Realnetworks (RNWK) 10 Feb 222021 Q4 Earnings call transcript

Greetings. And welcome to the RealNetworks, Inc. Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded. I would now turn the conference over to your host Mr. Relations. Investor Prenoveau, Brian sir. you, Thank

may begin. You

And Thank and RealNetworks quarter to year you, XXXX Laura. full financial fourth call. welcome results conference

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

those from our Relations be other other of from from materially these website. than set and of risks XX-K, copy as in Rhapsody certain forward-looking in on cause reports. statements risk and and statements Statements business financing all the call operation to does our can number Effective future relate Napster and Form SEC in in to corporate for Form Senior Group today's as been XXXX, results obtained profitability Napster, and contains recent addition, of expectations of to describe been its our belief in including In to to activities. express statements differ and most the or forward-looking purposes, other presentation. comparable and and section the reports growth, historical that this have forward-looking relate involve and Inc., historical and statements a these International could SEC certain MelodyVR conform factors XX-Q a accounting recast A periods risks Inc., facts filings, discontinued forward-looking are We which sale the that Investor forth of our that actual disclosure and uncertainties filings plc to and including presented December that statements. has XXXX

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

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

Rob businesses. For over that, to comparable reconciliations our company's And financial of open of under financial which can After financial corporate Mike the non-GAAP CFO included detailed and will of hand Senior our to submitted Vice Ensing, today's more Christine call will Financials With most press please measure SEC CEO; will and release Mike will on be directly during the Glaser, prepared Chairman each investor.realnetworks.com will refer the I Christine Form GAAP on questions. at and results. update and the tab. the progress made the conclude with our website XXXX. we call of today, today to to X-K a more the detailed in Rob. remarks, review discuss in strategy company President COO; and to a the us both the the fourth Treasurer. Rob and quarter and are AI provide found dated then Real's President, With measure, information Chambers, the

thank topics. And Thanks, Brian. My three Good remarks today. afternoon, joining will on everyone. center you for us

our discuss XXXX I'll First, results.

Chambers finally, will about detailed will our the Ensing, our I'll thoughts baton then who some through plans to Mike, discuss I'll third overall our more it. and I'll go Mike Second, our and and pass onto AI-based discuss after KONTXT. initiatives, SAFR financials. share initiatives then revitalize in depth. AI the And Games And business, Christine

XXXX. First,

what XXXX we how set up perspective beyond. of do year. discussing I'll year for our back look compare on achieve to XXXX to my into the at year, a typically new start us hope the to I how going and like share by As at and previous beginning XXXX the I'd then results

Our these was total from is revenue in of XXXX of results XXXX. $XX.X cities. three tale a in million, $XX.X down million Inside

city SAFR how by by meaningfully, about our we've few growth hoped, was minutes. not and said, We'll just businesses, those AI SAFR. which growth fast That applying learnings learned XXXX as XX%. a as Our for grew KONTXT especially we this had was in what XX% and talk we're

was Our reboot Games. city

XX% While Games to Games had compared million, down XXXX was revenue $XX.X our over XXXX, grown XXXX, up $XX.X which in XX% XXXX. in to was million,

in change As XXXX minutes. discussed which unfolded, in I determined that I’ll to leadership make few Games, a a we needed

declined is financially of but contribute on the city home million the $XX from legacy Our as rest to of line. continued bottom to which the expected million, our businesses, $XX

continuing EBITDA, EBIDA was a Christine and EBITDA loss loss some a previous will comparing in will elements share when to compared of between the Our years. diluted two should million loss considered $X.XX adjusted net operations EPS explain the of million adjusted non-reoccurring bridge $X.XX from loss was of in per to compared year. loss the be year. per and share the that $XX.X XXXX discuss prior $X.X of

set minutes, have strong Concurrently, mentioned. strategic big million growth. Christine sheet financial our continue to rest Stepping We the continues debt. us discuss the up SAFR, results prospects. remain the of games. greater detail details, balance We with very no a business as and our and much manage initiatives, and of our on growth focus We'll to use be few we stability resources back profit. bullish $XX to a will KONTXT us these for three to I judiciously Real’s will for in to cash continued available in to future

