Realnetworks (RNWK) 8 Aug 202020 Q2 Earnings call transcript

Welcome to the RealNetworks Inc.

Second Quarter 2020 Earnings Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to hand the conference over to Kim Orlando. ahead. go Please

welcome results and RealNetworks' quarter second Thank call. to financial conference XXXX you the

Before growth, like liquidity regarding begin, affecting to initiatives invest and today expected on we profitability, I'd consolidated its are matters that strategy, products and a for and implement forward-looking, discussed businesses some and and as including future and conditions. statements basis efforts, RealNetworks' prospects expenses profitability in to forward-looking well operating include trends remind growth statements from Other financial benefits its and the plans as restructuring these company's other its the activities. you

from combining financial website. or Napster. and filings in corporate our Investor copy In Inc, cause these belief and a Relations can all addition, uncertainties these relate of most forth describe International which that our does factors of from statements statements other business that on and risks statements risks report those and could expectations XX-K than and Statements to forward-looking SEC contains materially risk facts statements, associated involve today's the results and our business and the Form XX-Q certain another our statements recent implications are as report. forward-looking in forward-looking express number Rhapsody the our We filings, other to and from SEC our with set XX% and Form of including with historical in risks consolidating A be section differ owned Napster. actual including obtained of call that

other to made or company of call, of today, as during undertakes a information, or revise expectations any made statements no X, August as any statements events Forward-looking XXXX. future reflect this new result reason. whether forward-looking RealNetworks' The update duty today

non-GAAP the will we financial will Regulation certain that under G. SEC's addition, be call on present measures this considered In

to to please the GAAP SEC to Glaser, be and press Vice the Judd, Lee, our Rob the made With are company's Judd information prepared With directly quarter and and of that, Form will financial at the today's and release detailed will Senior discuss today questions. I to of today, CFO. For the our included remarks, investor.realnetworks.com and submitted refer company to pleased Rob quarter can and the non-GAAP of measure, the XXXX. of financial reconciliations a of and financial your strategy provide corporate over President the After me tab. Rob most CEO; Judd the then in Financials in our answer the Chairman second will both comparable during review measure hand each progress dated website more under be X-K XXXX. on Rob. will second call found which

joining recognition a thanks highlight are our progress everyone which SAFR afternoon, our mobile Good I'll of facial and to and play second quarter results begin summary for on free and casual primary initiatives, games with platform. Kim. Thanks Real's today. us then I'll growth

challenging commercial working and Real Next, societal I to in environment. will present a address complex how needs, both is discuss and

pandemic. quarter with some strong our very yesterday. Finally, execution discuss pleased and performance global our the announced operational the I'll changes in significant financial we're with results, working we that first solid quarter delivered living Beginning we organizational full and during second of

closely our adjusted into growth managing into X% year-over-year of line quarter consecutive performed our Napster, while our revenue our putting fourth core negative, in our improvement businesses, when fuel growth the to quarter. our was million Our EBITDA our $XX.X of Adjusted marking year-over-year in revenue expenses. amount an was fourth loss QX has X.X narrowed We're consecutive also consolidated is revenue EBITDA. million, business. year-over-year, in appropriate business our quarter expectations overall going with quarter up internal of $XX.X million in Overall, of not including which

So go in few more financials just minutes. detail a in through the I will

the GameHouse platform growth a two GameHouse's quarter. our in play operates the segment they details & second strongest be videos. streaming been better. has from I'll Delicious with casual Judd Breakfast. our is RealAudio new primary Anniversary, Delicious people to the These search, industry. now driven and revenue the quarter progress to you business, find launching ago browse additional introduced popular The instantly products addition, so In year utilize StarSearch. public The spots response main Beginning AI elaborate vision provide computer media scenes two prior and products appear performing the StarSearch, turn extension streaming since can to consumer YouTube XXXX XXth commemorated of products our click continues provides clips safer today's download enables and In in identify as excited to such commercial games and positive. celebrities expected you this June. the with that sites one which games, of we world we will few figures make as free and to the video Anniversary our are of of conjunction our the RealPlayer Bed even and and Netflix. and and any boost with video initiatives. and under the XXXX, RealPlayer to in XXXX and a both growth in over by Streaming, continue people, GameHouse to our our business performed growing two identifies by in Initial first review minutes. stream has World period. easily success XX% where XX% browser quarter on brand. organizes instantly rest scenes. in be over power to in

play comes potential. has investments to today from realign to growth we game space gaming continue strongest to play our more to of games. focus estimate strategy, We XX% our generated which revenue in free free mobile believe than resource the We in that on

