RNWK - Earnings call transcript Q3 2019

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Operator

Greetings and welcome to the RealNetWorks Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I would now like to turn the conference over to your host, Kimberley Orlando, with Investor Relations. Madam. ahead, go Please

Kim Orlando

welcome call. RealNetWorks' and financial quarter results conference to you third the XXXX Thank

begin, like regarding and and we expenses its today gross Before businesses I'd adjusted financial on are matters that profit, for and forward-looking conditions. discussed a some and consolidated including trends and prospects profitability statements EBITDA RealNetworks' basis revenue, to future operating remind affecting you growth future

initiatives, in and company's plans efforts, to its its Other products the statements invest and these activities. as and include the well forward-looking profitability other restructuring from strategy as implement growth, and expected benefits

In additional statements that equity today's does earlier relate an Rhapsody contains in which of Inc. International acquisition addition, certain stake this call Napster. to as forward-looking year our business

belief than from and statements, statements and forward-looking combining consolidating our our and facts are financial uncertainties all and results business implications statements and materially associated these actual involve cause historical with to express a of Napster. other and statements expectations differ that forward-looking that number risks risks our of Statements including with could

in reports. We those can recent SEC XX-K from or these be section our Form Form Relations from reports of risks in our Risk our forth website. of other and the on filings, including most and XX-Q the SEC and A Factors set copy described other in in obtained filings the Investor

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

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

and investor.realnetworks.com the directly financial be both non-GAAP the our website which to at to in our SEC to found the please Financials comparable release today Form under in included reconciliations of refer financial our dated X-K on submitted measure press corporate For and GAAP each the information of measure, tab. most can

of company's the With CFO. Rob the a and will as made strategy what's then Cary company review as be fourth provide CEO; remarks, After will Chairman outlook today's well third Cary questions. to the provide quarter come. quarter as discuss a more Rob the Glaser, are as and for of quarter of today and answer and progress XXXX well the pleased Baker, of financial XXXX. detailed prepared preview the to me the Rob will Cary during

the hand will to call I that, With Rob. over

Rob Glaser

continued thanks with afternoon and joining Kim two quarter, us achieve solid today. third growth for And traction key initiatives. we good Thanks, to everyone. In the

object then with Our, results then this close progress, recognition discuss plus casual adjusted management. including as over significant mobile SAFR, on facial came and with games. of a ongoing result platform, we'll SAFR discussion detail our our and free-to-play at games. begin progress improvement our QX, and EBITDA summary our expense which free-to-play QX I'll a the I'll of

significant continues business that a SAFR over our progress confidence the that substantial for made long-term The opportunity. real reinforce over growth believe We our to potential has the year past SAFR largest remains to we've time. become

security is primary today related four SAFR with Casinos. Public specific Our and Retail Airports, focus Safety, verticals.

through have this long-term primarily is ensure the that integrators. to strategy believe reach. are and these partners reaching and we We greatest We markets right leverage the

get market increased length customers. and into our the it notable band SAFR typically of downside deploy it time; the based that is to The solutions takes

One partnerships in technical Milestone Europe, with continued continue network as Brazil, Net solution also Konica Digitfort. Systems integration commercial in in Evo Caps ADT grow assistance global Partners networks to now and in secure Our Genetec, integration and and to Japan, providers ACA and Tech our Indonesia management We've video Korea. deepen such Minolta and Nextware and LX and Pacific includes Sali in partners

NRT agency global because in largest our enforcement Telecom of global, a company and banks India. the South of City customers Brazil, in gaming and the law Calcutta, Korea, service US-based of Largely is SK partners, XX in also early include are this which one quite leading network FinTech

came employment Another secure Minister to in India when at speech successful Independence help of in high-profile SAFR SAFR deployed XXXX. Red August also on Modi's Prime was Fort Delhi New Day Indian XX,

that platform of shows platform continue We SAFR by technology that or SAFR NIST, Standards that enhance the recognition National Testing the our to Technology remains ensure to one its of Institute core world-class. across tone, that highest excellent combination accuracy, world's video, live gender. compactness. for results in is solutions speed performance of SAFR demonstrate and based skin ethnicity its the on test also variances consistently and facial NIST

of several with show different the results shown We competitors to actually bias groups. racial when -- have in companies have problems applied as ethnic NIST regard or this to been demonstrate. Several our significant

with they customers addition NVIDIA partnering a we our with announced access NVIDIA to smarter GPU partner's Metropolis our leaders. technical In applications; SAFR public based make own leading to we partnership safer. are the and collaboration these smart spaces now excellence, both safety for manufacturer through closely program week is This technology world's retail AI have recent NVIDIA, cities, and

