@import url(http://finance.paidcontent.org/client/paidcontent/privatelabel.css);
July 31, 2008 at 16:00 PM EDT
RealNetworks Announces Second Quarter 2008 Results

SEATTLE, July 31 /PRNewswire-FirstCall/ -- Digital entertainment services company RealNetworks(R), Inc. (Nasdaq: RNWK) today announced results for the second quarter ended June 30, 2008.

    Quarterly Highlights:
    * Revenue of $152.6 million
    * Net loss of $1.3 million or $0.01 per share
    * Adjusted EBITDA of $17.4 million

"We achieved solid results in the second quarter," said Rob Glaser, CEO of RealNetworks. "We also launched a major initiative -- Music Without Limits -- that substantially strengthens Rhapsody by integrating mobile music and legal mp3s from all major labels."

For the second quarter of 2008, revenue grew 12% to $152.6 million compared with $136.2 million for the second quarter of 2007. Revenue growth in the second quarter of 2008 compared with the second quarter of 2007 was due to: a 40% increase in Games revenue to $34.9 million, of which $4 million was due to the acquisition of TryMedia; a 15% increase in Media Software and Services revenue to $29.2 million; a 5% increase in Technology Products and Solutions revenue to $51.3 million; and a 1% increase in music revenue to $37.2 million. Foreign currency exchange rate fluctuations positively affected 2008 second quarter revenue by approximately $1.1 million compared with the second quarter of 2007.

Net loss for the second quarter of 2008 was $1.3 million or $0.01 per share, compared with net income of $1.3 million or $0.01 per diluted share in the second quarter of 2007. Income taxes were $3.7 million compared with $2.2 million in the year-earlier period, and interest income was $3.4 million compared with $8.1 million. Adjusted EBITDA for the second quarter of 2008 was $17.4 million compared with $12.7 million in the second quarter of 2007. A reconciliation of GAAP net income to adjusted EBITDA is provided in the financial tables that accompany this release.

Gross margin was 64% in the second quarter of 2008, consistent with the gross margin a year earlier. Operating expenses for the second quarter of 2008 were $109.7 million, compared with $92.1 million in the second quarter of 2007. Operating expenses in the second quarter of 2008 included $9.2 million of related party advertising in Rhapsody America.

As of June 30, 2008, Real had approximately $523 million in unrestricted cash, cash equivalents and short-term investments, and $100 million of convertible debt. On July 1, $99.9 million of the convertible debt was repaid.

During the quarter, RealNetworks repurchased 218,000 shares of its common stock for approximately $1.5 million under a repurchase authorization approved by the board in April, 2008. Since the beginning of 2005, Real has repurchased approximately 44.4 million shares through its repurchase programs for $333.5 million.

Business Outlook

The following forward-looking statements reflect Real's expectations as of July 31, 2008. It is not Real's general practice to update these forward- looking statements until its next quarterly results announcement.

For the full year 2008, Real expects revenue in the range of $620 million to $630 million. Real expects 2008 GAAP net loss per share to be between $(0.06) and $(0.02) and adjusted EBITDA of between $63 million to $70 million. Real's earnings per share guidance for 2008 includes tax expense of between $7 million and $9 million, and pretax income is expected to be between a loss of $(2) million and income of $6 million.

For the third quarter of 2008, Real expects revenue in the range of $151 million to $155 million. Real expects third quarter GAAP net loss per share of $(0.05) to $(0.03), and expects adjusted EBITDA of between $10 million and $13 million. Real's earnings per share guidance for the third quarter of 2008 includes a tax benefit in the range of $1.4 million to $1.0 million, and pretax income is expected to be between a loss of $(8.6) million and a loss of $(5.2) million. For 2008, Real expects that small changes in its pre-tax earnings will result in large changes to its GAAP tax rate, which could significantly affect Real's quarterly GAAP results.

Webcast and Conference Call Information

The Company will host a webcast and conference call today at 5:00pm (Eastern)/ 2:00pm (Pacific). The live webcast featuring slides and audio, will be available at http://investor.realnetworks.com. Listeners must use RealPlayer(R) to listen to the conference call, which can be downloaded for free at http://www.real.com. The on-demand webcast will be available approximately two hours following the conclusion of the live webcast. Participants may access the conference call by dialing 800-857-5305 (773-681-5857 for international callers). The passcode is "Second Quarter Earnings," and the leader is Rob Glaser.

Telephonic replay will be available until 8:00 p.m. (Eastern), August 14, 2008. Dial In: 866-435-5410 (for domestic callers); and 203-369-1030 (for international callers).


