RNWK - Earnings call transcript Q3 2021

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Operator

Greetings. Welcome to RealNetworks, Inc.

Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. this being note, Please instructions] conference recorded. is [Operator conference Brian Prenoveau, will now Relations. to the turn I Investor over Thank you.

You may begin.

Brian Prenoveau

Thank third you. quarter RealNetworks’ XXXX financial And results conference welcome to call.

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

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

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

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

today, For reconciliations submitted in please comparable results. and GAAP measure With refer conclude businesses. Rob the corporate progress strategy directly SEC Christine the me found Christine that And will in to hand Rob. Financials over detailed call and the COO; President, on the the Rob made that, under CFO a financial open included XXXX. quarter each of will dated the will today X-K, information non-GAAP then the Real’s financial we’ll and can discuss I Ensing, CEO; call Treasurer. Vice President to With both detailed the review today’s our company’s and financial website Form our of most which measure, and to our and at on Chambers, press tab. investor.realnetworks.com are be the to Glaser, release our After Chairman third Senior prepared of questions. to company a more of remarks, update with more AI will during Mike and provide Mike

Rob Glaser

high on us. I’ll afternoon, remarks cover My level Thanks, joining results. financial three Brian, and for Then Good will and welcome topics. aboard. thanks center today everyone, first

on update our an provide I’ll First, strategy. overall

our And new that highlight to Real’s and progress I’ll we I’ll brought center AI leadership the that discuss business transformation Games situation. in to third, in an our Second, strategic address company.

pivot our AI the center public this to Earlier it that update on to plan company. the year, an First, strategy. Real told was an become overall we

business which a strategy would XXXX, described of in expectations our Games significant changed. core for hasn’t growth and contributor included belief the plans again also our and be XXXX growth XXXX. that We beginning our The

and with they believe shortly to lead is which KONTXT continuing XXXX are we Games believe that we I’ll growth That Our likely that contribute issues it be our said, to and will now AI business, in for in Games us drive SAFR not discuss a success. retool business grow will the significant future. as significant growth future

together, our double-digit have our from a the As as still fair calculations. putting significant now growth we you will excluding we growth while to view say it’s we’re in result believe expectations plan XXXX of I while that XXXX, Games think should

Now onto our businesses. AI

is AI XXXX. biggest computer SAFR We quarterly driver QX in more have revenue XXXX. to QX XX% revenue language year-over-year which processing our and and and the to KONTXT of continues two of I XXXX. compared vision be platform. XX% main XXXX AI continued compared total products KONTXT, SAFR, In QX year-over-year. in our steady growth compared increasing which to natural platform represent in is increasing businesses QX, double our with to progress compared and and services, SAFR XX% revenue, mobile services KONTXT XXX% segment to SAFR together XX% than our

aggregate as $XX.X to our a from especially public businesses, SAFR. AI XX in building expect intend QX We remain we’re In April, offering we and million businesses raised were – progress we we sequentially making. about growth. we’re Mike AI-based out AI down our investments we’re into to progress use long-term regarding believe bullish XXXX, While greater raised make short-term the KONTXT. Ensing our our the few go and Real AI detail and position minutes, in success the steps growth to with Real’s We SAFR In will taking fluctuations a with businesses. will for targeted proceeds businesses

Next to undertook we by change promising quarters. to came disappointed progress stalled for We play business, the an needed start feel and a in search been our we’ve a make assessment that recent a after leadership update rigorous process. games, to Games in and

industry the weeks change team and we result a an up total over XXX of as the upstairs. XX% the of Games recognize comments to my profit. brought lot believe games at a about ago, of and mission a the few record the RealNetworks in the We from process, XXXX. made This change business Simonetta deleted about growth right a hence background We experiences leader top creating lot to changes new passionate to reinvigorate Lulli GameHouse’s available earlier and this up a a of makes for Gómez players gamers. opportunity CEO. is our the and leader As GameHouse period, outstanding and games involve casual in has Simonetta the expectations this of that Simonetta female demographic there’s great to is this and right of yesterday new announced the business. deep public. time significant to from success in track growth We ramping and for continuing leadership own

financials. to to our was million, the Total third which revenue year. for briefly and $XX.X Finally, XX% the down prior X%, was down, quarter quarter prior I’ll turn the compared compared Real to

grew, businesses change Games both AI our prompting year-over-year While our sequential the just discussed. and declined business that I

we when On the results items. have line, non-operating look through bottom you good

