RNWK - Earnings call transcript Q4 2020

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Operator

Greetings and welcome to the RealNetworks' Incorporated Fourth Quarter and Full Year 2020 Earnings Call. At this time, all participants are in a listen-only mode. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with ADDO Investor Relations. Thank you, Kim.

begin. may You

Kimberly Orlando

welcome XXXX and Fourth and Quarter Thank Results to Conference Year Financial Call. Full you RealNetworks'

Before we profitability, RealNetworks' begin, matters I'd for trends like to remind and businesses are a basis prospects including affecting on its discussed growth you forward-looking, statements expenses regarding and Operating future consolidated profitability and today that and implement invest in growth, its liquidity and statements other forward-looking the strategy, Other and as include the as and these its initiatives restructuring from financial condition. company's efforts, well plans activities. to benefits products expected some

of filings section and risk set forward-looking and these forward-looking other Form our from obtained describe statements. number the our in from actual risks on differ the in call a Napster a all purposes involve relate Effective cause for as PLC. We uncertainties our today's that Rhapsody is express statements copy have these Napster other of addition, forth International in most as contains the this owned discontinued XX-Q website. risks XXXX filings recent Group and the periods MelodyVR as historical In conform including and results to corporate certain in can are disclosure SEC could of materially that of forward-looking that presentation. facts recast be SEC XX% Statements comparable business Relations expectations to XX-K factors and of statements to the and statements Inc, been and third Investor Form accounting and does and to of reports other from which our of those than reports. sale A historical belief to quarter operation or presented

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

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

and GAAP SEC X-K, financial reconciliations today, our can to dated under today please our Mike Chairman tab. with the of performance Ensing Senior discuss will and a non-GAAP Form For to answer investor.realnetworks.com company's With Mike refer then Vice each XXXX; review the forward; over press to are our of Financials comparable Judd major With website on information will and our of in fourth in prepared measure conclude CFO. be performance Rob, today's the Rob. corporate quarter at the operational release our moving After and which questions. Rob and pleased me submitted will Judd most financial found in to hand will the XXXX I President and the Rob and discuss Mike financial measure, that will and directly to results. priorities Lee, full-year COO; XXXX call President strategy and be Glaser, both CEO; our remarks, Judd included and

Robert Glaser

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

add financials Mike then I'll Then few which at continuing like also and financials go our our note on close operations, I'd most today personnel I'll passing Games go-forward baton I'll to our by and on and Media service two Consumer As about strategy segments. the before begin to presented I initiatives, our assessment with growth in the overall detail. XXXX few commenting and a do of year-end, my performance. includes matters games. the mobile more SAFR comments Judd a free-to-play typically our into focus mobile to significant that

total for consideration, sale in our million Napster in of As $XX MelodyVR you in Napster. XX% we December, the late included know, which completed to interest

have to very from results shareholder a for minority RealNetworks. longer consider no remain continuing in include end we XXXX Napster solid a we been operations. year MelodyVR, While I

Our But overall achievements. that XXXX. masks number up of three line notable revenue top grew X% over modestly,

games their initiatives: over with two First, growth mobile to our revenue XXXX. and free-to-play compared SAFR by combined XXX%

substantially results. Second, we our line improved bottom

EBITDA an of XXXX. Moreover, ahead from $X.X a improvement continuing adjusted finished negative Judd million loss. XXXX minutes, discuss EBITDA's and operations our over $XX.X million, Our improvement consecutive our was included sixth of and will quarter. fourth adjusted few we loss as XXXX excellent an in strong Mike quarter This year-over-year

down face several that our simplifying by I'm completed resilience us these success of and MelodyVR work, Napster live how stake and also in The in our affected the sectors were we the economic in team pandemic. resourcefulness experiences. the progress level of cater communicate deeply COVID-XX who a of sale where pleased in do pandemic. with can was customers spite to customers, turned very results appreciative both grateful the with achieved we we're disruption I'm when exhibited our our XXXX they to to Real: for the serve which A work, of closely continue we pandemic customers in activity business. how and the big reality Third, music the XX% contributor our our the world we we work in Group, by in to with virtual our year global experiencing. upside in how

to not also products, key also Napster. recently itself We our as that us sale of the help announced shareholder on streamline great create create complete, our helped intention cash our balance for growth to well deepens customers the Napster a over with deeply ongoing initiatives all to closely the stakeholder and meaningful the of work appreciate forward in the opportunity its our all sale proud and music Melody of focus will Real others' hard We to only work serve The team's from long-term Now past the success. XX our rebrand and believe contributed is Napster these industry but We're very Napster increase being and years look them MelodyVR/Napster's take year. the years. prior in value.

