RealNetworks (RNWK) Reports Q3 Loss of $0.12, Miss on Revenues; Offers Q4 Revenue Guidance

RealNetworks (NASDAQ: RNWK) reported Q3 EPS of ($0.12), versus $0.00 reported last year. Revenue for the quarter came in at $30 million versus the consensus estimate of $33.11 million.

Third Quarter 2017 Financial Highlights

• Revenue was $30.0 million, down from $33.1 million in the prior quarter and $31.1 million in the prior year period.
• Operating expenses declined by $0.8 million, or 4%, from the prior quarter and by $5.0 million, or 22%, from the same period in 2016.
• Net loss was $(4.3) million or $(0.12) per share, compared to $(3.4) million or $(0.09) per share in the prior quarter and $(3.1) million or $(0.08) per share in the third quarter of 2016.
• Adjusted EBITDA was a loss of $(2.3) million compared to a loss of $(0.8) million in the prior quarter and $(4.4) million in the third quarter of 2016. A reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
• As of September 30, 2017, the Company had $59.1 million in unrestricted cash, cash equivalents and short-term investments, compared to $62.5 million as of June 30, 2017.

Business Outlook

For the fourth quarter of 2017, RealNetworks expects to achieve the following results:

• Total revenue is expected to be in the range of $29 million to $31 million.
• Adjusted EBITDA loss is expected to be in the range of $(2.0) million to $(4.0) million.

Included in our guidance for the fourth quarter of 2017 is revenue from our music on demand customer in Korea. The nature of our relationship with this customer has evolved over time. Over the course of the relationship, profitability has declined meaningfully and currently delivers less than 3% gross margin on contracted revenues. The contract is set to expire at the end of 2017 and we do not anticipate renewal.

Revenue attributable to this contract was $11.4 million and $33.8 million for the three and nine months ended September 30, 2017, respectively. For the three and nine months ended September 30, 2017, gross profit attributable to this contract was $250 thousand and $900 thousand, respectively.

GUIDANCE:

RealNetworks sees Q4 2017 revenue of $29-31 million.

For earnings history and earnings-related data on RealNetworks (RNWK) click here.

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