EPS XX% the in GAAP compared period. per was of and in a share year $X.XX prior loss Our share loss to $X.XX loss quarter the per previous share

provide bridge $X.X was million QX million This loss EBITDA $X.X will a numbers the compared and of in loss between and XXXX. of Christine adjusted loss GAAP XXXX in a million. few negative QX minutes. EBITDA of to $X.X Our a

up us, balance to Ensing cash further call Mike? available AI And with future us now with Mike I’ll which we’ll turn the businesses to of strong $XX a have to sheet over discuss detail. judiciously our use set continue to growth. for that, We to in million

Mike Ensing

travel impacting the countries federal factor deployments, is and pleased in increased our restrictions in progress I’d made APAC quarter. the can Rob. discuss Starting the to increased and by driven lumpy. the with segments largely was KONTXT. SAFR and to business. third this recognition SAFR Revenue that two revenue we that of APAC business lockdown commercial COVID-XX region. briefly both had in the quarter are like made Year-over-year, be realize also revenue you, SAFR, the the in several business sequentially, Year-over-year bookings progress in XXX%. Thank businesses important as based AI revenue in with decreased a and

discussed focused use automated calls, including time access identity control, SAFR cases digital on is As surveillance, touchless authentication, solutions. embedded prior on several real and

would progress control of and XXXX use access within I spaces. authentication make highlight identity to the to digital a across projects these couple continue cases and We like

spoofing control access to engineering, solution phase from detection, combat focused compact the it face segment, initial Federal SAFR’s spoofing presentation biometric Pons will technology. control an and enable centric attempts directly advanced and control multi-location is enhance advanced. integrator program space technologies operating improving and cybersecurity, has information for in includes and to for service control Pons management. is and simple help face valuable the Bowler SAFR The recognition expanding embed for solutions edge. and with DoD Within by the platform SAFR systems access project a person solutions solution focused keep been Defense. customers within federal and liveness safe access on Bowler analytics and recognition, The access attacks devices chosen on to management the seeking at both leading makes especially of other Department SAFR’s platform develop

authentication The documents to support residents. a access rollout new expand identity allowing to designed Number My Within the represent to initial technology specialized provides government to authentication their confirm Number identification a services from based provider that the system medical with features. recognition for facial face My paper SAFR facial citizens access recently of ID selected healthcare and recognition infrastructure. as readers digital information with Japan’s authentication card Number citizens was government’s and announced and to to cards Japan’s an system by universal streamline space, Japanese we evolution cards cards My digital and

solution residents hospitals, to As thousands government access will and next cards part of pharmacies will clinics the over to different ID require be initiative, of the longer rolled several services. no multiple years. The new out

with and technical to are We citizens. benefit Japan and solution pleased overall our

a in However, it build been the My the in by and quarters factors, the major Japan. will authentication including We COVID-XX Number slowed we as to view point note the space deployment SAFR project upon for come. in that proof has

processing Next, I’ll our turn natural to KONTXT, a discussion language on platform.

enhanced focused KONTXT intently develop filtering help products billion been processed relationships, to develop than for for industry continuing – services messaging to By messages been on our develop to more with SMS leveraging X based deliver long-term Our based to along improved telecom has and daily, experience customers. our based to and we’ve MMS team robust our services AI tools facilitate AI at customers. able

have functionality months, expanding Over the significantly last KONTXT enhanced by platform core we our and capabilities. both several

interconnect First, developed and XXDLC scan messages. to we new KONTXT spam preventing XXDLC fraudulent have roots, further support, allowing

major codes for largely background XXDLC by For for and stands communication sanctioned omni-channel XX-digit is method campaigns. a used telcos long adopted messaging

for image also images and can service released new scan sent now MMS. hashing users. a to We end spam block We and have

method resulting spam campaigns greater learning machine In addition, core in breadth we upgraded our caught. of

