or mcharlier@real.com

About RealNetworks

RealNetworks creates innovative applications and services that make it easy for people to connect with and enjoy digital media. RealNetworks invented the streaming media category 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. Find RealNetworks corporate information at 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 third 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' expectations for future revenue, adjusted EBITDA and adjusted EBITDA margin.  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: 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 introduction and 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; fluctuations in foreign currencies; 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

Nine Months Ended

September 30,

September 30,

2011

2010

2011

2010

(in thousands, except per share data)

Net revenue

$ 84,414

$ 86,432

$ 255,467

$ 303,916

Cost of revenue

31,816

30,710

94,548

109,018

Gross profit

52,598

55,722

160,919

194,898

Operating expenses:

Research and development

16,496

19,517

54,200

81,775

Sales and marketing

28,625

26,321

85,958

91,530

Advertising with related party (A)

-

-

-

1,065

General and administrative

10,522

12,640

27,018

42,151

Restructuring and other charges

438

1,080

7,850

11,487

Loss (gain) on excess office facilities

-

314

(174)

7,396

Total operating expenses

56,081

59,872

174,852

235,404

Operating income (loss)

(3,483)

(4,150)

(13,933)

(40,506)

Other income (expenses):

Interest income, net

672

1,074

1,362

2,005

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

(1,440)

(6,142)

(5,739)

(11,569)

Loss on sale of equity investments, net

-

-

-

(50)

Gain on deconsolidation of Rhapsody  

-

-

-

10,929

Other income (expense), net

(228)

(206)

(661)

887

Total other income (expense), net

(996)

(5,274)

(5,038)

2,202

Income (loss) before income taxes

(4,479)

(9,424)

(18,971)

(38,304)

Income tax (expense) benefit  

(703)

33,947

(5,365)

37,238

Net income (loss)

(5,182)

24,523

(24,336)

(1,066)

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

-

-

-

2,910

Net income (loss) attributable to common shareholders

$ (5,182)

$ 24,523

$ (24,336)

$     1,844

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

$   (0.15)

$     0.72

$     (0.71)

$       0.16

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

$   (0.15)

$     0.71

$     (0.71)

$       0.16

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

34,199

33,905

34,081

33,826

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

34,199

34,442

34,081

34,558

(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)

September 30,

December 31,

2011

2010

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents  

$             102,811

$           236,018

Short-term investments

80,277

98,303

Trade accounts receivable, net

38,725

48,324

Deferred costs, current portion

6,948

9,173

Related party receivable - Rhapsody (A)

392

351

Prepaid expenses and other current assets

24,702

30,441

Total current assets

253,855

422,610

Equipment, software, and leasehold improvements, at cost:

Equipment and software

146,902

144,623

Leasehold improvements

25,534

25,367

Total equipment, software, and leasehold improvements

172,436

169,990

Less accumulated depreciation and amortization

132,321

126,619

Net equipment, software, and leasehold improvements

40,115

43,371

Restricted cash equivalents and investments

10,130

10,000

Equity method investments

9,956

15,486

Available for sale securities

38,667

27,541

Other assets

2,981

3,316

Deferred costs, non-current portion

15,018

18,401

Deferred tax assets, net, non-current portion

10,775

12,805

Other intangible assets, net

8,049

6,952

Goodwill

6,060

4,960

Total assets

$             395,606

$           565,442

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$               18,214

$             30,413

Accrued and other liabilities

70,107

85,702

Deferred revenue, current portion

14,724

19,036

Accrued loss on excess office facilities, current portion

1,053

1,144

Total current liabilities

104,098

136,295

Deferred revenue, non-current portion

398

460

Accrued loss on excess office facilities, non-current portion

2,458

3,380

Deferred rent

2,961

3,514

Deferred tax liabilities, net, non-current portion

1,790

1,049

Other long-term liabilities

10,813

7,999

Total liabilities

122,518

152,697

Shareholders' equity

273,088

412,745

Total liabilities and shareholders' equity  

$             395,606

$           565,442

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

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,  

2011

2010

(in thousands)

Cash flows from operating activities:

Net income (loss)

$     (24,336)

$   (1,066)

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

Depreciation and amortization

12,519

19,047

Stock-based compensation

9,086

10,280

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

81

155

Equity in net loss of Rhapsody and other equity method investments

5,739

11,569

Loss on sale of equity investment, net

-

50

Gain on deconsolidation of Rhapsody  

-

(10,929)

Excess tax benefit from stock option exercises

(57)

(48)

Accrued restructuring and other charges

-

997

Accrued loss (gain) on excess office facilities

(174)

6,108

Deferred income taxes, net

(429)

80

Other

(19)

153

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

(9,786)

(72,874)

Net cash used in operating activities

(7,376)

(36,478)

Cash flows from investing activities:

Purchases of equipment, software, and leasehold improvements

(6,013)

(11,415)

Purchases of short-term investments

(77,078)

(102,486)