new I current leadership sales up new our team excellent in very And of and put beyond. Our significant plan as is pipeline. is products our for games an and believe AI Games strong set lineup together will has XXXX growth that

approximately in growth into flat. together be topic, Games. we that achieve to my Taken and segues overall we This games XXXX, we believe second Games, digit will double is which excluding expect

to me make a through to XXXX. had Head did summer change. clear each became and had a consulting great Games we in as plan leadership leader, it us endorsed. Games. a a Simonetta mid-XXXX, October and to the need they we hit that of Then I we new ground that she process We the and team in fantastic We mentioned, other by started together found could, got would taken the Lulli. Simonetta Simonetta our that put rigorous search know Simonetta strongly new for strategy the has as of assignment appointed far business a I has running and to As

games. that less the in by growth market This months it's operational one and unfurls, down female is where and data App global ahead. Simonetta exists, Game gaming suggests discuss According represented market significantly on business As U.S. huge focus we has often female in women. female focus of the had of protagonists making result reflected for Canada, XX% players Similar significant XXXX She for created it stats that the significant we'll had options Australia. games XXX in women. gaming games the recent beyond. believe detail before expand it will players are of players in more themselves vitally untapped gamers than a for on and increase important. to are that in Germany, already where changes France, by doubling where can are top are is a Annie a study that in The Compare to differentiated with I while female and X% products interaction arrived. and

KONTXT. businesses, final SAFR, Now, few words on our my I move AI A topic. on to

our mentioned As grew in SAFR, computer XX% XXXX. XXXX vision over platform,

our access geographies. the initiatives hoped and minutes It's XXXX about will close our growth and friction. and than fit SAFR select a and this S&S Accordingly, about While great our it's specifically in with our the market. S&S where both more processing in least in it Federal a plan and focus SAFR XX% words in A We discuss selective safety where and was detail. for few and works KONTXT, Mike security sales to language natural the potential business. few growth see greatest In we on and a is in U.S KONTXT we've in the which globally, accelerated maturing minute. Mike retooled discuss had to will authentication, it's We've in us well we business more in opportunity progress more significant up product growth, a total learned our and That areas the made or value namely our line for XXXX, lumpy. dollars. in improving was in and sets focus product we lower believe depth growth other proposition beyond the control, said, in XXXX lot

to closing year world all a was year we've of as pandemic. Finally, whole, as a had words, the few challenging the logged a the second for just XXXX

partners ways to of stakeholders, stayed us. deeply and of millions lives, the saved remarkable lives. that, with who yet disrupted spite that's are end achieve me I'm our days turbulence the and hard foresee our customers, are focused vaccines and to the mic continued to to around all. excellence into I And work the all to pandemic putting for of While have Mike. they and not let ahead in us have brighter all employees, pass grateful

progress the I'd successes briefly most significantly we advanced In be our strategy group healthy Starting by in KONTXT. businesses, build XXXX. upon Rob. annual will to a and in we will two understanding and XXXX, fell partner product, in SAFR short discuss growth you, businesses, delivered with for better needs although made expectations. of SAFR like of and we gained customer shaping XX% our sales Thank our considered internal market XXXX AI-based

dimensions. During maintaining our accuracy the world, across and made several applications. significant our video size our advanced position algorithms reinforcing in advantages, speed for live real year The SAFR leadership we product progress while

embed effectively our our and a to solution. leverage flexible and standalone be hardware on on our customers ability easily product deployed chip giving We to continue SAFR to high-performance cost and popular allowing easily edge sets, software devices

enterprise event central face added have and archiving level server unlimited features registrations, administration. like We

different security. themselves level of to technologies from presentation two attacks Finally, developed we have our anti-spoofing of an structured protect liveness allow light technologies, and added These customers new types will for liveness. RGB