Finally, messages. whether URL smishing we have machine and within that brand to IP leverages is phishing content being or learning developed brand fraudulent detect a used

to discuss company our AI greater space on against centric our largely pleased and with to progress financial forward detail. continue developing both SAFR we for Christine? We products XXXX come. further in quarter over current execution communicating be in current growth evident generation continue next this In continued to the of strategy enhance results transformation call turn our and our Christine an and underway the I customers. in to will to benefits that working is quarters products to to new With prospects KONTXT. to that, both summary, now and our and to third we innovate the look It’s

Christine Chambers

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

and the as we Scener related deconsolidation reminder, longer in completed XX, to financial no such, a included XXXX, as of of our Scener As cost results. are June

and in revenue in Now and declines was year trends compared than million AI for quarter period. our prior in $XX.X this turning offset of third $XX.X Similar in million the businesses. results. to foundation growth the games businesses by Total to year, the our prior to our million the quarter more $XX.X was

more basis are and in is can primarily We do year-over-year. Revenue $XXX,XXX sequentially Looking sequential the increased This primarily decreased in finalization the commercial remind timing Games Media results the at sequentially revenue lumpy increases and and The recognition. segment for due want year-over-year. $XXX,XXX to you the revenue of renewals. SAFR contract SAFR year-over-year and Consumer services to due of free-to-play sales was decline revenue that decreases due contract quarter $XXX,XXX, mobile to detail. $X.X than sequential decline sequentially third legacy games. revenue down to to a $XXX,XXX greater year-over-year a On million Year-over-year in sales basis, down sequential our and year-over-year. a in doubled, quarter-to-quarter approximately and due both international basis, were be however, and timing sales. on revenue Mobile these both decreased. on the

gross As Games excited we’re Rob the perspective from that the stay million, $XX.X business, year – quarters. few recognizing growth million discussed and direction may but call, down profit of sequential can progress $XXX,XXX, the a still revenue in earlier for increase segment in prior take new about the Consolidated the quarter while may the take leadership was they a a to third compared $X.X period.

and primarily to to As extent, the from of changes games. revenue, charges, the compensation. prior from million the $X.X and of one-time expenses quarter diluted investment Net year due of prior a in per excluded loss $X.X to quarter adjusted was XX% net of and quarter are period. from million, was $X.X quarter a Games. operations $X.X net loss, $X non-cash with to associated of compared continuing XXXX period. share the loss million loss quarter in the was stock related for per XX% And the both a diluted $X.XX $X.X share to year the million in per prior related in $X.X from All a a prior recent changes million percentage our to in million million for in of restructuring third EBITDA, lesser net quarter of a award a leadership third $X.XX which $X a margin $X million restructuring primarily million third period. loss diluted to the million recent The the stock, in and a leadership of $X.X was loss or compared award an in Napster gross the loss compared was million $X.XX was million or related higher operating modification prior to in $XX.X period. stock loss year and charges the prior prior one-time the year increase quarter $X.X and in or Total was prior Included $XXX,XXX modification share increase in

was year-over-year compared to margin and quarter in period. of Services prior segment Now detail. contribution our a results Mobile million year in of prior losses quarter $XXX,XXX more turning third $X.X to loss the the segment contribution from Consumer million $X.X tones prior to KONTXT. change higher was compared operating gain by in of revenue margin of driven ringback a was year-over-year The a prior was loss $XXX,XXX in and and and primarily quarter the lower $XXX,XXX year expenses SAFR was basis, Media segment the licenses and in increase due to contribution of $XXX,XXX revenue year sequential period. Scener. of due $XXX,XXX increased of $XXX,XXX contribution $XXX,XXX lower a a were deconsolidation loss the prior games expenses the the quarter a in to of to of declines prior gain Games a and in margin primary in the driver year-over-year decline the period. margin. and software compared Revenue the On basis from loss

