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RealNetworks Announces First Quarter 2009 Results.

Article Excerpt
John Chapple Named to Board of Directors

SEATTLE, May 7 /PRNewswire-FirstCall/ -- Digital entertainment services company RealNetworks(R), Inc. today announced results for the first quarter ended March 31, 2009.

Quarterly Highlights: -- Revenue of $140.8 million -- Net loss of $(12.1) million or $(0.10) per share -- Adjusted EBITDA of $4.8 million -- Cash and short term investments of $376.5 million as of March 31, 2009

"In the midst of the deepest recession in decades, at RealNetworks we demonstrated our resiliency and delivered steady overall results," said Rob Glaser, RealNetworks' Chairman and CEO.

First Quarter Results

For the first quarter of 2009, revenue was $140.8 million, a decrease of 5%, compared with $147.6 million in the first quarter of 2008. Foreign currency exchange rate fluctuations negatively affected 2009 first quarter revenue by approximately $8.7 million compared with the year-ago quarter. Excluding the effects of these foreign exchange rate changes, revenue grew 1% year over year. Revenue trends in each of Real's businesses in the first quarter of 2009, including the effects of foreign currency exchange rate changes, compared with the year-earlier quarter were: a 16% increase in Music revenue to $44.1 million and a 3% increase in Games revenue to $32.8 million, offset by a 15% decrease in Technology Products and Solutions revenue to $43.6 million and a 23% decrease in Media Software and Services revenue to $20.3 million.

Net loss for the first quarter of 2009 was $(12.1) million, or $(0.10) per share, compared with net income of $2.4 million, or $0.02 per diluted share, in the first quarter of 2008. Adjusted EBITDA for the first quarter of 2009 was $4.8 million compared with $19.9 million in the first quarter of 2008. A reconciliation of GAAP net income to adjusted EBITDA is provided in the financial tables that accompany this release.

Gross margin was 60% in the first quarter of 2009 compared with 62% in the first quarter of 2008. Operating expenses for the first quarter of 2009 were $103.3 million, compared with $103.7 million in the first quarter of 2008. Operating expenses included $7.4 million and $7.3 million of related party advertising in Rhapsody America in the first quarter of 2009 and 2008, respectively.

Income tax provision was $1.5 million compared with $4.0 million in the year-earlier period. Interest income in the first quarter of 2009 was $1.2 million compared with $5.0 million in the year-earlier period.

As of March 31, 2009, Real had approximately $376.5 million in unrestricted cash, cash equivalents and short-term investments, of which nearly 90% is located in the U.S. In addition, Real has approximately $33.5 million in restricted cash and equity investments at March 31, 2009.

Business Outlook

Due to the high level of uncertainty regarding consumer spending, global economic trends, foreign currency exchange rate fluctuations and credit markets, RealNetworks is not providing quantitative guidance. The company expects 2009 to be a challenging year for consumer spending, online advertising and corporate infrastructure spending.

For the second quarter of 2009, Real expects overall revenue to decline year-over-year and to be flat to slightly down sequentially. Compared with the year-ago second quarter, the company expects second-quarter Music revenue to increase, and revenue in Games, Media Software and Services and Technology Products and Solutions to decline. Approximately 20% of Real's revenue is denominated in currencies other than the U.S. dollar, most notably the euro and Korean won. Based on current currency trends, Real expects revenues to be negatively affected by foreign currency rates in the second quarter.

The foregoing forward-looking statements reflect Real's expectations as of May 7, 2009. It is not Real's general practice to update these forward-looking statements until its next quarterly results announcement.

John Chapple Joins RealNetworks Board of Directors

RealNetworks also announced today that John Chapple has been appointed to the company's board of directors. Mr. Chapple brings to Real's board more than two decades of senior executive operating experience primarily with large telecommunications companies including Nextel Partners, where he served as CEO for eight years, and McCaw Cellular Communications. Mr. Chapple also serves on the board of directors of Yahoo! Inc. and Cbeyond, Inc., a voice and broadband Internet provider.

Mr. Chapple fills the vacancy on Real's board resulting from the resignation of Jeremy Jaech, which is also being announced today. Previously, Real had announced that Mr. Jaech would not be running for a new term on Real's board this year. Real anticipates nominating Mr. Chapple to serve a full term at Real's 2009 annual shareholders meeting later this year.

"We are delighted to have John Chapple join our board," said Mr. Glaser. "John's intellect, experience, and track record of creating substantial value will serve us well in the months and years ahead. I also want to thank Jeremy Jaech for...

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