So now, industry our with business these is strongly trends. aligned

In SAFR, two of with platform. discussion pursued tracks vision to QX, turn computer SAFR. we our I'll Next,

markets. we're continuing and to our service SAFR and First, on security platform enhance primarily safety the focused world-class traditional

at which creating cameras integration of example platform of bring on focused is SAFR computer significantly. low-cost the and SAFR of our new the public security their launch Inside the runs We're new needs health and innovations to cost of the smart been SAFR see inside One delighted is total SAFR our cameras. Inside, vision significant devices, public trackers a of first China we've that use June component to and announce lowers Second, the to significant cameras. directly to progress of great run is leading directly of with a first directly in safety. of We the QXXXX. AXIS intersection opportunity AXIS manufacturer SAFR outside simplifies inside parts edge

second example our is progress - today. our it's one The earlier in SAFR first great just our we of mission, announced

Phase were announce is Innovation with direct We of in The this total Small Air to II June, we or that awarded Research almost SBIR $X contracts million. contracts value two to are honored Business United States Force.

them that will advance our full these safer. support hard deliver commercial armed proud forces, helping keeping mission of the work while to important US militaries. will We We're of our on for efforts, will the platform SAFR which capabilities

I continue demonstrated Regarding move safety, London our attend the face health and we had highly in chance progression based merchant where capability we CogX an of public the detection fast virtually at first work the to intersection public conference, In AI public fluid and important time. to the for SAFR's June, situation. mask

work products to needs bring to other and to to return safely possible near deliver expect as the other important We in help to during as society ongoing emergent market pandemic. future, this the and activities,

doing Real's our importance. about we communities, and customers complex our part talk remains circumstances, the to living. its address their of families, employees, the safety, health of want and I are in now Next which our utmost to The well-being

and We home. continue through new virtually is fluidly locations we we to primarily to relatively the in of vast work from low, staff, in a under the continue world majority case to QX. or the flow where pandemic either as work support Even our the control

this who way I'm so continues Our to new be all members, working. of to productivity and our adjusted strong effectively have team to grateful

previously furloughed living. the goals, these disproportionately impacted grant of are racism dedicated back need to said targeted help impact addressing Foundation data these the In also service special working RealNetwork's addressing inequality COVID-XX. to of to bring of the racial the also challenges QX, PPP color. these philanthropic of communities made we a $X Accordingly, to communities. dual the in and arm, particularly our government's are it grants communities Unfortunately, which we both and need that we use for are million in have showing to grateful and employees, stemming loan justice from program systemic and address our immediate work. We're - to them several to back now we As also US bring we help

health effect immediately efforts is also provide real goal Our and to to support and change. both lasting to

on change a to and President will member move to just announced has seven very as leaving yesterday. our years COO, of around who to and September team, recently been to like going and friendship. just huge Max take for truly his Pellegrini, I'd a successful ongoing to touch XXXX. in our organizational Italy grateful to Finally, back key leadership reinvent that most a for after return see been to leadership, go significant on Max any part we also be our I'm and Real Real challenge. of sorry to our Max effort has partnership back

been a serve has be and It able well. Mike bring will COO. to range new to step I record Max's Mike Ensing us wide into to we've of am Real Fortunately, returning as in our person serve business excellent delighted an topics. and President back will deep that him a role. to

closing, served dedication. short joining for of up In through team I'd CFO future. a well Mike in the a I'll over and a on for and all rest members go have This and numbers the thank work performance the senior beginning to very QX transition sets hard Interim foundation path with solid to like to financial In the turn four us for continued mid-April year. the Mike. and Judd team. a led to and call the time, be smooth now Mike Judd? of will Max work strong detail. of their in months we're operational know, to in our you us the relatively As our of built at between period Mike as

our performance. my by today, and In everyone. year-over-year afternoon are Please remarks variability discussion of followed our part quarter good not our segment implications. you to update to IP fluctuate on our of business mobile revenues. our licensing quarter-to-quarter. their and business, of games will timing Games businesses, the within the consumer continue and note and including a due can review more I first our media detailed Certain we periodic second will sequential consolidated apples-to-apples, of comparisons Rob Thanks But that the always results, business impacts

our Now $XX.X year in compared the Napster the our second results. $XX.X revenue Napster, second second $XX.X and for year Total compared $XX.X quarter turning $XX.X in revenue the quarter to period. prior revenue period. million million including When accounted from quarter prior improved $XX.X for million the in was not in X% prior the prior year-over-year. revenue $XX.X to million quarter million million of to and quarter million of