we cash XX, at XXXX. at to cash unrestricted XXXX $XX a December At million equivalents borrowings our equity from prudent our debt facility. AI to had XXXX, with revolving September and At provides no April’s investments on no XX, flexibility compared June and $XX.X $XX.X to cash turning and September our million balance had offering XX, million us credit XXXX, The Now sheet. make XX, businesses. outstanding in we in

to remains growth invest most we Our in have about. the and balance sheet excited ample are of strong we flexibility areas

outlook. turning Now to our

chip seeing XXXX, the the million. of also $XX.X be the December adjusted $XX in issues be may million The digit of and and business $X.X chain We currently excluding China. is XXXX, in that For that, IP line XXXX low to gains revenue see to our in manifest from in AI year-over-year the Codec we’ll the to and to year XXXX revenue. supply continues part range loss our full revenue a of a investment on shortages set that be reflects ending quarter begin forward ranges million This earlier, revenue to for the expect to expect total the million with levels. the benefits in focus look range total will top we $X.X means fourth expect impact comments an in reigniting XXXX of XX, growth, due Per year, Rob’s beyond. in for decline now call growth now the EBITDA down end be to from games overall large open focus products to we investments when double questions. With we calculations. in our to meaningful Operator> decline

Operator

Street question Please Our you. is Mark Lake from Advisors. Argento first Instructions] Thank proceed. [Operator with

Mark Argento

congrats and on decent good afternoon, a Hi, quarter.

down to the deal different the things of the business My the on wanted in some bit SAFR going drill Just over Japan. on Number in a with with little ID particular,

that Just Was in a there. that. how the sourced through deal DoCoMo the guys did a NTT questions you was that couple you competitive up how or situation mix and end

Mike Ensing

Yes. called We sourced partner a the relationship deal we’ve network It competitive actually longstanding of pretty ours that another through was a situation. had with.

Rob Glaser

And government, of technology system competitive. was aspect as understand, I The among split in of terms it, competitive it yes, different it the partners. implementation Japanese four has the

it’s international in technology one in computer business recognition want platform, we platform four face of the only that vision we So the and my with are the understanding mix. the used

Japanese domestic So the others providers. were all

is know the we we the So within far competitive piece broader obviously both to of other large of the selection And significant business. product. piece in We and a a within such as excited process were strategic very won, were were we one of that. only but ones, international don’t dynamics about the also I the get know as delighted what terms

Mike Ensing

one is international international. other – There

Rob Glaser

other, one okay. was There

different not with But – integrator integrator. that. about Sorry our

Mike Ensing

Correct.

Mark Argento

what are algorithm actually providing the you integrator system doing And for partner guys [indiscernible] SAFR for the or you you’re the providing. solution, AI are the

Mike Ensing

Yes. Good question.

providing we’re algorithm gets that devices. the on embedded reader So actually these

Mark Argento

do there’s or I’m And is how it. kind that from of tune component you it. does licensing to look to elbow Got structure. fine continue you a to – And then I maintenance obviously, then with level the goes mean, there along the as any that there, guessing is such high

Rob Glaser

We that for The our say, is say we businesses, on for obviously our on of used. do individual deals, goal, solutions. deployed the to of can sometimes that customers is cameras that. based manifested relationships were based is on based get that the pay deals structures. are platform. more that’s to number comment business And device like camera get get which be based where I the it we the that deal – We would number associated are where more paid on scalable, generally based can can with of identities on we product don’t us identity can where

disaspirational, into plenty it’s if the sort long but scale we scale So can opportunities integrated up. get large we which of to view, operations, deeply is take there’s of

associated with love at scalability So but set the has statement it. of of it’s tends and a based. on we be attached that’s associated about revenue And today. the that SaaS of it’s because SAFR SAFR more to then a KONTXT, of case something diverse least more with – It in business monthly volumes, ways doing with side, services usage with a

Mark Argento

or take technology camera to work the we are they And points or any any on to brand in the integrator, you that figure Is integration relationship. it. hardware potentially systems you the with get kind the like like you’re leverage there’s out of hardware. access like of relationship the there from is kind kind scalability any integration and that try a a have working with could leverage that where into doing hardwares side, other of you one of integrating sounds, like, provider, the Got main