side access Looking we and control focus authentication forward, on on the business, of are increased use placing the cases. commercial

space Regarding directly it at application for control liveness recognition, products. of algorithm spoofing there seeking and and great operating market is and strong devices especially accurate, a a is being analytics making and in that large customers for growing need edge. compact, detection for face by to embed our access the provides biometric touchless differentiated valuable person-centric control, This fast, customer access

launching think customer solutions clear successes to in on access market to plan both we be products control we will building suite XXXX today. on space, we that other XXXX, authentication of authentication recognition end customers. differentiation During providers facial In the versus the products a provide will provide and

and space federal security mentioned, As in the to will markets continue focus in we the and business. and Rob our side commercial the geographic pursue hone of opportunities safety key

Regarding to evaluating facial the and Air processor. federal a U.S. of recognition we side the the on continue the XXXX, in Business safer quarter Force the with awarded for fourth of award last were Research of Small Innovation sensors being build the upon running unmanned Phase is will by SAFR, of an excess on X additional we used year. completed we $XXX,XXX a the to business, explore In The Award had end work XXXX. compact successes

analytics. and XXXX, us our were more identify provide face introduce and expand degradated In capabilities, X scenarios, comprehensive help new Phase detect we QX capabilities under that awarded increase to recognition more addition, during two will faces object SAFRs ability detection our

While Phase for Xs they relatively further in opportunities open small in are work XXXX. monetarily value, up

to to move path a We discussion our increased processing accelerate and growth XX% natural language of we believe platform. in KONTXT, I'll year-over-year a XXXX. have Now revenue

AI-based for voice calls, is delivering prior on facilitate based team help our improved our customers. As messaging services on services products focused to discussed and and

person It the in and a Americans estimated that to best Our for environment billion XX.X% product according SMS, Demand to X a is fell conditions; is one, customers. Spam of spam are omnichannel for Scam MMS will more we further for up XX.X%, for we phone more robust, in our XXXX. telecoms tools Truecaller's victim that increased channels sell mature the million XXXX, we industry KONTXT per expansion XX.X% daily from demand differentiated only AI-based three, two, The KONTXT. and the leverage federal growing. tools of XXXX an and month texts average regulatory and into. number tools product; believe report. that XXXX to filtering processed than $XX and three will was X.X% of In XX demand changing major reasons: scams accelerated XXXX, right in approximately enterprises receives more which means more We totaling and see is market filtering like regulation, messages billion deliver due growth to believe the sales

with our the front, to a On SMS on differentiators. set and scanning in-line product and spam includes now key MMS, support offering out new prevention long and code robo DLC, text, proven Building XX-digit missing of capabilities, core have expanding calling XX leveraging several detection developed omnichannel product blocking, voice capabilities, hashing we fraud while the several that's full our offering brand image and interconnect prevention.

great In classification, have continued AI both finally, to leveraging are fully our scalability products to tens ability product of messages with the platform labeling our ground or tremendous flexibility KONTXT the of examine of ability message addition, by up hybrid environments. process per we billions over for years day. our metadata, enhance to capability The with four self-service on-premise be differentiation. and cloud, to And both models, on truth, robust managed to in training deployed content differentiated of data our or suite

Communications side, a selling and Caller for the efforts UCaaS, also broadening the are our international Unified Service include as to continuing On CNAM, and our and of we buyers. carriers U.S. Name focus needs on

detail. changing in these the interest now are by that is this With that, trust matured of market needs by believe We will Christine discuss turn results enhance has increased types to product financial I years. and to customers. over our We in in and seeing the call through greater reputation Christine? the driven

first consolidated our discussion quarter detailed performance. will segment fourth In my of today, results, year more Thanks, business I Mike, remarks followed everyone. by full and review a afternoon, good and our

completed XX, to we half as financial XXXX. reminder, related a of XXXX, Scener Scener included in As the in of costs deconsolidation the June our as and not of results such second

$XX.X to our year. in million revenue to year results. $XX.X Total the was turning the million Now compared for prior