Proceeds from sales and maturities of short-term investments

95,104

96,026

Payment of acquisition costs, net of cash acquired

(2,888)

(5,760)

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

(141)

3,700

Net cash provided by (used in) investing activities

8,984

(32,066)

Cash flows from financing activities:

Net proceeds from sales of common stock under employee stock purchase

plan and exercise of stock options

1,940

1,378

Net proceeds from sales of interest in Rhapsody

-

1,213

Excess tax benefit from stock option exercises

57

48

Common Stock cash dividend paid

(136,793)

-

Net cash (used in) provided by financing activities

(134,796)

2,639

Effect of exchange rate changes on cash and cash equivalents

(19)

3,770

Net increase (decrease) in cash and cash equivalents

(133,207)

(62,135)

Cash and cash equivalents, beginning of period

236,018

277,030

Cash and cash equivalents, end of period

$     102,811

$ 214,895

RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)

2011

2010

Q3

Q2

Q1

Q4

Q3

Q2

Q1

(in thousands)

Net Revenue by Line of Business:

Core Products (A)

$ 50,705

$ 45,735

$ 48,107

$ 58,030

$               51,870

$ 51,742

$   51,203

Emerging Products (B)

10,764

12,717

11,135

12,558

8,778

8,997

11,428

Games (C)  

22,945

25,300

28,059

27,229

25,784

28,145

30,236

Total net revenue excluding music

84,414

83,752

87,301

97,817

86,432

88,884

92,867

Music  (D)

-

-

-

-

-

-

35,733

 Total net revenue including music

$ 84,414

$ 83,752

$ 87,301

$ 97,817

$               86,432

$ 88,884

$ 128,600

Core Products Revenue by Product:

SaaS (E)

$ 30,381

$ 30,216

$ 30,526

$ 35,656

$               31,885

$ 32,388

$   33,614

Systems Integrations / Professional Services (F)

3,844

388

1,840

4,388

953

998

367

Technology Licensing (G)

6,250

6,508

6,425

7,632

7,473

7,736

7,910

Consumer Subscriptions (H)

10,230

8,623

9,316

10,354

11,559

10,620

9,312

Total Core Products net revenue

$ 50,705

$ 45,735

$ 48,107

$ 58,030

$               51,870

$ 51,742

$   51,203

Net Revenue by Geography:

United States

$ 38,969

$ 41,984

$ 44,469

$ 48,048

$               46,874

$ 48,351

$   84,550

Rest of world

45,445

41,768

42,832

49,769

39,558

40,533

44,050

Total net revenue

$ 84,414

$ 83,752

$ 87,301

$ 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

775,000

775,000

700,000

700,000

675,000

650,000

SaaS subscribers (J)

34,000

34,550

35,900

36,700

37,500

37,600

37,950

Monthly SaaS ARPU (in cents) (K)

$     0.17

$     0.18

$     0.18

$     0.20

$                   0.16

$     0.16

$       0.16

ICM delivered in billions (L)

162

157

151

136

134

128

120

Consumer subscribers(M)

500

475

500

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, and 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

Q3

Q2

Q3

YTD

YTD

(in thousands)

Core Products

Net revenue

$  50,705

$  45,735

$  51,870

$ 144,547

$ 154,815

Cost of revenue

22,492

19,353

22,230

62,829

58,054

Gross profit

28,213

26,382

29,640

81,718

96,761

Gross margin

56%

58%

57%

57%

63%

Operating expenses

19,398

19,174

19,772

57,958

66,366

Operating income (loss)  

$    8,815

$    7,208

$    9,868

$   23,760

$   30,395

Adjusted EBITDA  

$  11,617

$    9,900

$  13,309

$   31,777

$   40,783

Emerging Products

Net revenue

$  10,764

$  12,717

$    8,778

$   34,616

$   29,203

Cost of revenue

3,913

2,978

1,076

8,431

5,944

Gross profit

6,851

9,739

7,702

26,185

23,259

Gross margin

64%

77%

88%

76%

80%

Operating expenses

8,884

9,369

6,059

28,144

20,694

Operating income (loss)  

$   (2,033)

$       370

$    1,643

$   (1,959)

$     2,565

Adjusted EBITDA  

$   (1,711)

$       707

$    1,771

$   (1,192)

$     3,048

Games

Net revenue

$  22,945

$  25,300

$  25,784

$   76,304

$   84,165

Cost of revenue

7,197

8,040

6,279

23,771

21,210

Gross profit

15,748

17,260

19,505

52,533

62,955

Gross margin

69%

68%

76%

69%

75%

Operating expenses

14,159

15,211

17,092

46,184

60,695

Operating income (loss)  

$    1,589

$    2,049

$    2,413

$     6,349

$     2,260

Adjusted EBITDA  

$    2,275

$    2,748

$    2,885

$     8,363

$     6,518

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

(1,786)

295

1,125

(483)

1,946

Gross profit

1,786

(295)

(1,125)

483

(1,946)

