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RealNetworks Announces Fourth Quarter and Full-Year 2010 Results

SEATTLE Feb. 10, 2011 Dec. 31, 2010

Quarterly Highlights:

  • $97
  • $1 $0.01
  • $13.3 million

Full Year Highlights

  • $401.7 million
  • $3.0 million $0.05
  • $25.3 million
  • $334.3 million Dec. 31, 2010

Bob Kimball

“Earlier this week, we took the final major step to restructure RealNetworks,” Mr. Kimball added. “We believe we have created a stable and efficient base upon which we can build for growth.  We expect to utilize our strong consumer and mobile carrier distribution channels and innovative technologies and services to play a leading role in improving how people use and enjoy their digital media.”

Fourth Quarter Results

$97 $37.6 million $145.5 million March 31, 2010 $1.9 million $12.6 million $58.0 million $27.2 million

$1.2 million $0.01 $(17.8) million $(0.14) $13.3 million $8.5 million

 

Dec. 31, 2010 $334.3 million $329.2 million Sept. 30, 2010 $384.9 million Dec. 31, 2009 $51.0 million

Segment Operating Results

2010

2009

Sequential

Yr/Yr

Q4

Q3

Q4

Change

Change

(in thousands)

Revenue

Core Products

$ 58,030

$ 51,870

$   64,154

12%

-10%

Emerging Products

12,558

8,778

13,014

43%

-4%

Games

27,229

25,784

30,736

6%

-11%

Corporate

Total excluding Music

97,817

86,432

107,904

13%

-9%

Music

37,598

NM

Total  

$ 97,817

$ 86,432

$ 145,502

13%

-33%

Operating Income (loss)

Core Products

$ 12,500

$   9,868

$   20,257

27%

-38%

Emerging Products

4,020

1,643

2,483

145%

62%

Games

1,788

2,413

(910)

-26%

-296%

Corporate

(12,329)

(18,074)

(32,880)

-32%

-63%

Total excluding Music

5,979

(4,150)

(11,050)

-244%

-154%

Music

(10,500)

NM

Total  

$   5,979

$ (4,150)

$ (21,550)

-244%

-128%

Adjusted EBITDA

Core Products

$ 15,523

$ 13,309

$   24,332

17%

-36%

Emerging Products

4,109

1,771

2,579

132%

59%

Games

2,452

2,885

1,063

-15%

131%

Corporate

(8,811)

(12,265)

(23,837)

-28%

-63%

Total excluding Music

13,273

5,700

4,137

133%

221%

Music

4,388

NM

Total  

$ 13,273

$   5,700

$     8,525

133%

56%

Full Year Results

$366 $401.4 million $35.7 million $160.9 million $401.7 million $562.3 million $160.5 million $125.1 million $1.1 million $41.8 million $212.8 million $111.4 million

$3.0 million $0.05 $(216.8) million $(1.64) $(19.8) million $36.5 million $30 million $10.9 million $(175.6) million $(4.0) million

$25.3 million $36.5 million  

Real’s reported net income (loss) for the periods presented are based in part upon Real’s share of Rhapsody’s preliminary net loss, which remains subject to finalization.  These amounts could change if the final amount of Rhapsody’s net income or loss differs from the preliminary net loss.  Changes to these amounts, if any, will not impact Real’s cash position or the adjusted EBITDA results reported in this release.

Business Outlook

For the first quarter of 2011, Real expects aggregate revenue from its Core Products, Emerging Products and Games segments to decline by up to 17% sequentially, consistent with the declines in last year’s first quarter compared with the fourth quarter of 2009, and to decline by up to 13% year-over-year.  As a result of the decline in revenue, Real also expects adjusted EBITDA for the quarter to be less than the first quarter of last year.

Real’s outlook for the year anticipates seasonality in revenue and adjusted EBITDA, which typically declines from the fourth quarter to the first quarter, and increases through the year. Real has generated more than 70% of its annual adjusted EBITDA in the second half of the year in each of the past two years.  Real expects to see similar seasonal patterns for both revenue and adjusted EBITDA in 2011.

For the full year, Real anticipates a small decline in revenue compared with 2010, excluding Music, due primarily to the elimination or de-emphasis of products and services that generate low-profit or unprofitable revenue.  Excluding the revenue from these products and services, Real expects 2011 revenue to be essentially flat compared with 2010, excluding Music.  Real expects 2011 adjusted EBITDA and adjusted EBITDA margin to increase over 2010 due in large part to the restructuring, which has lowered the company’s overall cost structure.  

Feb. 10, 2011

Webcast and Conference Call Information

5:00 p.m. ET Feb. 10 http://investor.realnetworks.com

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: Fourth Quarter Earnings
Leader: Bob Kimball

Telephonic replay will be available until 8:00 p.m. ET, Feb. 24, 2011.
Replay dial in:
800-216-4453 Domestic
402-220-3881 International

RNWK-F

About RealNetworks:

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 December 31

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,

2010

2009

2010

2009

(in thousands, except per share data)

Net revenue

$               97,817

$               145,502

$             401,733

$               562,264

Cost of revenue

35,705

56,821

144,723

222,142

Gross profit

62,112

88,681

257,010

340,122

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