RealNetworks, Inc.
Q4 2012 Earnings Call Transcript

Published: 6 Feb 2013

[Operator:]

Welcome and thank you for standing by. And welcome to the RealNetworks conference call. (Operator Instructions). Now I would like to turn the meeting over to Ms. Marj Charlier, Vice President of Investor Relations. You may begin.

[Marj Charlier:]

Thank you, Operator. And welcome to the RealNetworks' fourth quarter 2012 conference call. Before we begin, I remind you that some matters discussed today are forward-looking including statements regarding our future revenue, adjusted EBITDA, operating expenses, trends affecting its' businesses, and its' prospects for future growth, cost reductions, and profitability. Other forward-looking statements include the company's plans to reduce expenses, implement its' strategy, and simplify its' businesses as well as new products, value creation, and other benefits from those activities. All statements other than statements such as historical facts are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. We describe these and other risks in our SEC filings. A copy of those filings can be obtained from the SEC or from the investor relations section of our corporate website. These forward-looking statements reflect RealNetworks' expectations as of February 6th, 2013. The company undertakes no duty to update or revise any forward-looking statements made during this call whether as a result of new information, future events, or any other reasons. We will present certain financial measures on this call that will be considered non-GAAP under SEC regulation G. The reconciliation of each non-GAAP financial measures to the most directly comparable GAAP financial measure, please refer to the information included in our press release and in our 8-K dated and submitted to the SEC on February 6th, 2013. Both of which can be found at our corporate website at investor.realnetworks.com under the tab financial information. With me here today are Rob Glaser, Insurance CEO, and Sherman, and Tim Wan, Chief Financial Officer. Tim will provide a financial review of the fourth quarter and an outlook for the first quarter. And Rob will discuss the progress the company had made over the quarter. After their prepared remarks, they will take a few questions. To get things started, I'll turn this over to Tim. Tim.

[Tim W. Wan:]

Thank you, Marj. Earlier today, we released financial results for the fourth quarter of 2012. We will file our 10-K for 2012 soon. And I encourage you to review it and other SEC filings for a more thorough discussion and disclosure of our results. Today, I will review our fourth quarter financial results in detail and give some guidance for the first quarter of 2013. Total fourth quarter revenue was $67.3 million, reflecting a sequential increase of 14%. Our adjusted EBITDA in Q4 was $3.3 million versus a loss of $6 million in Q3. We are pleased with these results, which exceeded our guidance. Having said that, I want to put these results in context. They are the results of the following

[Robert Glaser:]

Thanks, Tim. Good afternoon, everyone and thanks for joining us. First, I’ll make a few brief comments about Q4 2012 and then I’ll turn my focus to 2013 and the year head. First, 2012. I’m pleased we’re able to return growth profitability in Q4. As Tim mentioned, there were three main factors that drove this result. First, the significant cost cutting we implemented beginning mid-year. Second, the successful release of RealPlayer 16 during the fourth quarter. And third, a few seasonal one-time items. Now, onto 2013. This year our focus is on competing implementation of the four objectives I laid out when I took over as interim CEO seven months ago. As a reminder, they are, one, any cash burn; two, putting a growth plan into place and into action; three, making Real a much simpler and much more focused company and four, moving quickly and having a strong bide towards action. If our sole focus as focus number one, we could have said today that we achieved our mission in Q4. However, our focus is on achieving all four of these objectives and thereby creating sustainable growth and profitability. To do that requires a modest amount of investment to create and produce compelling new products and services that are not simply upgrades of our current products. I’m pleased to report today that we’re making good progress on the other three objects as well. Regarding object two, putting a growth plan into place, we’re making very good progress. We expect to ship at least one major new product or service in each of our three major divisions during 2013. We believe that these new offerings will set us up for a durable return to growth and profitability for each business and therefore, for Real, that works as a whole. Regarding objective number three, making Real a much simpler, more focused place, we’re also making good progress. As Tim explained a few minutes ago, we’re rolling out a new segment and organizational structure to focus Real on its three main business segments. And as Tim also explained, we’re implementing a significantly more decentralized organizational model to support that structure. We think as a result, we will be more focused, move faster and we’ll be more responsive to the market in each of our three main businesses. Regarding the fourth point, moving quickly and having a biased towards action, I’m very pleased with the progress we’re making. We’re bringing a real sense of urgency and focus to everything we’re doing and our new decentralized organization is helping. Having said that, as the saying goes, nine women can’t get together and have a baby in one month. Developing new products in our business takes more time, especially when it’s committed as we are to building compelling sustainable products and services. In sum, I’m very confident that we’re in a path to revitalize Real and that the products and services we’re planning to bring out to market this year will enable to do so. Moreover, combined with the cost cuts we’ve already made or set in motion, I believe that we’re setting ourselves up both for growth and for sustainable profitability. With that, operator, let’s open up the call for questions.

[Operator:]

(Operator instructions). No questions asked.