XXXX, in and to XXXX, increased year to revenue Games and of Games addition XX%, in from Foundation sales. than more IP and in increased our again, revenue year in our driven legacy the full tones decreased more new by $X.X In revenue in by million both offset PC grew our our AI The was by prior decrease from year-over-year. and $X.X was games. growth the million For to businesses. declines free-to-play ringback our the down XX% due by in year. AI growth KONTXT Media than revenue businesses Consumer business SAFR XXXX services decreased the $X.X business. offset our driven lumpiness approximately in compared our declines the was declines year primarily commercial year-over-year, was services mobile KONTXT business. year-over-year, due legacy million mobile declines for sales businesses,

$XX.X may progress profit compared segment million million in lower in call, prior direction discussed perspective driven business leadership the earlier was the growth the the a take still take can the decrease that $XX.X XXXX and we're Consolidated Rob by about game recognizing excited the while the revenue. As gross new in year, quarters. a in few revenue from to

$XX.X of of flat million loss and prior consideration. $X.X due percentage revenue, to operating in to to million related favorable gross value million favorable the in XX% in value compared in the to to our compared net the year. compared gross full adjustment Net was higher year. RealNetworks primarily This from million the a prior per share $X.XX a XXXX, or of fair compared were Total XXXX $XX.X million expenses XXXX. Napster was in increase the year. Operating due per the million contingent prior decline million to diluted $X.X was million and $XX.X loss to the the in As operations contingent continuing was or $X XXXX. to was million a adjustment to $X.X attributed $XX.X in $X.XX profit compared the loss million in consideration in to year $X.X diluted related acquisition XXXX the The benefit for share $X from adjustment fair XXXX margin

million the In value to net fair to XXXX million offset the was prior a gains a loan $X.X $XX.X million. included by non-cash net $X Napster's Scener loss, of to adjustment in in I net with $X.X on of a mentioned, addition items related million just XXXX $X.X a adjusted adjusted of compared and year. forgiveness to loss the gain EBITDA loss EBITDA the of PPP million was of stock,

the prior Turning last to quarter. million in and XX% XX% million fourth XX% and QX or the declined in $XX.X to XX% grew $XX.X $X.X sequentially. grew X% year $XX.X but significant million million or quarter. the Total revenue revenue SAFR a QX XX% $XXX,XXX year-over-year services sequentially. was year-over-year Mobile year, revenue decreased compared and year-over-year prior period lapping and sequentially. in KONTXT

A can quarter million the of a gain and be and quarter. of reconciliation net related of loss a fourth in net $X.X EBITDA the Media sequentially, year-over-year was Games was Our the compared $XXX,XXX the remaining $X.X declined release. million lumpiness or year in a period loss loss to full of $XXX,XXX a fourth million within XX% and legacy million and Adjusted million primarily year-over-year sales $X.X free-to-play business. segment X%. in in or to for games. declined the sequentially. On Consumer and due decreases this year-over-year decline of legacy press found and by quarter $X.X products XX% IP XX% prior quarter our declines our sequential Net or our to $X.X loss million basis, declined fourth or to were impacted year-over-year a EBITDA our in a $XXX,XXX Scener. sequential loss and was to for mobile prior due both adjusted $X.X

$X.X revenues $X.X And our subscribers of Games compared Mobile segment $X.X loss declines to in The the segment to year. prior businesses. prior year. of $X.X by declining drivers margin year-over-year Services of and segment due legacy detail. million driven million decline. contribution XXXX gain prior Now a from Media Consumer with revenue. margin primarily contribution turning lower segment compared year-over-year was of million year and the Decrease in more $X.X a primary a the primarily $X.X of full with timing million was million to IP in license compared Revenue to million fewer decreased contribution loss results revenue was our gain the change with year. in a the to of traffic margin in of a loss

Turning sheet. $XX.X on our in unrestricted and facility. balance credit revolving to had million XX, December compared cash no outstanding XXXX, borrowings XX, our $XX.X to At December We we no cash million debt and had at equivalents XXXX.

