Q2 2022 RealNetworks Inc Earnings Call
Greetings and welcome to real networks, Inc. Second quarter 2022 earnings call.
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As a reminder, this conference is being recorded it is now my pleasure to introduce your host Brian in front of all Investor Relations for real networks. Thank you you may begin.
Thank you, Doug and welcome to real networks second quarter 2022 financial results Conference call before we begin I'd like to remind you that some matters discussed today are forward looking including statements regarding real networks future revenue operating expenses and adjusted EBITDA as well as trends affecting.
Its businesses and prospects for future growth profitability liquidity and financial condition.
Other forward looking statements include the company's plans to implement its strategy investments products and initiatives and restructuring efforts depending merger agreement as disclosed in the 8-K, we filed with the SEC on July 28, 2022, as well as the expected growth profitability and other benefits from these activities.
Today's call contains certain forward looking statements statements that express our belief and expectations and all statements other than statements of 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, including in the risk factors set forth in our most recent reports on Form 10-K, and Form 10-Q and in other reports copy of those filings can be obtained from the SEC or from the Investor Relations section of our corporate website.
Forward looking statements made today reflect real networks expectations as of today July 28 2022.
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 reason.
In addition, we will present certain financial measures on this call. It will be considered non-GAAP under the SEC's regulation G for reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Please refer to the information included in our press release and in our form 8-K, aided and submitted to the SEC.
Today, both of which can be found on our corporate website at investor Dot real networks Dot com under the financials tab with US today are Rob Glaser, Chairman and CEO and Christine Chambers, Senior Vice President CFO and Treasurer, Robert will discuss the company's strategy and the progress the company made during the second quarter of 2022 Kristina.
I'll conclude with a more detailed review of the financial results with that I will hand, the call over to Robert.
Brian Good afternoon, everyone and thanks for joining us.
Let me start with a recap of the announcement. We made this morning, then I'll summarize our Q2 business.
Actual results and finally I'll discuss how we're organizing the company for success going forward. After I conclude Christine <unk>, who will discuss our detailed financial results.
First this morning's announcement.
Earlier today, we announced the real networks and I have entered into a definitive merger agreement whereby my affiliates and I will buy the outstanding shares of the company for 73 cents per share.
The company shareholders will be asked to vote upon the adoption of the merger agreement and approval of the merger at a shareholders meeting called for such a purpose and the date, we announced the transaction is expected to close in the fourth quarter of 2022.
In our announcement I explained my thinking in the following way.
Well I found where that was 20 years ago, because I believe that the internet represented a once in a generation transformational opportunity for additional media I believe that machine learning based artificial intelligence represent just similar transformational opportunities today, albeit one that will take time and resources to fully realize I'm happy that the rollout with sport and I could reach alignment.
An agreement on a path to pursue this transformation with focus efficiency and speed by training, we're back into a private company and in a way that is fair to all shareholders.
Because we're going through a highly structured process, we're limited as to what we can say publicly accordingly, we will not be taking questions. Upon the conclusion of today's call.
Next topic is our quarterly results revenue in the second quarter was 11 $49 million down from $14 6 million in the second quarter of 2021 earnings per diluted share was a loss of 11.
Compared to a loss of three cents per diluted share in the prior year period in the second quarter 2022, adjusted EBITDA was a loss of $4 $2 million compared to an adjusted EBITDA loss of $4 $3 million in the prior year period.
Our results reflect steady progress with contact expected results in games and significant softness with safer.
Regarding context, we're seeing steady progress in adding additional customers and products in June we began a pilot program with Vodafone, Germany, a company. They were testing Vodafone called protect which is based on our context, where voice product. This program will warn Vodafone, Germany customers a potential fraudulent scammer spam type calls.
Regarding safer, we had a disappointing second quarter and overall first half of 'twenty 'twenty. Two we have a clear plan to address their issues centered on our launch in May a safer scan and the hiring of Paul the peso Who's just joined us as president of safer.
Paul brings a wealth of experience in the physical security space and is a proven leader with a track record of building and great significant businesses in the access control industry. He was most recently executive Vice President and general manager of Phoenix and access control as a service software solutions company that he co ran from its founding and was recently acquired by acre.
We believe Paul is the right leader to build a large and successful business based on our excellent safety platform and the exciting say per scan product.
In addition to Paul joining US we've also went up to changing our CFO position.
Ian Mcclain joined US in July and we officially begin as interim CFO and Treasurer on August 1st Brian . Most recently he served as President and CFO Telco, Inc. A leading computer security company, where he managed customer care supply chain purchasing engineering development finance human resources, I T and sales.
Brian has over 25 years experience in various financial leadership roles, Brian its a great skill set and relevant experiences will help us transition from pure software to a combination of software and AI software based hardware products.
With the addition of Paul Brian as well as micro Cooley, who joined US in April in his messaging similar Lilly who joined US last October and runs game House. We now have a strong set of leaders for our growth businesses Rios now transition to a decentralized structure with presidents for each of our growth initiatives, who report directly to me. We've also consolidated all of our Finance Foundation businesses.
Under a longtime real executive perhaps avoid we believe this structure will help us focus better and move faster chief success.
Okay.
Before moving the call to Christine I wanted to take a moment to thank both Mike and Sue and Christine Chambers for their hard work and dedication of all networks. They help lead real through enduring the heart of the pandemic and it helps set us up for our next chapter I wish each of them the best in your future endeavors, and with that I'll turn the corner over to Christine to review the second quarter financials.
Hudson detail Christine.
Thank you Rob and good afternoon, everyone. In my remarks today I will first review our consolidated second quarter results followed by a more detailed discussion of our segment business performance.
Total revenue for the second quarter was $11 9 million compared to $14 6 million in the prior year period.
Deferred revenue decreased 65% due to decreases in commercial sales and federal sales context revenue increased 18% year over year, driven primarily by image hashing. It feature introduced in late 2021 and by increased revenue in China.
Consumer media revenue in the second quarter 2022 increased <unk> 4 million year over year, driven primarily by our IP business and a large contract, especially late in the second call with it.
Games revenue for the second quarter of 2022 was down 1.2 million compared to the second quarter of 2021.
The decline in quarterly revenue was primarily driven by lower in game purchases and a lowest subscription counts.
Consolidated gross profit in the second quarter. It was $9 2 million compared to 11 million in the prior year driven by lower revenue.
As a percentage of revenue gross margin was 77% of two percentage points compared to the second quarter last year.
Total operating expenses in the second quarter were $14 1 million compared to $16 7 million in the prior year and.
The decrease was driven by cost reductions across the board.
Net loss for the quarter attributable to seem to be on networks was $5 1 million or 11 cents per diluted share compared to a net loss of $1 3 million or three cents per diluted share in the prior year period.
Second quarter 2022, adjusted EBITDA was a loss of 4.2 million compared to adjusted EBITDA loss of $4 3 million in the prior year period.
Now turning to our second quarter 2022 segment results in more detail.
Mobile services segment contribution margin was a loss of $2 9 million compared to a loss of $1 4 million in the prior year period.
Year over year change was driven primarily by decreased revenue in our legacy businesses.
Revenue in all states of business.
Considering the median.
Segment contribution margin was a gain of 700 million compared to a loss of eight zero.
0.8 million in the prior year period, the improvement was primarily due to a 21% increase in revenue and a 40%.
<unk> and operating expenses.
Games segment contribution margin was a loss of 0.2 million essentially flat when we compared to the prior year period revenue declines were offset by lower costs.
Turning to our balance sheet at June 30 is 2022, we had $14 4 million in unrestricted cash and cash equivalents compared to $27 1 million at December 30, <unk> 2021.
We had no borrowings outstanding on our revolving credit facility.
As mentioned we mentioned.
Mentioned, we continue to focus our resources on our AI based growth initiatives and carefully manage our expenses.
Within our states of businesses, we're investing in safety scanned and optimizing our geographic footprint.
I'll now turn back to Rob for some closing remarks.
Thank you Christine I appreciate all the hard work you put into real networks and again I wish you the best in your future endeavors.
As I mentioned earlier, we will not be conducting a Q&A session on today's call given the pending merger any shareholder comments regarding the merger should be addressed to Reals boards Independent Special Committee.
Thanks, and good afternoon.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.