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RealNetworks Announces Fourth Quarter and Full-Year 2011 Results Feb 15, 2012 (03:02 PM EST)
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 positivelyaffected 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 at5:00 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
(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:
