RNWK - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to RealNetworks Inc. Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to with conference Investor like host, to now Bainbridge Laura Relations. would turn over the your I Please go ahead.

Laura Bainbridge

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

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

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

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

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

For the for and as of will XXXX year hand in company’s are comparable included measures With of Cary please can Rob to the to progress dated to answer full well in financial the After as and Chairman website that, directly the call reconciliation company the Glaser, first as will information our more submitted of corporate well in financial our release X-K most measures, and and and financial will provide and to With the under I the Form a be today the prepared XXXX. GAAP what's the Rob outlook Information. the press me tab, Baker, CEO; each today’s SEC to be quarter remarks, non-GAAP refer found provide Rob. strategy which Rob Financial over made at discuss quarter CFO. XXXX today, both detailed on investor.realnetworks.com to our review come. preview then the as and will fourth Cary questions. pleased Cary

Robert Glaser

and Thanks, thanks joining afternoon, today. everyone Laura. Good us for

our We Napster. recent regarding a cover, to including lot have most announcement

in in ramp The growth revenue ways model our were, doubled whole, From which summarizing businesses. operating that where and I'll the objective. modest key C, this up We did by not very We're we EBITDA ownership a old A, counterbalanced I'll growth disappointment. XXXX We typically discuss reducing we Financially, better business set that our XXXX process structure miss next are main entered to reasons good not profitability. will where games. was out and of recent and portfolio subscription discipline was our in and maintained I'll review platform; XXXX in XXXX slippage to by and results was codec total our free-to-play B, disappointed message a expected and significant subscription new return initiatives; legacy slow margin OpEx much out for are in strategically. then year and and transaction in anti-spam rolling we do platform; about of grow our enhanced step initiatives; three initiatives, premium expense as We this and achieve expenses on a by recognition focus both As I close our XXXX, There track. video back mobile today. XX%. facial cost the in end, year-over-year. then look classification we generation at our models, XXXX. RMHD, business I a our Napster X% feel Kontxt, XXXX to in at SAFR, financially two equity standpoint our new were the game our Strategically free-to-play to

be. machine deliver SAFR AI for on scale. to would SAFR We school focus last opportunity of with both we strategies July exit promising, highly would proved a what transformative were namely as for with of and up growth hence to initiatives single which a into not specific all year we based which learning Facial that largest leverages to facial platform initiatives SAFR they with accurate as XXXX the focus. We and XXXX the stands Recognition. While announced safety. a know Accurate end horizontal going the which dual prospects did strong SAFR the be thought our having other at focus, Secure, clarity recognition these and

available we make and This through approach States both to every safety, would basic schools United served some SAFR of Regarding K-XX has a early customers us well. and Canada. the school for we version free very announced that

tremendous world, Associated U.S. also consistency major the across one well school with standpoint, NBC News, the coverage geographic in marketplace as to from fastest a some or Press Wired, very Fast customers, with Company, of have has received cases Journal, The in Science one the Institute NPR, most According Wall Street with We the the accurate SAFR and the more. National the greatest platform national ethnicities. many great has NIST, performed real of tests difference Technology attention the From satisfied received. a of SAFR amount the systems and of and systems been by use Government's systems technology it ranks of one

for Our opportunity. primary access market a SAFR commercial is which secure far thus been has very focus broad

very pipeline announced. SAFR. SAFR. are integrators to with work the with other large months one is include global of is us Japan; Seventh, customers yet Net partners and One, past both potential global in They integrators systems integrators access deploy systems have to that the and six customers happy our of up we've leading systems Brazil; and pipeline learnings said a deployment the integration process. who initial monitoring in major is signed haven’t signed, We one excellent three a solution that, provider Having over that but of Overall, opportunity for multistep our with the and

to XXXX focus SAFR next and SAFR the chance to it has into the growth to sure few we've think we Real's to Going number giving biggest focus over one the company. make business happen. that years decided want the of resource make our and that becomes We we're make