forward being a details going traditional with and an strategy few of success Real mobile media digital SAFR to from transformation is Now middle and being our the in media about technology-based free-to-play games AI-based digital in a company share to company. XXXX. our I'd like a

media Metcalf market our better platform our our has create messaging leveraged super-fast digital last processing talent messaging-based because leveraging two to transition computer from our applies to different expertise years media initially each with the accurate, and products bias this having is to built ad-based our at are excels experiences. conscious services in most excellent vision and a transition natural two SAFR a the that Over products machine that datacenter. digital a deep create large of was is digital [ph] company high in inter-carrier and its small. significant platform. platform of earlier highly years, vision global being and throughput also on has help globally SAFR Kontxt, very ways great that our in popular that businesses. been also The and-a-half for has of are language to conscious computer transition, technology which and services Kontxt's which examples company been very learning very four we've gone services This products a applied media. to SAFR, and that multiyear customers in low deliver engineering

market far, and a the saw results some year also growth headwinds about despite of Federal SAFR's the Korea. We SAFR U.S. caused in talk pandemic. particularly me segments with in its Let now commercial significant in the market XXXX. bit Japan by so and strong had best South

a company payments speed transport leveraging in Korea, We've illness passengers' smart began payments or which Air help to Innovation to DOCOMO United our facial Research II centers. two States the on business, SBIR transportation. and contracts QX, services provide customer we've program help in the save awarded Force. biometric direct the continued U.S. In is now Small Phase pilot these the both We deals engagements both of being Regarding safer multiple DOCOMO. to recognition innovation in federal In Business public to SAFR is cloud, risk our will led Japan. that were delivering execute mobility with XXXX. in a part so to of and to first and partners QX and payment touchless of has to to do the we'll time reduce with half exposed of key in one Japan, public on of proven continue Tmoney,

uses and partner. that communities International the compliance. helps in compliance businesses improve encouraging safety operate Research SAFR, help been with by terrific In data and face a mask SAFR we addition post-COVID and during see future. we regular free also commercial to a to help the to use of us In face and XXXX, greater app pandemic released to COVID-XX who to partnership specific with assessing a MaskCheck opportunity We the safety [ph] MaskCheck, December get reopen all released which platform Team mask servicing

see continue significant beyond. forward, with sharpen Going front our and focus to growth and in opportunities us of we to expect in SAFR XXXX

first the in users our was Delicious features X.X XXXX. strong ahead think of XXXX by and games, games: full two free-to-play were played of Breakfast We mobile titles them. These Delicious Bed million and Regarding games World. both & mobile have of two year downloaded flagships

titles. continued has team as them well as Gamehouse a few developing Our work additional to on enhancing

Finally, people-related two on I'd matters. touch to like

and as knowledge the over we reporting thank our of Judd in Effective Christine of also contributions be have with be We're VP Chief COO, and after want his a the wish bright President, out March. week, Finance his pandemic Officer of and happy will I XXXX. progress President very to pleased to company of Christine our for Judd is drivers Lee, we Mike She the appointed to year. X, made financial We replace Financial deep Ensing. will most in company the Christine to the our Real brings through last business. rejoin In will Christine unprecedented who very decade, announced very Treasurer. endeavors. recently people for rejoining in to be working Judd for Real. of Vice will and Senior Chambers Real many As the future and summary, our I'm March transitioning well position

and to our to ahead us of weathered not and results of that the Mike? That confidence With in its will will knowing the a XXXX. and wake. pandemic forward. recede call our in I how of draw XXXX when lot have going work thrived including change We the team thoughts ways for a in number of many Mike key I world share how our in on uncertainty the over out some priorities will financial to challenges, of discuss turn said,

Michael Ensing

and due always priorities to Rob, forward. XXXX outline the discuss briefly sequential year-over-year afternoon, moving to key Today, I'd comparisons and Thanks, not are Please good in financial apples-to-apples, and variability results like everyone. our that periodic quarter-to-quarter, note fluctuate including to but we our business part games the IP the impacts of timing their our businesses business Certain mobile licensing of Media these and on revenues. and can continue within you will implications. our update Games full-year Consumer

for results addition, highlighted, RealNetworks unless being Therefore, purposes. disclosure Napster. as noted, which Napster relate operation today Rob In presented to discontinued is the accounting of exclude as operations continuing is otherwise and our treated