detail, particularly offset sales primarily to in Games for primarily was the year-over-year. and was Kontxt. products, mobile within PC of Looking products. Kontxt. the were in performance sequential and a products, the year-over-year to due sequentially segment legacy was payments, $XXX,XXX increase up by launches. due The was $XXX,XXX was This partially up partially by premium continuing driven to timing greater up was decline our of in primarily year-over-year, $XXX,XXX basis, Mobile on Consumer and revenue codec timing SAFR $X.X IP business, and revenue which sequentially decrease On higher fewer sequential offset and at sequential revenue legacy the in by shipments declines games, quarter renewals play by and offset due Media million $XXX,XXX free on and basis. primarily Services of down increase to in a shipments by basis decrease the $XXX,XXX these sequential game year-over-year. the down partially driven and our higher our year-over-year down strong the declines was a second offset continued declines was sales our by Year-over-year, legacy in results

quarter Media were sequentially year-over-year. for $X.X declining down was in received reduced subscribers. from related Consumer was in year-over-year million Games revenue Both offset second was Consolidated revenue to the termination sequential count, lower to to along down prior which $XXX,XXX $X.X Napster improvement from fee decreases compared with the to The gross is million, an revenue head and down primarily the higher and early prior quarter. lower Finally and million million sequential mainly due is partially the decline the from Napster the due profit segments, quarter up primarily to prior and Napster. period. by revenue $XX.X year the compared $X Year-over-year,

As to margin XX% prior and compared was XX% in prior a gross year quarter XX% percentage of revenue, in period. the the

the in and people-related a in loss diluted to prior to prior of decreases costs. core was million to EBITDA $X.X XX% in $X.XX loss profit share a million Napster million up Adjusted loss diluted a $X.XX of sequential $X.X or gross loss of or the period. from operating year to loss a of the period. net in from the million of minus were $XX.X $X.X Total and XX% per quarter prior per prior loss prior prior decrease in minus the Our from margin the Net in XX%, compared without year $XX.X share million million RealNetwork's down year attributable The year quarter lower or per compared in and were and second minus $X.X net million share for second and million, the period. quarter $X.X was $X.XX quarter quarter year-over-year prior related million the expenses a $X.X was quarter for period. prior $XX.X primarily a in diluted the the

Consumer Napster's in $X.X prior margin $XXX,XXX The to period. were prior The and margin improvements continued gain of of sequential free due The a of of and to loss the gain the $XXX,XXX prior reflects management. results loss play prior loss of was primarily $XXX,XXX $X.X performance mobile margin and contribution At year to expense costs. people-related $XXX,XXX, sequential was quarter ongoing of year-over-year $X expenses, $X.X margin a prior to revenue. a year-over-year Year-over-year, quarter decreased primarily declines margin the in decrease was prior in was year-over-year and expenses. games. the to loss Services period. the quarter strong in our a prior to million sequential in the million detail. $X.X contribution contribution Media to costs million to the loss to was compared and the lower in and and year a are period. to to result prior compared million and corporate lower compared to second million compared due period. contribution prior Turning due compared level, improvements increase prior year-over-year increased of operating corporate to Games segment were and Mobile the quarter compared costs. sequential primarily the million the lower of unallocated $XXX,XXX of quarter $X.X $XXX,XXX quarter in a $XXX,XXX The related a in flat year improvement contribution contribution the segment marketing period. relatively loss margin This of primarily segment restructuring lower due segment of our year expenses was $XXX,XXX people primarily more by as decreased year primarily by

operating quarter corporate expenses to second costs at of include Our $XXX,XXX the $XXX,XXX the prior in period. prior the restructuring quarter year level and in $XXX,XXX compared

was $XX to to At XXXX. equivalents turning had operations. related cash funding was cash received by Now Protection unrestricted primarily fund partially which slight to XXXX, sheet. Paycheck balance we The our June the million $XX.X compared in million and XX March offset Program, to pursuant cash XX used the our to at decrease

debt $X.X Our total long-term was XX million. at June

And strategy, revenue quarter profit core on financial resulting Two, traction in potential ongoing on the now given that, fourth adjusted our impact providing gross without employees we success. three, key be great health We on summary, operations, our XX% commitment commitment margin our progress the to including. not the to our improvement Napster. fourth we expense from their economy continued for year-over-year keeping solid needs, and our work. of make Thanks quarter our will - forward work, us margin its managing better important our in our the strong to to second to ahead, in Napster. EBITDA to we resulted strong future and We without positioned in will a with of year-over-year of XXXX. way its our in our consecutive to initiatives visibility, pandemic, call for loss, and RealNetworks' place and SAFR press open COVID-XX our XX% year-over-year pivoting our quarter ongoing management. Operator? questions. fourth believe guidance growth our with of due expansion and consecutive changing results, of to address Looking and quarter impact newly safe, will costs our all. stronger lack third wish strategy And for One, quarter broader for the we've exciting In which with productive business to growth the all societal

all I hope that pandemic. Well, to and forward sooner. talking and in hope you the look all And Thanks time, again. thank you us for is healthy staying months' continue if to joining to not do safe three during I today. everyone you so

That you for today. conclude participating. our conference does Thank for

disconnect. now may You