Exhibit (c)(4)
Project Ryan PRELIMINARY DISCUSSION MATERIAL SFOR THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF REALNET WORKS,INC. MARCH 24,2022 | CONFIDENTIAL PRELIMINARY DRAFT SUBJECT TO FURTHER REVIEW
Preliminary Observations and Considerations Selected Company Observations ? SAFR, KONTXT, Foundation and Games generally characterized by discrete services, customers/end-users and development stages? Certain facilities and personnel shared across segments ? Corporate functions required to manage consolidated platform ? Profits from certain segments (Foundation) are used to finance investments in other segments (KONTXT, SAFR) Approach to Financial Analysis ? Selected Companies Approach ? Review of selected companies for each of SAFR, KONTXT, Foundation and Games? Emphasis on EV / Revenue multiples for LTM period and CY 2022 ? Discounted Cash Flow Approach ? Review of contributions of each of SAFR, KONTXT, Foundation and Games to projected cash flows and revenues ? Emphasis on consolidated DCF with “blended” discount rate and terminal multiple Considerations Subject to Continued Diligence ? Performance of Bird launch ? Developments related to SAFR federal contracts ? Performance of KONTXT and Games (particularly FTP titles development and roll-out) ? Opportunities to streamline G&A cost structure ? Additional detail on G&A allocations and NOLs ? Overall industry and market dynamics (i.e., impact of geopolitical events) EV refers to Enterprise Value; CY refers to Calendar Year; FTP refers to Free-to-Play; G&A refers to General & Administrative; LTM refers to Latest 12 Months; NOL refers to Net Operating Loss. Source: Selected Company Observations and Considerations Subject to Continued Diligence based on discussions with RealNetworks management. CONFIDENTIAL – PRELIMINARY DRAFT – SUBJECT TO FURTHER REVIEW
Selected Illustrative Sensitivity Information Note: The calculations and sensitivities shown are provided for illustrative purposes only, and are not intended to be indicative of or provide any conclusions regarding valuation. ? The sensitivity tables below show (i) implied enterprise value and (ii) the multiple of implied enterprise value to CY 2021 revenue, in each case across a range of illustrative stock prices and illustrative assumptions related to platform costs and required levels of investment Implied Baseline Business Enterprise Value Sensitivities (dollars in millions, except per share values) Illustrative Per Share Common Stock Price $51.3 $0.62 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.70 ¹ $0.0 $4.5 $12.0 $26.3 $40.7 $55.4 $70.4 $85.7 $101.0 $116.4 $128.6 / $10.0 $14.5 $22.0 $36.3 $50.7 $65.4 $80.4 $95.7 $111.0 $126.4 $138.6 Platform Costs Investment $20.0 $24.5 $32.0 $46.3 $60.7 $75.4 $90.4 $105.7 $121.0 $136.4 $148.6 $30.0 $34.5 $42.0 $56.3 $70.7 $85.4 $100.4 $115.7 $131.0 $146.4 $158.6 Implied Baseline Blended EV / CY 2021 Total Revenue2 Multiple Sensitivities (dollars in millions, except per share values) Illustrative Per Share Common Stock Price $0.62 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.70 $0.0 0.1x 0.2x 0.5x 0.7x 1.0x 1.2x 1.5x 1.7x 2.0x 2.2x / $10.0 0.2x 0.4x 0.6x 0.9x 1.1x 1.4x 1.6x 1.9x 2.2x 2.4x Platform Costs Investment¹ $20.0 0.4x 0.5x 0.8x 1.0x 1.3x 1.6x 1.8x 2.1x 2.3x 2.6x $30.0 0.6x 0.7x 1.0x 1.2x 1.5x 1.7x 2.0x 2.3x 2.5x 2.7x Illustrative range of per share common stock prices based on (i) closing price per share of $0.62 as of 3/22/22 and (ii) April 2021 follow-on offering price per share of $2.70 The implied enterprise value calculations in the sensitivity tables are based on the following3:? Cash and cash equivalents: ~$27.1 million4;? Scener investment: ~$2.2 million5;? Napster investment: ~$1.8 million5; ? An illustrative deduction to reflect platform costs and required level of investment1; and? (i) ~47.3 million shares of common stock outstanding6, (ii) ~8.1 million shares of Series B preferred stock outstanding7, (iii) ~6.5 million outstanding options to purchase shares of common stock (to the extent in the money, per the treasury method)7 and (iv) ~2.1 million non-vested restricted stock units7. 