Rob Glaser

a scalable us So allow – I system scale. think Nextware to is it’s a drive with very integrator and working pretty will them

Mark Argento

go piece is responding there Great. bit that little of in out with, Is rolls up. Pons, how And a on pivoting access gauge trying was the how of lot Maybe over, or government, testing to then you guys Bowler that roll control on with working of systems you’re it specific a DOD out. been the beta kind I’m expectations mentioned or have had talk it’s kind or think, about there. side scale integrator that them? your RFPs the that you it to could I coronavirus

Mike Ensing

Yes.

go significant well. potential is very, that XX-month And would So very a be then expect this POC beyond we there that. that rollout will

Rob Glaser

to a My again, would and customers I Bowler we I you about card is prove is few a subset them deals we that to newness of deployment sort about general out being because of say of want deployment ask of specific scale with. appreciate with in And two part technology, the see that Generally to their have there’s what part, start number that piece them. the in of Number of talked the of in Pons intended integrated of period. because a be

sometimes they they’re formally Sometimes have rollouts. And then faced are to scale POC, called opportunities there’s further. up in success,

they on are XXx much very do. to the depends always it Sometimes not but that with ratio, up trying would initial they’re larger opportunities what scale be, deployment

doing So we’re that you seed planting these what and in fertilizes percentage but we if of will that’s high early we’re hoping days. scales, of businesses the it and grows a think nature the and corn, is

Mark Argento

business, to been it of along, What’s start kind it’s of last And helpful. to of Great. XX% opportunity the into that, one is the some number, low What’s existing plugging got That’s rate accelerate see kind that KONTXT serves on that just you growth me? growth business, you maybe maybe more carriers. could growth? there, deeper to there the unlock there the need to go carriers, dynamic sign double-digit

Rob Glaser

without Well, about are development. are into in to talk that that that deals going it’s under products process hard

with accelerating technology derivative SAFR that difference well and broader and segments of that always be current is KONTXT business. portfolio – deployed today, focusing would go business can the cases, gets deployed in growing the big SMS MMS about your between what multiple customers doing have servicing that describing say and additional Let market of the tradeoff opportunity between that into of or today that new very share of is, them customers. KONTXT might or an I’d a developing the products SAFR And it’s We much me say growth just goal I customers scenarios and the we’re today. that it’s caught, image the hashing of broadening spam the in many with of of with significant messaging content getting image product being the utility use lot wasn’t and – embedded different a the in actually image. appeal because and is Mike there’s talked product, the spam on What because the was a an

able tricks And scalable because set add spam do to that extract and how to that mix. image so in being it a the high to figure of from the to pretty do that efficiently way, that are actually and our do and a out volumes

think really just has opportunities with opportunities Natural to serve. current markets business we at we’ll and we going to then value business – it. we Processing And applicable. see viability – technology great current our love have we’re we’ll customers with growth and And increased really, to of continue and significant the we created associated faster. grow we for and additional would in portfolio portfolio that it product Language the us I use keep, look where markets we’ll still new the And our the grow with is

Mark Argento

Great. Appreciate the color. everybody. Thanks,

Rob Glaser

Great.

Mike Ensing

Mark. you, Thank

Operator

would I of closing Rob our reached like the for over back turn the session. question-and-answer to conference have end comments. to We

Rob Glaser

family some made and and supply disruptions, the some Christine we’re we’re to are seeing as the that around of We colleagues some we’re chain and in Mike on impact Well, last We this full still the thanks well. I’ll world’s seeing – guess is of and not back healthy hope your the few to everyone references on made call a of to pandemic. everybody. progress things is say normal world. I a and of know and a friends the are, thing lot

to As pandemic vaccination, we phase in, hope safe. everyone go post not but this we’re stays continue through post

and forward driving business to think forward, keep the profit to in look you continuing that going us the in success to and to continue quarters to make engage months ahead. future, scale the are we investments weeks, going We’re and with

Operator

conclude does This you. Thank today’s conference.

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

Realnetworks (RNWK) 4 Nov 212021 Q3 Earnings call transcript