Last10K.com

Realnetworks Inc (RNWK) SEC Filing 8-K Material Event for the period ending Wednesday, November 3, 2021

Realnetworks Inc

CIK: 1046327 Ticker: RNWK

Exhibit 99.1
REALNETWORKS ANNOUNCES THIRD QUARTER 2021 FINANCIAL RESULTS


SEATTLE — November 3, 2021 - RealNetworks, Inc. (Nasdaq: RNWK), an emerging leader in AI-based software and solutions, today announced its financial results* for the third quarter ended September 30, 2021.

Revenue of $14.3 million, net loss attributable to RealNetworks of $(7.7) million and Adjusted EBITDA loss of $(2.7) million
Continued revenue growth year-over-year for the Company’s AI-based businesses with 124% growth in SAFRTM and 12% growth in KONTXT
Strong balance sheet with focus on targeted investments; unrestricted cash and cash equivalents of $29.0 million and no debt as of September 30, 2021
Hired a new Games CEO, Simonetta Lulli Gómez, in October

Management Commentary
“In the third quarter we continued to make solid progress in our AI-based businesses, SAFR and KONTXT. My Number Card in Japan is a great example of customers deploying SAFR for important mission-critical uses in 2021,” said Rob Glaser, Founder, Chairman, and Chief Executive Officer of RealNetworks.

Mr. Glaser continued, “We’re excited about our new GameHouse CEO, Simonetta Lulli Gómez. She’s a terrific leader with a track record of great results. We’re confident that, over time, Simonetta will reinvigorate and drive growth and success in our Games business."

Third quarter 2021 Financial Highlights from Continuing Operations
Revenue was $14.3 million, down 2% compared to $14.6 million in the prior quarter and down 13% compared to $16.6 million in the prior year period.
Revenue from key growth initiatives, SAFR and KONTXT, increased 124% and 12%, respectively, compared to the prior year period. SAFR and KONTXT together grew to represent 31% of total Mobile Services revenue for the third quarter of 2021.
Operating expenses increased $1.0 million, or 6%, from the prior quarter and $2.3 million, or 15%, from the prior year period. Included in this quarter’s operating expenses was a $2.0 million, one-time award modification in stock compensation.
Net loss from continuing operations attributable to RealNetworks was $(7.7) million, or $(0.16) per diluted share, compared to a net loss of $(1.3) million, or $(0.03) per diluted share, in the prior quarter and a net loss of $(3.2) million, or $(0.08) per diluted share, in the prior year period. Included in net loss was a $2.0 million one-time stock award modification and $0.7 million related to restructuring charges associated with Games. In addition, net loss included a $1.2 million loss associated with our Napster investment.
Adjusted EBITDA was a loss of $(2.7) million compared to a loss of $(4.3) million in the prior quarter and a loss of $(1.9) million in the prior year period.
At September 30, 2021, the Company had $29.0 million in unrestricted cash and cash equivalents compared to $29.9 million at June 30, 2021 and $23.9 million at December 31, 2020.


Business Outlook
For the fourth quarter ending December 31, 2021, RealNetworks expects to achieve the following results from continuing operations:

Total revenue is expected to be in the range of $12.5 million to $15.0 million.



Adjusted EBITDA loss is expected to be in the range of $(5.5) million to $(3.5) million.

2021 is a year of investment that will position the Company for double-digit revenue growth beginning in 2022, excluding Games from the calculations.

Conference Call and Webcast Information
RealNetworks will host a conference call today to review its results and discuss its performance at approximately 4:30 p.m. ET / 1:30 p.m. PT. Participants may join the conference call by dialing 1-877-451-6152 (United States) or 1-201-389-0879 (International). A telephonic replay of the call will also be available shortly after the completion of the call, until 11:59 pm ET on Wednesday, November 24, 2021, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number:
13724054.

A live webcast will be available on RealNetworks’ Investor Relations site under the Events & Presentations section at http://investor.realnetworks.com and will be archived online upon completion of the conference call.

About RealNetworks
Building on a rich history of digital media expertise and innovation, RealNetworks has created a new generation of products that employ best-in-class artificial intelligence and machine learning to enhance and secure our daily lives. Real's portfolio includes SAFR, the world's premier computer vision platform for live video; KONTXT, an industry leading NLP (Natural Language Processing) platform for text and multi-media analysis; and leveraging its digital media expertise, a mobile games business focused on the large free-to-play segment. For information about all of our products, visit www.realnetworks.com.