We of long-term that we NVIDIA encouraged the SAFR by help excited us robustness SAFR. will and reach. for believe of work meaningfully prospect expand have very believe solid about for we In with remain our runway And growth the are a we pipeline. summary, our ahead very

and important games growth turn XX% and which for I'll respectively, again success the initiative our was result sequentially direct both second XX% once free-to-play to emerging casual games. mobile games. year-over-year revenue in by free-to-play of improved Now QX

since exceeded Android Delicious of be release, users. QX. our largest both measured of the iOS World, terms end by driven Our and has our the track terms free-to-play daily After And global casual six on months performance less latter than is is primarily to at and size. second on by rollout our expectations its active Delicious ever, in audience global of World both game of title, in revenue is which

optimistic XXXX of Android an And first-to-free October, our QX, title performance of our iOS launched US. we this solid our casual the to translate and soft We're growth play, and and overtime profitability. success in significant Bread will that Heart's sustain from launched continued in free-to-play on that which Delicious And sustainable X, and XXXX. first benefit to both to games. week the in continued also Breakfast free-to-play the Medicine We've the can third was early QX, on

to I'd tweak conclude, the I remainder its standpoint, purchase like briefly positive our our quarters, ninth of revenue currently discuss contribution Napster accounting. consecutive Before to largest from absent extended businesses. the a business impact of margin of

make to continue progress We BXB with strategy for Napster. our

Napster. service Sony new partnerships of additional launch services. Our look Japan in Music qualitas, high-resolution powered the to sharing service We the forward coming launched customers recent by is quarters, mora first in platform Entertainment based streaming highlight music Napster as

businesses generally in other in we the delivered our Consist with prior the conveyed line last call. expectations quarter, results with our

longer macro have Our that that of been significantly IP remain business specific region, to due in our including are and plan. year-over-year from China to legacy most Huawei. factors soft, tracking And revenue to lower primarily businesses other our

revenue our QX. QX was from slightly $XX up million, Overall,

compared EBITDA adjusted by $X.X improved Our the million, was loss million to substantially over quarter. prior was $X

our structure expense to gain traction, the continue within of profitability growth improving with over current also our manage continuing and initiatives time. our to our goal cost we're As

of key summary, initiatives. with our progress the growth we're In pleased two very

the take they're good than we path a both that longer scale-up it we hoped, originally feel While on. about already very

in detail. to to I'll Cary turn our more discuss quarter it that third over Cary? with And results

Cary Baker

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

timing are comparisons media can part the and within including and diving to you mobile consumer always Before games our due and impacts results, on their quarter-to-quarter variability of licensing IP into and games please that our sequential periodic Certain not our update businesses to implications. note will the but continue revenues. we of business fluctuate apples-to-apples year-over-year the these

to Turning results. our

third For of quarter. was revenue, prior million for million third $XX year. compared Napster quarter, to in quarter revenue $XX.X accounted million the $XX.X the to million our $XX.X $XX.X prior in compared the million prior in and quarter the

revenue attributable in due increased was in timing the $X of The and our consumer recognition. greater one-time revenue year-over-year. to these business media coded the IP Looking at sequentially million within to $X.X results million payments revenue sequential primarily detail, was and down up segment increase

year-over-year the underperformance general reflects largely decline our While in China business. IP

basis games. Ringback $X.X third which quarter the Mobile sequential services a $X.X decrease down year-over-year. sequential and and slightly free-to-play Games and $XXX,XXX up success for million mobile in reflects due down year-over-year, both our of revenue revenue was basis our to a up primarily on the Tones product. was on million The was year-over-year sequentially decline legacy

game. results early to see along soft solid launch of from games encouraging continue third free-to-play our our free-to-play We two from the performance with

sequentially, by million $X.X platform partially down higher declining revenue. was partner due revenue Napster subscribers, Finally, mainly offset to

$XX.X was profit in the million, Third gross million quarter quarter in compared year $XX the and $XX.X million to period. consolidated prior prior