to messages. aggregators, classify classification initiatives and next traction. to fishing mobile spam machine route Our uses growth to networks messages. and information and other allows to and continues identify message remain This to intent our learning Kontxt prioritized important origin block network operators platform and intercarrier the and us. appropriately generation place build to Kontxt, anti-spamming

leading we a began with messaging went Kontxt trial our live a aggregator. and investment longstanding partner QX multi OpenMarket, Syniverse, with During

these RMHD, Our with in up we and chipsets, and highlights deepening effort fraud partners additional Chinese partners both partnership OpenMarket's signing XXXX. and ecosystem and to messaging with case the continue Kingdom. the see in for combined equipment relationships to built content on messaging the rolling our we Kontxt to of manufacturers. forward and OpenMarket, out which counter work our in In providers, announced QX, look United across identify network late We

with XXXX momentum final to version expect CIBN's planned of efforts combination with learned broadcaster subscription In on the bumpier be users. Our just CIBN most iOS, The QX app premium then to continues January Hearts premium our major mobile affiliate the news Mobile's the a year simultaneous popular games we stores purchases Doctors This hit premium first premium based revenue as has sales launched on sign device pivoted to our for individual new of a I fully is honing than transition the games mobile offerings. us China revenue are live we've and for and was in android. of the additional as Oath, starting XXXX titles, from of deploy China. in China. want to app game started experimentation is a live Stars China. for games. title to rolling [indiscernible] for partnership Stars premium mobile good and longer progress and focus particular, also RMHD our build we content XXXX. plan. RMHD to up its channels we're touch through streams disappointing on globally that to Chinese to out our app it broadcast a China foundation we we see broadcasters, In revenue. manufacturers we mobile is in in tremendous didn’t free-to-play In for for RMHD advertising, Medicine android was launched The all took our XXXX The title providers, and in amount still now in in free-to-play major

months. way roll games. step to in to it and early in become a bring has we've a figure this over would embrace. casual out second that the Free-to-play economic in expect back game We out Unlike really next test have globally model casual some consumers we model free-to-play mobile traditional to the game few tried a publishers, games way and to dominant markets

are past on Napster our XX%. consecutive While this pricing circumstances the the done income recent will partner phone job positive deal unusual The found minutes details generating Cary a the Real great have favorable has Napster approximately million in back We're of BXB our Columbus our streaming improving itself to to XXXX. financial quarters there which operating months, results our into turn Nova delighted Bill a a fully the Napster first more transaction. transaction months through that the both nine and operating service do, In six music over over we to $XX refocusing few results. I'll structure encouraging. of doubled dramatically to family. lot now about say in. the popular XX Patrizio's is more of Napster its welcome delivered to stake leadership Under early has income reflects

strategy Napster Napster's with its Directors, own Bill Bill serve Going independently remain will and to to as at collaboration Board Napster including look with Board continue I to helm CEO. continued will forward, his will continue of and team. forward and management as the team share close run who and Patrizio,

XXXX. in The promising significant Looking growth at [indiscernible]. better believe of Real future our Napster including important but future expected, initiatives, year our as is Combined for several Napster a prospects. whole, have significantly longer adds about especially since addition Real It's taken positioned along to that than full SAFR, million RealNetworks dimensions. revenue, our feel I optimistic over combined to been would scale I very with $XXX [indiscernible] return the

So with to our quarter that, detail. to in results fourth year greater discuss Cary over it turn Cary? full I'll and