remains balance future sheet growth. to Our we'll for up us these strong, use and set resources judiciously

Now turning to our outlook.

to first be be revenue in in quarter million. $X currently XX, XXXX, million total of we the to range million $X.X ending the of and million range March the $XX expect to EBITDA $XX loss adjusted to For

QX believe be trough expect we'll open the on initiatives We revenue XXXX up achieving now will in We will business. a Games we growth for anticipate us for beyond. path the set growth undertook questions. and year this the Operator? a in double-digit towards excluding that, and call the year With XXXX,

Street of question Capital from [Operator Mark Instructions] the with Our first Markets. comes line Lake Argento

your You question. proceed may with

end It additional of of with with of like or touch versus of and some also applications. to thanks bigger bigger with projects terms I But additional have actual thought of in set like nuts particular solution seems kind of Christine, have it? into of working from potentially deployments channel. points in guys initiatives you AI municipality terms solutions Any the Rob, kind initial integrators, bigger to had both Hey bigger or full front other bigger in more bolts my the you a with hit projects types getting and guys targeting systems of could some the players solution, and and government NTT, segments, just it into starting more been taking behind DoCoMo markets seems getting lot in particular. to on like revenue be the have wanted for seem see conceptual involved, more Mike in other question. going kind success to that the

is I'd Mark. things, Well, within you. a your to few I good hope say It's talk world. well everything to

customers a access we But been AI and our federal going path globally. access we've in a mentioned which surveillance Security have I been – come the Mike through on focus deployment. actually focus what for globally, business on based many fertile probably terms is for As business control or for best around segments. us to we probably then many sale in see touched different engaging it and little that think of geographies on historically market the like geographies. about has still what business with control the definitely coming SAFR with they've think our in bit, in what both and be the serve world certain for on to and is to primary focusing we us and scaling Is I looks talk and us a that followed to

that's partial of question. So your answer sort to a

deal I on think deal think In have terms goal robust the to have we size, you size, a fair typically I to say a business that be would it's comment where pipeline. but of don't

small phase to instance initial headquarters. or a because before but on find branch work might laboratory. deployments, they're a U.S.-based, lot a people kind that trial some doing they because be week, You call they of which go in their They're was talked offices of like of with, about this they work first. I a they're with for operations the the primarily got doing they customer international some international of is experimenting

a there's see deployment that. definitely we with cycle good we're multiphase big customers for So and

number medium that on of larger add we Mike, to happy either aggregate are buying of what a a it's I if think customers we amount going big course. those, try opportunities, you to to of lots one. But make times, think want we're done very a whether anything? customers or we like persistent certain do its focus be straight small be to orders, deals. Sometimes verticals few large we placing go to We've all where and and

think I it, covers Rob. No, that

had you subquestions. other couple of Mark, a

wanted You you said to…

Yes.

know Just a talk little pivot the going of lot obviously But direction you just in over more progresses of in of year the in a you yourself provide lot I focusing how general terms on, us a probably social, said to give games, games visibility can a terms there's bit. on space. as market? M&A and activity just more of kind crowded differentiate Anything mobile, doing a more to in tough you there. any

Yes. Well, the dominant focus is mobile for sure.

So feel think that's free-to-play premium being in leverage to between segments. not a is to between change. has come Simonette And that and and I feel we've there come both synergy

So and premium some funnel. popular lots a from be downloads and we as can continue we side, that the have to operate very of came kind products which get on of

higher. all free-to-play grossing free-to-play are games, products much monetize There which biggest typical. are You which three the is games,

free-to-play is say reinvigorating XXXX. was business. And in the from time, of hit so our the we're dollar I'd we pocket fastest-growing and until going will the to make That committed Simonetta our growth business, think of to I games That growth. highly over up of probably, that come was air part most most

got In how it sort and been has it's that on better that I predictive terms in. and us is she share lot broad I've and think points rather experience of doing with mind talk approaching that did our we things a to she's I this the the is And say of of of to which But in about is will of of view very of pleased a be she games. very, then set disciplines than the in detail for put board the she I how initiative it, rigor going work.