of to X% up RBT year, due XXXX, operating gross IP year continued also address year share XXXX, to Consolidated profit Revenue pretax Free-to-play that business the in of operating and in confident continue $X.XX societal the and Kontxt. in XXXX down the million year. $X.X continued primarily segment revenue full million, Gross gain or full also to $X.X these over year was down loss game or Mobile for to Consumer with driver prior forward. the in results, year from Net to a million XXXX free-to-play XXXX, XX% Now efficiencies. loss Media our prospects for from million diluted regard or of up for from was the XXX% are as million was profitability. $X.X was games. and and one-time a our conditions the within business down XXXX. as than transaction our $XX.X efforts, the diluted revenue $XX.X SAFR of The cash increased We XX% a needs a XXXX continuing moving decline related represent or Revenue partially million, for loss segment including legacy in continuing let's attributed $XXX,XXX to loss our reflecting compared for compared favorable consideration were included mobile million, roughly costs million, per and XXXX the China million up be legacy per and In have was our from Normalizing higher for mobile XXXX. pleased market XX% was net of $X.X our $XX.X down $XX.X the review our involving of games $XX.X other XX% million about or team's results. liability to our up XX% minus million, half to margin to to performed businesses restructuring remain note interest million important general, $XX.X year. sale minus Games expectations our Real longer-term to included million, by from by of of the a a XXXX. Gamehouse $XX.X million contingent from the and continue in-line full prior $XX.X segment from an to expenses Napster. as We for in changing well to rapidly manage non-cash to net million adjustments in revenues maximize XX% the driven RealNetworks $XXX,XXX to our Services operations result year. our expenses compared related to the we year, $X.XX prior $XX.X decline were from loss operations the pretax more in was Player from the with as Total compared were EBITDA growth was X% Please certain ongoing by to compared offset the Adjusted businesses primarily In offset for Revenue flow net in legacy operating from offsetting cost for million in prior-year. games share $X.X was $XX.X reduction XXXX. our million XXXX primary incredibly in $XX.X the our $XX.X gain SAFR or will that prior pandemic. compared ability million bullish and by items, our Napster growth remain the charges. we of in to react newly $X.X improvement

liabilities. year. cash, As of at and $XX.X million, the The on total the in sale which million comprise mentioned, stock in closed we $XX.X $XX.X on in MelodyVR XX late million was value closing date $XX.X Napster December million assumed the in

million held As a million in cash stock, debt $XX.X escrow. in to of result, repayment Real MelodyVR plus cash dollars in million be as $XX.X received preference, in $X.X liquidation

in which Columbus $X.X The fulfill expect We provide January equity to to XXXX of agreement MVR our to Napster will to million their improved the consideration of balance at and/or acquire Nova cash discuss shortly. sheet significantly terms Judd stake Napster. sale of our

some Finally, going I to would priorities like forward. major outline of our

continue company digital First, strength we and company's on to strategic Rob transformation the AI-based media the learning. discussed based will an machine

Kontxt in drive continued our the mobile key initiatives SAFR a and on focus through Second, growth of and customer. games delighting end we free-to-play will

will managing strong improving delivered finally, our against to we was continue to Third, progress growth summary, operate innovation Real And as manner we year order in growth our by culture, mindset. our In invest financial emphasizing to and financially-disciplined XXXX while initiatives. growth continue in with will a costs for a substantial we improved the profitability. performance company a in evolve

on Looking quarter are detail. Judd? forward, of financial revenue to the discipline fourth keenly turn financials we through will and go transformation, now to I priorities call the Judd our strategic in cultural over growth, evolution. focused

Judd Lee

my followed our will In segment discussion by remarks everyone. afternoon review good our and fourth detailed business Mike, of quarter consolidated performance. results Thanks, today, more I a

our Media operations. was million year the by and The $XX.X was Services by turning from and the $XX.X Consumer the prior and growth Services segments. quarter Mobile sequential revenue Now in in in compared million fourth Games to driven results our segments million for and was the year-over-year increase period. our Total driven increase growth to prior continuing $XX.X in quarter Mobile

sequential the Services as was on fourth products. revenue and and in revenue for a $XXX,XXX higher The segments, and in quarter Year-over-year, was $XXX,XXX the was prior revenue the was by driven sequential fewer games, improvement of game in year due $X.X lower game game Compared Mobile timing premium On we of with and $XXX,XXX PC change the segment. primarily by to coupled in to launches. year Consolidated to within lower payments Media the due this driven Games with and year prior mobile both Looking which profit for period, higher not by decline and timing to year-over-year. Kontxt to partially Media million, to legacy quarter were do Mobile partially was increase prior the up segment. segments, at strong our a expect and revenue to the compared installs increases our revenue million the a seasonality the compared in year-over-year down partially calibration our mobile in offset Compared The basis, and million period. and up from decreased to The the recurring. Media million to due period, the improvement our IP sequentially was Consumer games partially up $XXX,XXX quarter Services gross was monetization of products performance shipments driven revenue down be to declines these $XX.X by sequential increased revenue fourth of the due was was Games offset results of legacy free-to-play offset along in our by and revenue primarily prior SAFR continuing by and increase primarily higher on and a the Services $X $X basis sequentially and sales by in due sequential Mobile in greater shipments, year-over-year primarily products. declines detail, in our higher basis. segment games, revenue offset year-over-year. business. decline primarily free-to-play legacy up sequential a result lower Consumer $XXX,XXX our Consumer