Cary Baker

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

business periodic always new please apples-to-apples that standard sequential Before well not and quarter revenue quarter-to-quarter. business in Media are businesses, the our fluctuate our of first can mobile adoption variability into revenues part games IP of including the accounting results, diving Certain our the of the the within XXXX. year-over-year note licensing Games of our due as Consumer in to and as comparisons the

the continuing update fourth implications. were the short will and We to the X% quarter period. for Turing from million, $XX.X quarter revenue million year timing fall from in our guidance and down the operations, We was results our continue prior on prior $XX.X in $XX.X to impacts quarter. of these down revenue XX% million you disappointed to for their from

the to relative guidance the later mobile segment games shortfall games As and releases forecasted discuss I to business. our will related than in was the primarily later, our

embedded Media decline $XXX,XXX basis and Consumer revenue codec primarily $X.X at $XXX,XXX the from in quarter Looking the product. business. codec the prior sequential quarter. and sequentially the a than a the revenue shipped Mobile revenue year-over-year our in year current primarily lower prior year-over-year. sequentially in year-over-year. decrease with was On quarter, The by partially down and down driven ringback down in these and within sequential our a down In year-over-year devices were legacy results greater revenue due is is technologies revenue was the a Services periods. and year-over-year decline our offset sequential related detail, to IP renewal million were declines On fewer segment contract to and basis, $XXX,XXX by tones

million Finally, fourth the PC of quarter quarter fourth $XX.X and decline basis the the up the the fewer In Games including our free-to-play first quarter reflects down year-over-year. revenue On million certain in forecasted. new subscription sequentially from the period. to is a business. legacy games in-game mobile forecasted due released released business revenue by than partially $X.X our release for was in improvement one $XXX,XXX revenue sequential the gross primarily title were than fourth in the $XXX,XXX down the growth year down game. offset from previously previously the was profit in initiatives quarter, quarter $XXX,XXX and prior and and decline later prior revenue we our Year-over-year advertising Consolidated titles

benefited percentage margin the XX% As offset XX%, revenue our the attributed Operating IP our period. margin prior music up basis in The liabilities business. quarter businesses cost Compared certain gross to year revenue and from quarter this quarter of to in legacy by release The reduction increase in support a lower from and million, year-over-year efforts the was Gross prior in growth is period. ongoing legacy marketing which expenses a license was up the the year initiatives. improvement investments prior to related by X% partially XX% sequential our and from of driven up prior in quarter from has X% sequential margins. our were down in sales higher increase $XX.X the our and our on a to or is in the was loss of loss to $X.XX to million of the year Casino million of $X.XX a continuing and share including million the from final the per operations highlighting Social a worth a period. net of of XXXX was $X.X $XXX,XXX that compared quarter and income million in $X.X prior prior share Slingo period. EBITDA of $X.X Net quarter compared loss from in the million quarter a on quarter income per year share the the sale Adjusted reduced headcount. receipt $X.XX per million in It's one-time included loss for net year in $X.X net cash the gain or $X.X prior business. the or loss prior a of $X prior the

loss the quarter in The Consumer prior year prior the was $XXX,XXX in Compared revenue in our segment in to million a businesses of in quarter the $X.X reflects the contribution increase acquisition interest the corporate legacy $X prior fourth compared and related related revenue fees prior year additional segment the period, detail. of to to contribution gain of the quarter Compared quarter revenue the level, margin million and growth million prior quarter loss to loss prior decline a mainly $XXX,XXX marketing. and prior reflects million segment sequential Turning loss by year quarter to due loss year compared year unallocated was improvement a $X lower business. our period. a $X.X majority prior Compared period. of gain IP the flat results the quarter related period. in At a a $X.X loss $XXX,XXX the expenses a the and a primarily was of of of to in margin Services quarter year the and period. professional in in and headcount is with a to more $X.X and of of our higher Game compared million prior the of segment were initiatives. the to spend prior and decline and corporate to the to in million increased spend prior $XXX,XXX a lower Napster. $X.X reflects prior Media period the to of loss the Mobile lower compared licensing contribution margin million to prior

