Realnetworks (RNWK) 8-K Realnetworks Announces Fourth Quarter and Full Year 2017 Results

Exhibit 99.3

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited) (Recast)

	2017
	Q4			Q3				Q2			Q1
	(in thousands, except per share data)
Net revenue	$	18,865		$	18,557			$	21,605		$	19,691
Cost of revenue	4,965			5,343				6,287			6,569
Gross profit	13,900			13,214				15,318			13,122
Operating expenses:
Research and development	7,625			7,152				7,584			7,349
Sales and marketing	5,419			4,883				5,496			7,155
General and administrative	5,358			5,081				5,254			5,303
Restructuring and other charges	255			557				150			1,564
Total operating expenses	18,657			17,673				18,484			21,371
Operating income (loss)	(4,757		)	(4,459		)		(3,166		)	(8,249		)
Other income (expenses):							��
Interest income, net	83			116				109			128
Gain (loss) on investments, net	4,500			—				—			—
Equity in net loss of Rhapsody	(2,894		)	—				(349		)	(748		)
Other income (expense), net	(217		)	(50		)		(13		)	(226		)
Total other income (expense), net	1,472			66				(253		)	(846		)
Income (loss) from continuing operations before income taxes	(3,285		)	(4,393		)		(3,419		)	(9,095		)
Income tax expense (benefit)	(3,732		)	139				360			455
Net income (loss) from continuing operations	447			(4,532		)		(3,779		)	(9,550		)
Net income (loss) from discontinued operations, net of tax	392			198				393			126
Net income (loss)	$	839		$	(4,334	)		$	(3,386	)	$	(9,424	)
Net income (loss) per share - Basic:
Continuing operations	$	0.01		$	(0.12	)		$	(0.10	)	$	(0.26	)
Discontinued operations	0.01			—				0.01			0.01
Net income (loss) per share - Basic	$	0.02		$	(0.12	)		$	(0.09	)	$	(0.25	)
Net income (loss) per share - Diluted:
Continuing operations	$	0.01		$	(0.12	)		$	(0.10	)	$	(0.26	)
Discontinued operations	0.01			—				0.01			0.01
Net income (loss) per share - Diluted	$	0.02		$	(0.12	)		$	(0.09	)	$	(0.25	)
Shares used to compute basic net income (loss) per share	37,315			37,200				37,103			37,030
Shares used to compute diluted net income (loss) per share	37,383			37,200				37,103			37,030

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited) (Recast)

	2016
	Q4			Q3			Q2			Q1
	(in thousands, except per share data)
Net revenue	$	20,395		$	21,189		$	20,073		$	19,822
Cost of revenue	6,591			7,235			6,651			7,071
Gross profit	13,804			13,954			13,422			12,751
Operating expenses:
Research and development	6,738			6,699			7,167			9,319
Sales and marketing	7,451			7,183			7,749			9,225
General and administrative	6,035			7,086			6,217			8,077
Restructuring and other charges	192			499			413			385
Lease exit and related charges	48			1,233			127			831
Total operating expenses	20,464			22,700			21,673			27,837
Operating income (loss)	(6,660		)	(8,746		)	(8,251		)	(15,086		)
Other income (expenses):
Interest income, net	133			119			80			117
Gain (loss) on investments, net	2,495			6,021			(46		)	3
Equity in net loss of Rhapsody	(5,904		)	(233		)	(396		)	—
Other income (expense), net	(128		)	(243		)	15			(287		)
Total other income (expense), net	(3,404		)	5,664			(347		)	(167		)
Income (loss) from continuing operations before income taxes	(10,064		)	(3,082		)	(8,598		)	(15,253		)
Income tax expense (benefit)	139			252			228			157
Net income (loss) from continuing operations	(10,203		)	(3,334		)	(8,826		)	(15,410		)
Net income (loss) from discontinued operations, net of tax	227			278			479			239
Net income (loss)	$	(9,976	)	$	(3,056	)	$	(8,347	)	$	(15,171	)
Net income (loss) per share - Basic:
Continuing operations	$	(0.28	)	$	(0.09	)	$	(0.24	)	$	(0.42	)
Discontinued operations	0.01			0.01			0.01			—
Net income (loss) per share - Basic	$	(0.27	)	$	(0.08	)	$	(0.23	)	$	(0.42	)
Net income (loss) per share - Diluted:
Continuing operations	$	(0.28	)	$	(0.09	)	$	(0.24	)	$	(0.42	)
Discontinued operations	0.01			0.01			0.01			—
Net income (loss) per share - Diluted	$	(0.27	)	$	(0.08	)	$	(0.23	)	$	(0.42	)
Shares used to compute basic net income (loss) per share	37,042			36,805			36,755			36,520
Shares used to compute diluted net income (loss) per share	37,042			36,805			36,755			36,520