About Continuing and Discontinued Operations and Non-GAAP Financial Measures
*This release refers to “continuing” and “discontinued” operations due to the completion of the sale of Napster, RealNetworks’ 84%-owned subsidiary, to MelodyVR Group PLC, which closed on December 30, 2020. Effective as of the August 25, 2020 announcement date, Napster has been treated as a discontinued operation
for accounting and disclosure purposes; therefore, unless otherwise noted, results presented in this release relate to the continuing operations of RealNetworks, which exclude Napster.

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 contribution margin by reportable segment, which management believes provide investors with useful information.

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) from continuing operations to adjusted EBITDA and operating income (loss) by reportable segment to contribution margin by reportable segment.

The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the quarterly 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 our current expectations regarding our future growth, profitability, and market position, our financial condition and liquidity, our strategic focus and initiatives, product plans, agreements with partners, Scener’s current and future activities, and certain remaining contingencies relating to the sale of Napster. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-



looking statements. These statements reflect our expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results for RealNetworks, on a consolidated basis, to differ from the results predicted include: our ability to realize operating efficiencies, growth and other benefits from the implementation of our growth initiatives and restructuring efforts; cash usage and conservation, and the pursuit of additional funding sources; successful monetization of our products and services; competitive risks; issues with the use of AI; potential outcomes and effects of claims and legal proceedings; risks associated with key customer or strategic relationships and business acquisitions and dispositions; challenges caused by the COVID-19 pandemic; disruptions in the global financial markets; volatility of our stock price; material asset impairment; continued declines in subscription revenue; difficulty recruiting and retaining key personnel; regulatory, tax, accounting, and cross-border risks; and risks related to our governance structure. More information about potential risk factors that could affect our business and financial results is included in RealNetworks' latest annual report on Form 10-K for year ended December 31,
2020, 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 our financial statements and forward- looking financial guidance requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. RealNetworks assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

For More Information:
Investor Relations for RealNetworks
Brian M. Prenoveau, CFA
MZ North America
561-489-5315
IR@realnetworks.com
RNWK-F






RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Ended September 30,Nine Months Ended September 30,
2021202020212020
 (in thousands, except per share data)
 Net revenue$14,332 $16,554 $44,781 $50,461 
 Cost of revenue3,119 4,062 10,370 12,429 
           Gross profit11,213 12,492 34,411 38,032 
 Operating expenses:
       Research and development5,250 5,781 17,818 18,375 
       Sales and marketing7,177 5,130 17,573 15,969 
       General and administrative4,228 4,124 13,502 13,263 
Fair value adjustments to contingent consideration liability— — (1,040)(200)
       Restructuring and other charges1,017 307 4,906 1,097 
           Total operating expenses17,672 15,342 52,759 48,504 
 Operating loss(6,459)(2,850)(18,348)(10,472)
 Other income (expenses):
       Interest expense(27)(7)(146)(12)
       Interest income27 31 
       Gain on forgiveness of Paycheck Protection Program loan— — 2,897 — 
       Loss on equity and other investments, net(1,229)(37)(6,070)(90)
       Other income (expense), net46 (104)2,066 63 
           Total other income (expenses), net(1,203)(142)(1,226)(8)
Loss from continuing operations before income taxes(7,662)(2,992)(19,574)(10,480)
 Income tax expense316 133 606 
Net loss from continuing operations(7,668)(3,308)(19,707)(11,086)
Net loss from discontinued operations, net of tax— (1)— (2,466)
Net loss(7,668)(3,309)(19,707)(13,552)
Net loss attributable to noncontrolling interests of continuing operations— (77)(244)(196)
Net income (loss) attributable to noncontrolling interests of discontinued operations— — (364)
Net loss attributable to RealNetworks$(7,668)$(3,238)$(19,463)$(12,992)
Net loss from continuing operations attributable to RealNetworks$(7,668)$(3,231)$(19,463)$(10,890)
Net loss from discontinued operations attributable to RealNetworks— (7)— (2,102)
Net loss attributable to RealNetworks$(7,668)$(3,238)$(19,463)$(12,992)
Net loss per share attributable to RealNetworks- Basic:
       Continuing operations$(0.16)$(0.08)$(0.45)$(0.28)
       Discontinued operations— — — (0.06)
              Net loss per share attributable to RealNetworks- Basic$(0.16)$(0.08)$(0.45)$(0.34)
Net loss per share attributable to RealNetworks- Diluted:
       Continuing operations$(0.16)$(0.08)$(0.45)$(0.28)
       Discontinued operations— — — (0.06)
              Net loss per share attributable to RealNetworks- Diluted$(0.16)$(0.08)$(0.45)$(0.34)
 Shares used to compute basic net loss per share47,055 38,270 43,312 38,247 
 Shares used to compute diluted net loss per share47,055 38,270 43,312 38,247 





RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,
2021
December 31,
2020
 (in thousands)
ASSETS
 Current assets:
 Cash and cash equivalents$28,990 $23,940 
 Trade accounts receivable, net10,465 10,229 
 Deferred costs, current portion70 196 
 Investments2,758 9,965 
 Prepaid expenses and other current assets6,155 3,480 
 Total current assets48,438 47,810 
 Equipment and software29,634 30,726 
 Leasehold improvements2,757 2,776 
 Total equipment, software, and leasehold improvements32,391 33,502 
 Less accumulated depreciation and amortization30,937 31,631 
 Net equipment, software, and leasehold improvements1,454 1,871 
 Operating lease assets 4,478 7,937 
 Restricted cash equivalents 1,630 1,630 
 Other assets945 4,150 
 Deferred costs, non-current portion— 74 
 Deferred tax assets, net861 909 
 Goodwill17,073 17,375 
 Total assets$74,879 $81,756 
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
 Accounts payable$2,183 $2,750 
 Accrued and other current liabilities14,214 17,850 
 Deferred revenue, current portion2,762 2,122 
 Total current liabilities19,159 22,722 
 Deferred revenue, non-current portion270 45 
 Deferred tax liabilities, net1,068 1,129 
 Long-term lease liabilities5,354 6,837 
 Long-term debt— 2,895 
 Other long-term liabilities718 2,241 
 Total liabilities26,569 35,869 
 Total shareholders' equity48,310 46,149 
Noncontrolling interests— (262)
 Total equity48,310 45,887 
 Total liabilities and equity$74,879 $81,756 




RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
20212020
 (in thousands)
Cash flows from operating activities:
Net loss from continuing operations$(19,707)$(11,086)
Adjustment to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation and amortization600 697 
Stock-based compensation3,789 1,093 
Loss on equity and other investments, net6,070 90 
Loss on impairment of operating lease assets2,461 — 
Foreign currency (gain) loss(62)25 
Fair value adjustments to contingent consideration liability(1,040)(200)
Gain on deconsolidation of subsidiary(1,961)— 
Gain on forgiveness of Paycheck Protection Program loan(2,897)— 
Net change in certain operating assets and liabilities1,331 (652)
Net cash used in operating activities - continuing operations(11,416)(10,033)
Net cash used in operating activities - discontinued operations— (4,086)
Net cash used in operating activities(11,416)(14,119)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements(280)(261)
Deconsolidation of subsidiary, net(836)— 
Net cash used in investing activities - continuing operations(1,116)(261)
Net cash used in investing activities - discontinued operations— (192)
Net cash used in investing activities(1,116)(453)
Cash flows from financing activities:
Proceeds from issuance of common stock (stock options)534 — 
Proceeds from issuance of preferred stock— 10,000 
Proceeds from equity offering, net of costs20,114 — 
Tax payments from shares withheld upon vesting of restricted stock(186)(12)
Payment of contingent consideration liability(2,500)— 
Proceeds from long-term debt— 2,876 
Other financing activities— 2,106 
Net cash provided by financing activities - continuing operations17,962 14,970 
Net cash provided by financing activities - discontinued operations— 2,007 
Net cash provided by financing activities17,962 16,977 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(380)32 
Net increase in cash, cash equivalents and restricted cash5,050 2,437 
Cash, cash equivalents, and restricted cash, beginning of period25,570 22,179 
Cash, cash equivalents, and restricted cash, end of period30,620 24,616 
Less: Cash, cash equivalents and restricted cash from discontinued operations— 6,741 
Cash, cash equivalents, and restricted cash from continuing operations, end of period$30,620 $17,875 




RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
20212020
 Q3 Q2Q1 Q4 Q3 Q2 Q1
 (in thousands)
Net Revenue by Segment
Consumer Media (A)$2,763 $2,061 $3,309 $3,384 $2,543 $3,159 $3,495 
Mobile Services (B)5,772 6,356 5,980 7,338 6,400 6,461 6,690 
Games (C)5,797 6,144 6,599 6,879 7,611 7,465 6,637 
     Total net revenue$14,332 $14,561 $15,888 $17,601 $16,554 $17,085 $16,822 
Net Revenue by Product
Consumer Media
- Software License (D)$1,506 $841 $1,875 $1,593 $642 $1,702 $2,020 
- Subscription Services (E)779 793 818 867 892 898 929 
- Product Sales (F)270 330 438 625 193 261 222 
- Advertising & Other (G)208 97 178 299 816 298 324 
Mobile Services
- Software License (H)1,459 1,931 1,391 2,376 931 972 831 
- Subscription Services (I)4,313 4,425 4,589 4,962 5,469 5,489 5,859 
Games
- Subscription Services (J)2,361 2,431 2,528 2,589 2,705 2,730 2,770 
- Product Sales (K)2,612 2,830 3,163 3,315 3,874 3,712 2,978 
- Advertising & Other (L)824 883 908 975 1,032 1,023 889 
     Total net revenue$14,332 $14,561 $15,888 $17,601 $16,554 $17,085 $16,822 
Net Revenue by Geography
United States$9,227 $9,209 $9,932 $10,893 $11,855 $10,742 $10,214 
Rest of world5,105 5,352 5,956 6,708 4,699 6,343 6,608 
     Total net revenue$14,332 $14,561 $15,888 $17,601 $16,554 $17,085 $16,822 
Net Revenue by Segment
(A) The Consumer Media segment primarily includes revenue from the licensing of our portfolio of video codec technologies. Also included is RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software to consumers, and consumer subscriptions such as RealPlayer Plus and SuperPass.
(B) The Mobile Services segment primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.
(C) The Games segment primarily includes revenue from player purchases of in-game virtual goods within our free-to-play games, mobile and PC games, online games subscription services, and advertising on games sites and social network sites.
Net Revenue by Product
(D) Software licensing revenue within Consumer Media includes revenues from licenses of our video codec technologies.
(E) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.
(F) Product sales within Consumer Media includes sales of RealPlayer Plus software to consumers.
(G) Advertising & other revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.
(H) Software license revenue within Mobile Services includes revenue from our facial recognition platform, SAFR and our integrated RealTimes platform.
(I) Subscription services revenue within Mobile Services includes revenue from our messaging products, including Metcalf intercarrier messaging services and Kontxt, as well as ringback tones and related professional services provided to mobile carriers.
(J) Subscription services revenue within Games includes revenue from online games subscriptions.
(K) Product sales revenue within Games includes revenue from player purchases of in-game virtual goods, retail and wholesale games-related revenue, as well as sales of mobile games.
(L) Advertising & other revenue within Games includes advertising on games sites and social network sites.