related or improved and share of that the the $X.XX Adjusted a quarter involving of $X.X operations Please share income a net or in a our Net million quarter quarter a net million of quarter fourth the also non-cash Napster, period. to $X.X consideration one-time partially XX% prior period. As minus in sequential RealNetworks related million, to decrease compared prior margin to net The in $X.XX loss in or XX% in for from loss per restructuring prior $X.X year was and year primarily $X.XX prior per as the were of minus million and period. EBITDA the period. diluted $XXX,XXX percentage in liability total the from compared from million Normalizing the operating the diluted $X.X the $XX.X gain flat million pretax prior XX% fourth million in per a net year revenue, loss or to million well note The loss the gross prior included quarter a decrease to the a and and related of for expenses $XX.X transaction to year the lower quarter compared costs, prior decrease period. in relatively and year-over-year of of in expenses loss million $X.X people-related fourth the quarter prior operating prior Napster. interest of a charges. prior as the XXXX from to attributable $X.X offset with by year diluted and other adjustments were in quarter for a share $X.X favorable million sell related XX% and items, was to continuing decreases certain the contingent were to $X.X loss

a SAFR. results $X.X fourth prior to the revenue, Napster, favorable corporate and the was was detail. to million lower the reflects a increase the Turning and the and $XXX,XXX the margin segment ongoing The and level, the compared year, decrease gain restructuring of Mobile gain a sale primarily loss Games $X.X to people-related $XXX,XXX contribution year consideration sequential $XXX,XXX period. was were mobile decreased in and to a charges. of the was sequential The a $X.X improvement Year-over-year, driven management. $XXX,XXX in The sequential other due million, by compared increase prior prior strong a by a prior by prior $X.X due of year gross period. to of to offset the was expenses expenses The gain in of the continued driven year-over-year $X.X of over revenue in a related unallocated a partially loss operating net higher was revenue. the in of lower was decreased higher and million revenue compared to lower contribution Consumer margin sequential in quarter corporate million $XXX,XXX primarily prior quarter as free-to-play games. partially to adjustments primarily offset to more prior the improvement decreases a of related margin. quarter contingent At decreased loss to prior related gain of year loss offset period. and The was by result gain costs. higher the the quarter year to related which primarily to the the performance of of of was margin segment expense period. million our liability, partially segment Services expenses Year-over-year, by The to contribution and The $XXX,XXX revenue, compared by related quarter our $XXX,XXX compared decrease Media incremental Year segment by

At year balance higher December revolving we credit primarily and related significantly debt to received with outstanding restricted million release a cash to equivalents turning September XXXX, and was The the from million of sale sheet. $XX.X facility. December ended XX and our $X.X improvement XX, We compared no million to had $XX.X the Napster XXXX. total balance proceeds XX, unrestricted our at borrowings of cash was our cash. of cash the with at Now the cash on

the the on from its we prior its impact our impact potential recent uncertainty the economy be will we on despite to quarters, effects lack of COVID-XX the given providing guidance challenges XXXX has case operations, COVID-XX, to the significant of improvements position fourth all our enhance quarter full profitability traction and progress businesses. we as the questions. growth losses. Further, open of our we faced the not the delivered and visibility, of been will in company the year strengthened for XXXX key resulting With in the first due overall we by and adjusted now As financial the In quarter XXXX. call including Real's summary, pandemic, in and evidenced EBITDA that, for Operator? in continued

Operator

Thank you.

now [Operator be question-and-answer conducting will We a session. Instructions]

Robert Glaser

Operator, I up guess wrap here to we're today. ready

Operator

sir. Yes,

Robert Glaser

thank his not again want I if Judd want to look Real I sooner and for best seeing today. three wish next his in but for forward joining time, chapter, the [ph] in nothing you again and all everybody I us hopefully months' to in to sooner. thank him and tenure

Judd Lee

everybody. Great, thank you

Operator

conference. today's concludes This

You may for Thank your your at disconnect have time. you evening. lines this a participation and wonderful

Realnetworks (RNWK) 11 Feb 212020 Q4 Earnings call transcript