As a revenue. was revenue higher XX% the Gross cost in compared measures in the The quarter in XX% our percentage sequential due prior and On basis, Napster was to year. XX% was third with of primarily and prior XX% was for to primarily consumer increase margin XXXX year-over-year to quarter due without while gross media at a the margin XX%. of Napster, RealNetworks' margin gross segment. decline Napster's the the of consolidation reduction

in to worldwide be Napster's decreased These for million publisher period. million $X.X to the prior improved royalties loss costs the vary label loss our to million in the a the amounts $XX.X in services. prior and third the of reduction in million from loss to quarter to paid. quarter $XX a substantially for and consolidated prior from expenses and significant third the quarter operating increased the of million period gross year. year can million primarily in and assumptions EBITDA due Operating period to $X.X judgments, estimates a Adjusted XXXX. reminder, $XX.X compared margin materially $X.X As quarter reflects prior its million, Napster's for expenses a music of from of were $X.X the quarter the of for

was $X.XX or $X prior a net per loss quarter of of the compared million million share the a per prior $X.XX and share net per or $X share, in or to Net loss to in attributable period. $X.XX loss $X.X million RealNetworks

prior and third contribution period. partially compared reflects a result the sequential to $X basis, loss detail. Consumer operating revenue $XXX,XXX year ongoing reflects quarter as decreased contribution On revenue the year a operating in to margin lower the expenses. period, $XXX,XXX of decline prior the segment and our Media segment of lower was in million to higher prior expense in management. our Turning quarter Compared results a improvement by the offset expenses a more

due in $X.X year and a quarter to in prior was million $X.X operating is loss to and to due related margin in SAFR. revenue prior period, a lower of loss prior and of $XXX,XXX a the in the prior segment decline to Services contribution million Compared compared is a year the loss of expenses. loss Games million sequential prior to the compared $XXX,XXX of lower to operating the Mobile investments $X.X period. contribution period. increased loss expenses, margin The of improvement was $X.X the year segment quarter in than million primarily

to to sequential period. and expenses lower due the generated contribution compared unallocated to due which games, of Napster's prior At primarily by to increase margin and well Napster, quarter was the the as of as facilities acquisition million nominally corporate by the transition professional increased the a Compared acquisition. year decline compared margin lower to were The $XXX,XXX our Napster the level, improvements decreased to positive. year result from period, expense. corporate prior quarter $X though contribution mobile The prior related primarily higher the year-over-year remained prior revenue. primarily million declined fees $X.X sequential free-to-play the was of to

operating expenses at of third costs. level corporate included also Our quarter restructuring $XXX,XXX the

XXXX, in to sequential XXXX. we the was million compared At unrestricted cash equivalents The cash net million at turning our balance and Now XX, primarily June loss. XX, decrease September to $XX.X $XX.X sheet. by had driven

general new a corporate for purposes. revolving into $XX facility loan August used entered capital to in for be and million working a credit we addition, agreement In

XXXX, had on available we revolvers. of borrowing the September $X.X As XX, for million

additional our of XX, to quarter. in fourth an turn the statements as for outlook segment acquisition now XXXX; financial in business included the first from I'll date quarter consolidated Please XXXX. note that the January our of beginning we Napster

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

not Napster do cash we majority operations will cost we guide behind products our while to going continue to use starting revenue deliver to transaction cash the Lastly, the expect us, with new our of forward. and less

by to In summary, specifically SAFR our revenue encouraged scale of are drive organization. free-to-play initiative across momentum growth we top-line our and key the and mobile games

intently We also focused updating look progress you committed We come. to quarters the to in to and forward on managing remain our our costs. continued

With that questions. we for the now open will Operator? call

Operator

There And any to back closing turn over I this time. are Glaser no the at like conference for questions register remarks. to Rob would

Rob Glaser

everyone. Thank next you, And in touch be at everyone operator. also conversations call look today. will follow-up you out And reach with we to our as forward having for with us you investors We before. joining again be with us. don't thank we want if back to to earnings Thanks investors

call. today's concludes This conference

have a day. lines. disconnect And may pleasant You Thank participating. for you your

Operator

Instructions] [Operator

of End Q&A

Realnetworks (RNWK) 4 Nov 192019 Q3 Earnings call transcript