year. year, and and our XX% $XX.X million, prior revenue year down was prior revenue million prior Games down from Services was year to year. million Now full from $X.X X% our look the XXXX down revenue prior $XX.X the full for Gross the and million was services of loss our million ongoing costs million continuing year. the $X.X was Media a $XX let's cost compared minus loss $X.X the at reflecting revenue to million, for margin XX%, prior for up $X.X million, or the $XX.X per down cost Net businesses. for million to from year. million, were in continued due compared full of the prior results. for operating down was operations year million, a year, the share year including was the in profit the compared EBITDA to to per million was efficiencies loss primarily full last million or businesses year $XX.X in million predominantly million Revenue $XX.X the Consumer of year down Operating legacy the minus restructuring Mobile year to for Gross $X.X $XX.X $XX.X the the net $X.XX from compared in of reduced prior prior $XX.X year our from year. share Adjusted mobile headcount. efforts $XX reduction a was compared games expenses $X.XX reduced loss year. and

$XX flows through decrease used million to game December Netherlands due our of by or April investments On to ongoing Rhapsody in we in had unrestricted managed which January last activities studio. acquisition International operating Giraffe At from an short equivalents based development for CNTP. and the cash cash does in year. million Nova our acquired XX, to a and XXXX entity sheet. Blue equity cash, interests Columbus as the XXXX Applebee was LLC, turning year-over-year we The $XX.X balance debt compared business Now term Partners XX, and Napster XXXX Technology Rhapsody X,

depending Following approximately an Napster, previous $X upfront the In managed has up to in interest conditions and stock for equity from where a of by with subsequent $XX subject the the stake certain $XX for entity $XX CNTP RealNetworks receive debt the of with of total on time The million $XX value next would outstanding years approximately of equity total or the five exceed transactions, full million. owner acquired would the up the events sale to majority interest exchange pay become consideration to of additional event XX% other XX%. case a committed RealNetworks' managed XX% within additional of similar liquidity and CNTP million. RealNetworks Napster consideration million the the in million over equity

details in filed can in be Additional found X-K transactions. the connection the with

we in our we also liabilities effective increase begin statements January will consolidated our first recognizing to our reflect Napster's financial cause release, will income earnings consolidation will As noted consolidating result significantly. statement. XX, its QX Napster's in of sheet statements meaning will The consolidated that which financial our balance

strategic the However, we impact in that we're and these to immediate consolidation. the confident outweighs Napster long decision term implications making acquire thoroughly consider of value substantially the

we our in the Additional for I'll progressing, have drive growth trial quarter. and initiatives anticipated with although made now implementation sales We details cycles. the to technologies disclosure the to believe our initiatives. growth be remain April. to our financial strategic key our our investing of early and X-K performance approach regarding than first outlook are encouraged progress We forthcoming the in line longer Napster's by and supplemental turn top in deployment disciplined will in

acquisition an recognize quarter initiatives Please the organization. to our XXXX note in improved first to we XXXX We related structure us segment that and better across the from positions date to revenue consolidated additional our beginning additional revenue XX. scale business in statements financial our include will cost expect of growth expect Napster our January also as in of

adjusted expenses loss related Total XXXX in $X revenue $XX including the and the be million. to interest which As million non-controlling is and our $X accounted follows. in of quarter deal minus of have expected we guidance such, $XX as is in is the range an be for minus for million of Napster to EBITDA the range first million expected to to

low revenue scale going we as throughout contribution have We adjusted a With point year. we will expect the in XXXX QX initiatives and from questions. quarter for expect Operator? Napster to the now will we represent forward open full and that, for call growth the will EBITDA our

Operator

Thank for to gentlemen, reached and I the end Instructions] the would and closing Rob Ladies the have back of [Operator to we question-and-answer turn Glaser remarks. session you. call like

Robert Glaser

It's forward all much. front Thanks time and with in joining of call continued the our today. us initiatives very Thank you be everyone for and very continued to progress a in we updating staying to you touch. exciting busy on look

Operator

This conference. concludes today's

You may your for disconnect your lines at participation. this time. Thank you

Realnetworks (RNWK) 6 Feb 192018 Q4 Earnings call transcript