Item 2.02 Results of Operations and Financial Condition.
This financial information is preliminary, has been prepared by, and is the responsibility of, our management, and is subject to change in connection with the completion of the Company’s financial statements for the quarter ended March 31, 2021, and the year ended December 31, 2021, as well as the fiscal years ended December 31, 2022 and 2023. In addition, the Company’s independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to this unaudited preliminary financial information and does not express an opinion or any other form of assurance with respect thereto. Accordingly, you should not place undue reliance on this information. Additional information and disclosures would be required for a more complete understanding of the Company’s financial condition, liquidity and results of operations as of March 31, 2021, December 31, 2021, December 31, 2022, and December 31, 2023.
While RealNetworks, Inc. (the “Company” or “RealNetworks”) has not finalized its full financial results as of and for the quarter ended March 31, 2021, the Company expects to report total revenue for the three months ended March 31, 2021 to be between $15.7 million and $15.9 million, and expects to report that adjusted EBITDA loss will be an improvement over the Company’s first quarter 2020 adjusted EBITDA loss but a greater loss than the Company’s fourth quarter 2020 adjusted EBITDA loss.
In the Company’s Mobile Services segment, for the quarter ended March 31, 2021, it expects to report revenue from the SAFR business growing 160% and from the Kontxt business growing 10% compared to the prior-year quarter with increases from its growth businesses offsetting lower revenue from the ringback tones business. Moreover, the Company expects SAFR and Kontxt revenue as a percentage of Mobile Services revenue to grow to 29% for the first quarter of 2021. The Company expects to report revenue for the quarter ended March 31, 2021 from the Consumer Media segment and Games segment as being relatively flat when compared to the prior-year quarter. In the Games segment, the Company expects revenue growth quarter over quarter related to its free-to-play business to be offset by revenue declines in its classic games business.
Further, the Company expects full fiscal year 2021 revenue to be relatively flat when compared to revenue reported for the fiscal year ended December 31, 2020. The Company expects meaningful, double-digit revenue growth in fiscal year 2022 and fiscal year 2023 driven by the Company’s artificial intelligence-focused products, SAFR and Kontxt, as well as its Games business. The Company further expects that adjusted EBITDA losses for the full fiscal year 2021 will be greater than the full fiscal year 2020 adjusted EBITDA, as the Company invests in 2021 in its growth initiatives.
Adjusted EBITDA is a non-GAAP measure, which the Company calculates as GAAP net income (loss) including noncontrolling interests and excludes the impact of the following: interest income and interest expense; income tax expense; (gain) loss on equity and other investments, net; foreign currency (gain) loss; depreciation and amortization; fair value adjustments to contingent consideration liability; restructuring and other charges; and stock-based compensation.
Item 7.01 Regulation FD Disclosure.
Revenue from our SAFR business for the fiscal year ended December 31, 2020 grew by 169% over the prior year. SAFR’s total addressable market (TAM), based on a report by Memoori research, is estimated at a combined $27.2 billion for the access control and video surveillance markets in 2019 with projected compound annual growth rates (CAGR) of 8.5% and 13.3%, respectively, for the period from 2019 to 2024. Revenue from our Kontxt business for the fiscal year ended December 31, 2020 grew by 131% over the prior year. According to a report by Mordor Intelligence, Kontxt’s TAM was $10.7 billion in 2020 for the natural language processing market, with a projected CAGR of 26.8% for the period from 2021 to 2026. Our SAFR and Kontxt businesses are both accounted for within our Mobile Services segment. In fiscal year 2020, revenue from these two growth businesses comprised approximately 23% of total revenue for this segment, up from approximately 9% in the prior fiscal year. In 2019, based on the mobile gaming market, the GameHouse Original Stories’ TAM was $68.5 billion based on management estimates on industry data, with a projected CAGR of 11.3% from 2020 to 2022. In the last five years, our mobile games sales, including both our traditional mobile game subscriptions and free-to-play games, has had a 24% CAGR.