RealNetworks, Inc. and Subsidiaries

Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin

(Unaudited)

	2017															2016
	Q1			Q2			Q3			Q4			YTD			Q1			Q2			Q3			Q4			YTD
	(in thousands)															(in thousands)
Consumer Media
Net revenue	$	5,669		$	6,951		$	4,197		$	5,752		$	22,569		$	5,726		$	6,400		$	6,482		$	6,443		$	25,051
Cost of revenue	1,405			1,159			981			915			4,460			2,417			1,561			1,507			1,589			7,074
Gross profit	4,264			5,792			3,216			4,837			18,109			3,309			4,839			4,975			4,854			17,977
Gross margin	75		%	83		%	77		%	84		%	80		%	58		%	76		%	77		%	75		%	72		%
Operating expenses	4,010			3,730			3,217			3,573			14,530			5,376			4,293			4,271			4,459			18,399
Operating income (loss), a GAAP measure	$	254		$	2,062		$	(1	)	$	1,264		$	3,579		$	(2,067	)	$	546		$	704		$	395		$	(422	)
Depreciation and amortization	167			159			42			42			410			1,303			375			295			239			2,212
Contribution margin, a non-GAAP measure	$	421		$	2,221		$	41		$	1,306		$	3,989		$	(764	)	$	921		$	999		$	634		$	1,790
Mobile Services
Net revenue	$	8,199		$	7,720		$	7,678		$	7,155		$	30,752		$	8,057		$	7,636		$	7,821		$	7,775		$	31,289
Cost of revenue	3,190			2,426			2,134			2,271			10,021			2,816			3,357			3,521			2,912			12,606
Gross profit	5,009			5,294			5,544			4,884			20,731			5,241			4,279			4,300			4,863			18,683
Gross margin	61		%	69		%	72		%	68		%	67		%	65		%	56		%	55		%	63		%	60		%
Operating expenses	8,119			6,705			6,437			6,709			27,970			9,794			8,784			8,075			7,786			34,439
Operating income (loss), a GAAP measure	$	(3,110	)	$	(1,411	)	$	(893	)	$	(1,825	)	$	(7,239	)	$	(4,553	)	$	(4,505	)	$	(3,775	)	$	(2,923	)	$	(15,756	)
Acquisitions related intangible asset amortization	196			201			88			89			574			308			209			208			198			923
Depreciation and amortization	203			175			180			174			732			422			608			403			290			1,723
Contribution margin, a non-GAAP measure	$	(2,711	)	$	(1,035	)	$	(625	)	$	(1,562	)	$	(5,933	)	$	(3,823	)	$	(3,688	)	$	(3,164	)	$	(2,435	)	$	(13,110	)
Games
Net revenue	$	5,823		$	6,934		$	6,682		$	5,958		$	25,397		$	6,039		$	6,037		$	6,886		$	6,177		$	25,139
Cost of revenue	1,937			2,679			2,226			1,868			8,710			1,845			1,817			2,203			2,054			7,919
Gross profit	3,886			4,255			4,456			4,090			16,687			4,194			4,220			4,683			4,123			17,220
Gross margin	67		%	61		%	67		%	69		%	66		%	69		%	70		%	68		%	67		%	68		%
Operating expenses	4,947			5,090			5,071			5,293			20,401			5,295			4,725			4,649			4,975			19,644
Operating income (loss), a GAAP measure	$	(1,061	)	$	(835	)	$	(615	)	$	(1,203	)	$	(3,714	)	$	(1,101	)	$	(505	)	$	34		$	(852	)	$	(2,424	)
Acquisitions related intangible asset amortization	27			25			27			18			97			25			34			29			27			115
Depreciation and amortization	141			157			169			163			630			179			154			104			146			583
Contribution margin, a non-GAAP measure	$	(893	)	$	(653	)	$	(419	)	$	(1,022	)	$	(2,987	)	$	(897	)	$	(317	)	$	167		$	(679	)	$	(1,726	)
Corporate
Cost of revenue	37			23			2			(89		)	(27		)	(7		)	(84		)	4			36			(51		)
Gross profit	(37		)	(23		)	(2		)	89			27			7			84			(4		)	(36		)	51
Gross margin	N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A
Operating expenses	4,295			2,959			2,948			3,082			13,284			7,372			3,871			5,705			3,244			20,192
Operating income (loss), a GAAP measure	$	(4,332	)	$	(2,982	)	$	(2,950	)	$	(2,993	)	$	(13,257	)	$	(7,365	)	$	(3,787	)	$	(5,709	)	$	(3,280	)	$	(20,141	)
Other income (expense), net	(226		)	(13		)	(50		)	(217		)	(506		)	(287		)	15			(243		)	(128		)	(643		)
Depreciation and amortization	187			119			139			48			493			361			246			634			260			1,501
Restructuring and other charges	1,564			150			557			255			2,526			385			413			499			192			1,489
Stock-based compensation	1,434			863			748			630			3,675			3,171			608			778			867			5,424
Lease exit and related charges	—			—			—			—			—			831			127			1,233			48			2,239
Contribution margin, a non-GAAP measure	$	(1,373	)	$	(1,863	)	$	(1,556	)	$	(2,277	)	$	(7,069	)	$	(2,904	)	$	(2,378	)	$	(2,808	)	$	(2,041	)	$	(10,131	)