1. Informed by, among other things, cash and cash equivalents balance of ~$27.1 million as of 12/31/21. 2. Multiple sensitivity information reflects CY 2021 total revenue of ~$58.2 million. 3. In addition to items listed, reflects (i) no debt outstanding as of 12/31/21, per RealNetworks Annual Report on Form 10-K for the year ended 12/31/21 (the “2021 10-K”) and (ii) no discrete value ascribed to outstanding net operating loss carryforwards. 4. As of 12/31/21, per the 2021 10-K. 5. Reflects carrying values as of 12/31/21, per the 2021 10-K. 6. As of 2/17/22, per the 2021 10-K. 7. As of 12/31/21, per RealNetworks management. EV refers to Enterprise Value; CY refers to Calendar Year. Sources: RealNetworks management and public filings. CONFIDENTIAL – PRELIMINARY DRAFT – SUBJECT TO FURTHER REVIEW
Selected Historical Trading and Financial Performance Observations Historical Trading Observations (Since January 2020) 6-Month 3-Month 1-Month 20-Day 10-Day 5-Day 1-Day VWAP $1.11 $0.80 $0.59 $0.59 $0.56 $0.57 $0.61 Closing Stock Price ($) Daily Volume (millions) Q4 $7.00 CY20 30.0 Q3 Q1 $6.00 Q2 CY21 Q2 Q1 ?5.8%2 Q3 25.0 CY20 CY20 CY21 CY20 CY21 $5.00 Q4 6.53 mm3 ?1.7%2 20.0 2 2 CY21 ?18.4%2 ?19.0% ?9.0% $4.00 ?9.6%2 ?11.8%2 6.07 mm3 2 15.0 3 2.32 mm3 ?13.8% $3.00 3 4.28 mm3 1.60 mm 2.77 mm 1.90 mm3 10.0 $2.00 1.59 mm3 $1.00 Current Stock Price = $0.621 5.0 $0.00 0.0 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 Daily Trading Volume RealNetworks Inc. Stock Price Current Stock Price [1] 1-Week Stock Reaction [2] 1-Week Volume [3] Comparison of Reported Financials vs. Wall Street Estimates and Company Guidance4 (dollars in millions) CY 2020A CY 2021A Q3 Q4 Q1 Q2 Q3 Q4 Revenue Adj. EBITDA Revenue Adj. EBITDA Revenue Adj. EBITDA Revenue Adj. EBITDA Revenue Adj. EBITDA Revenue Adj. EBITDA Consensus Wall Street Estimate [5] NA NA NA NA $15.8 ($3.0) $15.0 ($5.3) $14.5 ($4.5) $14.3 ($5.1) Company Guidance [6] NA NA NA NA NA NA $14.0—$15.5 ($6.0)—($4.5) $13.5—$15.5 ($5.0)—($3.5) $12.5—$15.0 ($5.5)—($3.5) Reported Financials $16.6 ($1.9) $17.6 ($0.9) $15.9 ($3.0) $14.6 ($4.3) $14.3 ($2.7) $13.4 ($3.7) % Difference || Wall Street Estimate NA NA NA NA 0.6% NMF -2.7% NMF -1.4% NMF -6.3% NMF % Difference || Company Guidance Midpoint NA NA NA NA NA NA -1.0% NMF -1.4% NMF -2.5% NMF 1. Reflects closing price as of 3/22/22. 2. Refers to percentage change between closing share price immediately prior to reported earnings and closing share price 1-week after reporting earnings, per Capital IQ. 3. Refers to total volume 1-week after reporting earnings, per Capital IQ. 4. Quarters prior to Q3 CY 2020 not shown as figures reflect impact of subsequently divested Napster business. 5. Reflects consensus Bloomberg Wall Street analyst estimates for relevant financial metric immediately prior to reported earnings. Sole covering analyst Lake Street Capital Markets initiated coverage on 5/10/21. 6. RealNetworks did not provide management guidance for the periods Q2 CY 2020 to Q1 CY 2021. Management guidance reflects guidance provided in the immediately preceding quarter. A refers to Actual; Adj. EBITDA refers to Earnings Before Interest, Taxes, Depreciation and Amortization, adjusted for certain non-recurring items; CY refers to Calendar Year; NA refers to Not Available. NMF refers to not meaningful; mm refers to millions; Q refers to Quarter; VWAP refers to Volume-Weighted Average Price. Sources: Bloomberg, Capital IQ, RealNetworks management and public filings. 4 CONFIDENTIAL – PRELIMINARY DRAFT – SUBJECT TO FURTHER REVIEW
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