RealNetworks, Inc. and Subsidiaries
Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin
(Unaudited)
2021202020212020
Q3Q2Q3YTDYTD
 (in thousands)
Consumer Media
Net revenue$2,763 $2,061 $2,543 $8,133 $9,197 
Cost of revenue418 497 593 1,393 1,723 
Gross profit2,345 1,564 1,950 6,740 7,474 
Gross margin85 %76 %77 %83 %81 %
Operating expenses1,495 2,332 2,092 6,028 6,754 
Operating income (loss), a GAAP measure$850 $(768)$(142)$712 $720 
Depreciation and amortization16 17 37 45 
Contribution margin, a non-GAAP measure$866 $(763)$(125)$749 $765 
Mobile Services
Net revenue$5,772 $6,356 $6,400 $18,108 $19,551 
Cost of revenue1,282 1,517 1,511 4,291 4,989 
Gross profit4,490 4,839 4,889 13,817 14,562 
Gross margin78 %76 %76 %76 %74 %
Operating expenses5,890 6,332 5,577 18,367 18,847 
Operating loss, a GAAP measure$(1,400)$(1,493)$(688)$(4,550)$(4,285)
Depreciation and amortization80 79 88 243 288 
Contribution margin, a non-GAAP measure$(1,320)$(1,414)$(600)$(4,307)$(3,997)
Games
Net revenue$5,797 $6,144 $7,611 $18,540 $21,713 
Cost of revenue1,414 1,552 1,955 4,671 5,707 
Gross profit4,383 4,592 5,656 13,869 16,006 
Gross margin76 %75 %74 %75 %74 %
Operating expenses4,844 4,849 5,152 14,791 15,051 
Operating income (loss), a GAAP measure$(461)$(257)$504 $(922)$955 
Depreciation and amortization78 81 71 235 275 
Contribution margin, a non-GAAP measure$(383)$(176)$575 $(687)$1,230 
Corporate
Cost of revenue$$$$15 $10 
Gross profit(5)(6)(3)(15)(10)
Gross marginN/AN/AN/AN/AN/A
Operating expenses5,443 3,170 2,521 13,573 7,852 
Operating loss, a GAAP measure$(5,448)$(3,176)$(2,524)$(13,588)$(7,862)
Other expense, net46 (45)(104)105 63 
Foreign currency (gain) loss(47)88 143 (62)25 
Depreciation and amortization29 28 28 85 89 
Fair value adjustments to contingent consideration liability— — — (1,040)(200)
Restructuring and other charges1,017 718 307 4,906 1,097 
Stock-based compensation2,518 435 390 3,789 1,093 
Contribution margin, a non-GAAP measure$(1,885)$(1,952)$(1,760)$(5,805)$(5,695)





RealNetworks, Inc. and Subsidiaries
Reconciliation of Net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure
(Unaudited)
2021202020212020
Q3Q2Q3 YTD YTD
(in thousands)
Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA:
Net loss from continuing operations$(7,668)$(1,485)$(3,308)$(19,707)$(11,086)
Income tax expense18 316 133 606 
Interest expense27 24 146 12 
Interest income(7)(7)(6)(27)(31)
Loss on equity and other investments, net1,229 569 37 6,070 90 
Foreign currency (gain) loss(47)88 143 (62)25 
Depreciation and amortization203 193 204 600 697 
Fair value adjustments to contingent consideration liability— — — (1,040)(200)
Gain on forgiveness of Paycheck Protection Program loan— (2,897)— (2,897)— 
Gain on deconsolidation of subsidiary— (1,961)— (1,961)— 
Restructuring and other charges1,017 718 307 4,906 1,097 
Stock-based compensation2,518 435 390 3,789 1,093 
   Adjusted EBITDA, a non-GAAP measure$(2,722)$(4,305)$(1,910)$(10,050)$(7,697)


View differences made from one to another to evaluate Realnetworks Inc's financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ)
Sample 10-K Year-over-Year (YoY) Comparison

Compare this 8-K Corporate News to its predecessor by reading our highlights to see what text and tables were  removed  ,   added    and   changed   by Realnetworks Inc.

Continue

Assess how Realnetworks Inc's management team is paid from their Annual Proxy

Definitive Proxy Statement (Form DEF 14A)
Screenshot example of actual Proxy Statement

Realnetworks Inc's Definitive Proxy Statement (Form DEF 14A) filed after their 2021 10-K Annual Report includes:

  • Voting Procedures
  • Board Members
  • Executive Team
  • Salaries, Bonuses, Perks
  • Peers / Competitors

Continue

SEC Filing Tools

Financial Statements, Disclosures and Schedules

Inside this 8-K Corporate News

Material Contracts, Statements, Certifications & more

Realnetworks Inc provided additional information to their SEC Filing as exhibits

Ticker: RNWK
CIK: 1046327
Form Type: 8-K Corporate News
Accession Number: 0001046327-21-000040
Submitted to the SEC: Wed Nov 03 2021 4:05:33 PM EST
Accepted by the SEC: Wed Nov 03 2021
Period: Wednesday, November 3, 2021
Industry: Computer Programming Services
Events:
  1. Earnings Release
  2. Financial Exhibit

External Resources:
Stock Quote
Social Media

Bookmark the Permalink:
https://last10k.com/sec-filings/rnwk/0001046327-21-000040.htm