because these but not to the platform understand difference she it because metrics to variable the also finance, cost she'd across also, you But rigorous and to that world, and are monetize businesses she a a knew you've businesses, these like where have even because daily many got monetization-type as the be they from highly very acquisition of per in differently. measure economies, So, measure Android the strong got out in you various cohorts an between user, geographies. look ideas geographies almost you've and to I engagement, has got and really in cohorts the the incredibly actually background comes turns platform iOS within lot it's the at revenue the various geographies in differences somewhat of way just

super but are then also business. a fun. interesting economically that financially make and you've games complicated And obviously, to got So, it's

So, at the of their are in books the consumers record numbers end categories. day, in these pocket voting with

all the of activity, right that to more You're a there buying means for it whatever it billion, activity that's of there. range is from think out $XX Microsoft lot business. the And has positive we food that certainly, of all because Activision been trying there inorganic interest way M&A across ends down buy the chain, is or to acquisitions at our

of lot a see in interest business. the we So,

of think we it. sort lot stand-alone it's in terms a go it. we we of with how shareholder long revitalize a get value a strategic as it term that in as described with asset. We've believers out there it's in strategic can We we it, Simonetta a leader it of and like And ways are of there's asset

her to leader, really going in give a before ground. opportunity and to decision an on bring want is tough I'm thing about make guessing But And to we're revitalize investors the that's I the focus the that first excited I'm everything super start primary the about first, to talking growth. progress The to in it. will also, we in new impatient is happen. making see be that dig

just Great. last And then question.

philosophically, a Just sheet. you decent got obviously, balance

thing sheet? is talk maybe guess value a could guys of the I think cash about the how opine just about I buy your stock of pretty consumption on I kind guess, just Thanks. enterprise even maybe about mode, In maybe do deploying is forward? about, being terms capital AI in small. some on, because M&A still you think augment games, balance a are maybe the their going buyer both But and third thoughts back capital to of you your capital know businesses you but or

Christine, or at you do and of Mike give on know. I'll don't then that. a to top cut I take want that,

Sure.

Yes.

I So, XXXX, just million talked we in in go are products like into as investments and about, as AI SAFR around we year with that $XX the we cash. and over ended my remarks, And in our we judiciously and allocating Mike focus the a KONTXT. of investment said remain

Yes, a bit Mark, around that. more just little

investments cash, our next we're So, AI-based then the with is focused open over we to are AI-based the But And regarding pretty on businesses. first businesses. always in things. making priority our year acquisitions, the

Mark. much Yes. I don't too add that, top of know can on if I

investments on products, those the the good make. return to all pretty that hands, to I customers' fair think in build is are on our going and to I say. to see job And put guess, them in to would pick assuming And a good prospect of are the people great return we that them products we're those. and the carefully, investments that to very based it's having people to products that choice that's pick But we people growth strong the sell those and are having our make a in right our I investing market say the to right position belief have sell make them right products, initiatives. that on for three

I Good luck. Thanks. appreciate the color.

Mark. Thanks

you. Thank

of end this Ladies turn Rob the to and for Glaser to back I would reached have Mr. gentlemen, session. closing remarks. we question-and-answer today's over like call

was everyone everybody’s this in healthy bet XXXX Well, sniffles a a than thing. in table early from as fully had more to my debilitating with and January well. operator. COVID I safe start, than it. It less hope recovered I and is a well, off and you, Thank

for everything most during well to et those cetera, that customers Again, stays to of partners, our done have hard our to day they hopefully, unusual hope heads on had help to and at thank all and So every and similar future possible. value years. healthy. experiences; team, have have had want I optimistic up the of through to stakeholders, I our remain this you working down trying couple We here everyone everybody make of have create go it and that

So, talking be thanks, you everyone. We'll to soon.

conference. today's concludes This

your of Enjoy day. you You participation. for may this disconnect lines Thank your rest your at time. the