Gross margin

N/A

N/A

N/A

N/A

N/A

Operating expenses

13,640

14,116

16,949

42,566

73,738

Operating income (loss)  

$ (11,854)

$ (14,411)

$ (18,074)

$ (42,083)

$ (75,684)

Adjusted EBITDA  

$   (8,094)

$ (11,133)

$ (12,265)

$ (25,097)

$ (42,534)

Total

Net revenue

$  84,414

$  83,752

$  86,432

$ 255,467

$ 303,916

Cost of revenue

31,816

30,666

30,710

94,548

109,018

Gross profit

52,598

53,086

55,722

160,919

194,898

Gross margin

62%

63%

64%

63%

64%

Operating expenses

56,081

57,870

59,872

174,852

235,404

Operating income (loss)  

$   (3,483)

$   (4,784)

$   (4,150)

$ (13,933)

$ (40,506)

Adjusted EBITDA  

$    4,087

$    2,222

$    5,700

$   13,851

$   12,029

RealNetworks, Inc. and Subsidiaries

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

(Unaudited)

2011

2010

2011

2010

Q3

Q2

Q3

YTD

YTD

Core Products

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

Operating income (loss)

$    8,815

$    7,208

$    9,868

$  23,760

$  30,395

Acquisitions related intangible asset amortization

833

710

1,059

2,017

3,286

Depreciation and amortization

1,969

1,982

2,382

6,000

7,102

Impairment of goodwill

-

-

-

-

-

Adjusted EBITDA  

$  11,617

$    9,900

$  13,309

$  31,777

$  40,783

Emerging Products

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

Operating income (loss)  

$   (2,033)

$       370

$    1,643

$   (1,959)

$    2,565

Acquisitions related intangible asset amortization

79

53

-

132

-

Depreciation and amortization

243

284

128

635

483

Impairment of goodwill

-

-

-

-

-

Adjusted EBITDA  

$   (1,711)

$       707

$    1,771

$   (1,192)

$    3,048

Games

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

Operating income (loss)  

$    1,589

$    2,049

$    2,413

$    6,349

$    2,260

Acquisitions related intangible asset amortization

257

256

126

767

247

Depreciation and amortization

429

443

346

1,247

4,011

Impairment of goodwill

-

-

-

-

-

Adjusted EBITDA  

$    2,275

$    2,748

$    2,885

$    8,363

$    6,518

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

Impairment of goodwill

-

-

-

-

-

Adjusted EBITDA  

$          -

$          -

$          -

$          -

$    4,214

Corporate

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

Operating income (loss)  

$ (11,854)

$ (14,411)

$ (18,074)

$ (42,083)

$ (75,684)

Other income (expense), net

(228)

(311)

(206)

(661)

887

Depreciation and amortization

593

569

1,033

1,721

3,100

Restructuring and other charges

438

508

1,080

7,850

11,487

Stock-based compensation

2,957

2,686

3,588

8,250

10,280

Loss on excess office facilities

-

(174)

314

(174)

7,396

Adjusted EBITDA  

$   (8,094)

$ (11,133)

$ (12,265)

$ (25,097)

$ (42,534)

Total  

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

Operating income (loss)  

$   (3,483)

$   (4,784)

$   (4,150)

$ (13,933)

$ (40,506)

Net loss attributable to noncontrolling interest in Rhapsody

-

-

-

-

2,910

Other income (expense), net

(228)

(311)

(206)

(661)

887

Acquisitions related intangible asset amortization (A)

1,169

1,019

1,185

2,916

3,591

Depreciation and amortization (A)

3,234

3,278

3,889

9,603

15,386

Loss on excess office facilities

-

(174)

314

(174)

7,396

Pro forma gain on sale of interest in Rhapsody America

-

-

-

-

598

Restructuring and other charges

438

508

1,080

7,850

11,487

Stock-based compensation

2,957

2,686

3,588

8,250

10,280

Adjusted EBITDA  

$    4,087

$    2,222

$    5,700

$  13,851

$  12,029

(A)  Net of noncontrolling interest effect.

RealNetworks, Inc. and Subsidiaries 

Earnings Per Share Reconciliation

(Unaudited)

Quarters Ended

September 30,

Nine Months Ended

September 30,

2011

2010

2011

2010

(in thousands, except per share data)

Net income (loss) attributable to common shareholders

$ (5,182)

$ 24,523

$ (24,336)

$ 1,844

Less termination of MTVN's preferred return in Rhapsody  

-

-

-

3,700

Net income (loss) available to common shareholders

$ (5,182)

$ 24,523

$ (24,336)

$ 5,544

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

34,199

33,905

34,081

33,826

Dilutive stock options and restricted stock  

-

537

-

732

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

34,199

34,442

34,081

34,558

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

$   (0.15)

$     0.72

$     (0.71)

$   0.16

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

$   (0.15)

$     0.71

$     (0.71)

$   0.16

SOURCE RealNetworks, Inc.



RELATED LINKS

http://www.realnetworks.com