RealNetworks, Inc. and Subsidiaries

Reconciliation of Net income (loss) from continuing operations to adjusted EBITDA, a non-GAAP measure

(Unaudited)

	2017															2016
	Q1			Q2			Q3			Q4			YTD			Q1			Q2			Q3			Q4			YTD
	(in thousands)															(in thousands)
Reconciliation of GAAP Net income (loss) from continuing operations to adjusted EBITDA:
Net income (loss) from continuing operations	$	(9,550	)	$	(3,779	)	$	(4,532	)	$	447		$	(17,414	)	$	(15,410	)	$	(8,826	)	$	(3,334	)	$	(10,203	)	$	(37,773	)
Income tax expense (benefit)	455			360			139			(3,732		)	(2,778		)	157			228			252			139			776
Interest income, net	(128		)	(109		)	(116		)	(83		)	(436		)	(117		)	(80		)	(119		)	(133		)	(449		)
(Gain) loss on investments, net	—			—			—			(4,500		)	(4,500		)	(3		)	46			(6,021		)	(2,495		)	(8,473		)
Equity in net loss of Rhapsody	748			349			—			2,894			3,991			—			396			233			5,904			6,533
Acquisitions related intangible asset amortization	223			226			115			107			671			333			243			237			225			1,038
Depreciation and amortization	698			610			530			427			2,265			2,265			1,383			1,436			935			6,019
Restructuring and other charges	1,564			150			557			255			2,526			385			413			499			192			1,489
Stock-based compensation	1,434			863			748			630			3,675			3,171			608			778			867			5,424
Lease exit and related charges, net of sublease income	—			—			—			—			—			831			127			1,233			48			2,239
Adjusted EBITDA, a non-GAAP measure	$	(4,556	)	$	(1,330	)	$	(2,559	)	$	(3,555	)	$	(12,000	)	$	(8,388	)	$	(5,462	)	$	(4,806	)	$	(4,521	)	$	(23,177	)