Entertainment Mélange

RealNetworks Announces First Quarter 2021 Financial Results

SEATTLE, May 12, 2021:  RealNetworks, Inc. (Nasdaq: RNWK), a leader in AI-powered digital media software and solutions, today announced its financial results* for the first quarter ended March 31, 2021.

  • Revenue of $15.9 million, driven by growth in AI-businesses offset by declines in some of the Company’s foundation businesses
  • 160% year-over-year revenue growth for SAFRTM driven by successes in the U.S. Federal market and in global commercial applications
  • Net loss of $(10.6) million; adjusted EBITDA loss of $(3.0) million marking the seventh consecutive quarter of year-over-year improvement; adjusted EBITDA of $(2.4) million excluding Scener
  • Completed public offering of common stock for approximately $20.3 million in net proceeds on April 29, 2021

Management Commentary

“2021 got off to a strong start at Real,” said Rob Glaser, Founder, Chairman, and Chief Executive Officer of RealNetworks. “We continued to progress in our strategic transformation to an AI-based company. Our first AI business, SAFR, grew approximately 160% year-over-year and our second AI business, KONTXT, grew 10% year-over-year. We told our AI story publicly for the first time to investors as part of our recent public offering, and as a result, raised approximately $20.3 million in net proceeds. These additional resources position us well to accelerate our AI efforts.”

First Quarter 2021 Financial Highlights from Continuing Operations

  • Revenue was $15.9 million, down 10% compared to $17.6 million in the prior quarter and down 6% compared to $16.8 million in the prior year period.
  • Revenue from key growth initiatives, SAFR and KONTXT, increased 160% and 10%, respectively, compared to the prior year period. SAFR and KONTXT together grew to represent 29% of total Mobile Services revenue for the first quarter of 2021.
  • Gross profit margin was 77%, unchanged from the prior quarter and up from 76% in the prior year period.
  • Operating expenses increased $10.3 million, or 127%, from the prior quarter and increased $0.9 million, or 5%, from the prior year period. Normalizing for certain one-time and non-cash items, operating expenses increased $1.2 million, or 8%, compared to the prior quarter and decreased $1.5 million, or 8%, from the prior year period. The increase in operating expenses compared to the fourth quarter of 2020 was primarily due to restructuring, fair value adjustments to the contingent consideration liability and higher stock-based compensation expenses.
  • Net loss attributable to RealNetworks was $(10.4) million, or $(0.27) per diluted share, compared to net income of $6.1 million, or $0.16 per diluted share, in the prior quarter and a net loss of $(4.6) million, or $(0.12) per diluted share, in the prior year period. Included in net loss attributable to RealNetworks in the first quarter of 2021 was a loss of $4.3 million from the fair value adjustment to the Company’s interest in MelodyVR stock (now Napster Group PLC (LSE: “NAPS”)) and $3.2 million of restructuring.
  • Adjusted EBITDA was a loss of $(3.0) million compared to a loss of $(0.9) million in the prior quarter and a loss of $(4.4) million in the prior year period. Adjusted EBITDA for the first quarter of 2021 excluding $600,000 of costs related to Scener was a loss of $(2.4) million.
  • At March 31, 2021, the Company had $17.0 million in unrestricted cash and cash equivalents compared to $23.9 million at December 31, 2020 and $19.0 million at March 31, 2020. In April 2021, the Company strengthened its balance sheet with the closing of an underwritten public offering that resulted in net proceeds to the Company of approximately $20.3 million.

Business Outlook

For the second quarter ending June 30, 2021, RealNetworks expects to achieve the following results from continuing operations:

  • Total revenue is expected to be in the range of $14.0 million to $15.5 million.
  • Adjusted EBITDA loss is expected to be in the range of $(6.0) million to $(4.5) million, including Scener expenses of up to $750,000, and in the range of $(5.25) million to $(3.75) million, excluding Scener (which is in the process of being spun out).

As announced as part of the Company’s April 2021 public offering, RealNetworks’ management currently expects 2021 will be an investment year that will position the Company for double-digit revenue growth in 2022 and 2023.

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.
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, and expectations and 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.

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Disclaimer: The following Press Release comes to you under a network of a strategic syndication partnership with PR Newswire. Prittle Prattle News takes no editorial responsibility for the same.

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