    RNWK-F

ABOUT REALNETWORKS

RealNetworks, Inc. delivers digital entertainment services to consumers via PC, portable music player, home entertainment system and mobile phone. Real created the streaming media category in 1995 and has continued to lead the market with pioneering products and services, including: RealPlayer(R), the first mainstream media player to enable one-click downloading and recording of Internet video; the award-winning Rhapsody(R) digital music service, which delivers more than 1 billion songs per year; RealArcade(R), one of the largest casual games destinations on the Web; and a variety of mobile entertainment services, such as ringback tones, offered to consumers through leading wireless carriers around the world. RealNetworks' corporate information is located at http://www.realnetworks.com/company.

About Non-GAAP Financial Measures

To supplement RealNetworks' condensed consolidated financial statements presented in accordance with GAAP, we present investors with certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses.

     *    Adjusted EBITDA and adjusted EBITDA by reporting segment consist of
          net income excluding the impact of the following:  interest income,
          net; income taxes; depreciation; amortization (net of minority
          interest effect); stock-based compensation; expenses for employee
          stock options that were converted to cash rights; equity investment
          gains and losses from sales or impairments; income and expenses
          including charitable contributions related to the Microsoft
          agreements; and gain on initial formation of Rhapsody America.
     *    Adjusted cost of revenue consists of GAAP cost of revenue excluding
          stock-based compensation expenses, and acquisition costs including
          amortization of intangible assets (net of minority interest effect)
          and expenses for employee stock options that were converted to cash
          rights.
     *    Adjusted operating expenses consist of GAAP operating expenses
          excluding stock-based compensation expenses, antitrust litigation
          expenses (benefits) and acquisition costs including amortization of
          intangible assets (net of minority interest effect) and expenses for
          employee stock options that were converted to cash rights.

RealNetworks believes that the presentation of adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with our past financial reports, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Management has historically used these non-GAAP measures when evaluating operating performance because the inclusion or exclusion of the items described above provides additional useful measures of our operating results and facilitates comparisons of our core operating performance against prior periods and our business model objectives. We have chosen to provide this information to investors in order to enable them to perform additional analyses of past, present and future operating performance, to enable them to compare us to other companies, and as a supplemental means to evaluate our ongoing operations. Externally, we believe that adjusted EBITDA continues to be useful to investors in their assessment of our operating performance and the valuation of our company.

Internally, adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue, and adjusted operating expenses are significant measures used by management for purposes of:

     *    supplementing the financial results and forecasts reported to our
          board of directors;
     *    evaluating the operating performance of our company which includes
          direct and incrementally controllable revenue and costs of
          operations, but excludes items considered by management to be either
          non-cash or non-operating such as interest income and expense,
          stock-based compensation, tax expense, depreciation and
          amortization;
     *    managing and comparing performance internally across our businesses
          and externally against our peers;
     *    establishing internal operating budgets; and
     *    evaluating and valuing potential acquisition candidates.

Adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue, and adjusted operating expenses are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non- GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of RealNetworks' results as reported under GAAP. We expect to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. Some of the limitations in relying on our non-GAAP financial measures are:

     *    Adjusted EBITDA and adjusted EBITDA by reporting segment are
          measures which we have defined for internal and investor purposes
          and are not in accordance with GAAP.  A further limitation
          associated with these measures is that they do not include all costs
          and income that impact our net income and net income per share.  We
          compensate for these limitations by prominently disclosing GAAP net
          income (loss), which we believe is the most directly comparable GAAP
          measure, and providing investors with reconciliations from GAAP net
          income (loss) to adjusted EBITDA and adjusted EBITDA by reporting
          segment.
     *    Adjusted cost of revenue is limited in that it does not include
          stock-based compensation expenses, and certain costs associated with
          our acquisitions.  Adjusted operating expenses are limited in that
          they do not include stock-based compensation expenses, antitrust
          litigation expenses (benefit) and certain costs associated with our
          acquisitions.  We compensate for these limitations by prominently
          disclosing the reported GAAP results and providing investors with a
          reconciliation from GAAP to the adjusted amount.

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) to adjusted EBITDA, income before income taxes to adjusted EBITDA by reporting segment, GAAP cost of revenue to adjusted cost of revenue and GAAP operating expenses to adjusted operating expenses for the relevant periods.

Forward-Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to Real's current expectations for future revenue, GAAP net income (loss) per share, adjusted EBITDA, tax expense and pre-tax income, income tax expense, interest income, depreciation and amortization and stock-based compensation expense. Actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: risks associated with the ability to complete the previously announced casual games spin off transactions and their impact on the games business and Real's remaining businesses; potentially large changes in Real's GAAP tax rate that could result from even small changes in Real's pretax earnings; development and consumer acceptance of legal online music distribution services generally and RealNetworks' content services in particular because these are relatively new and unproven business models and markets; risks associated with the creation and operation of Rhapsody America; risks associated with acquisitions generally, and the acquisitions of WiderThan, Sony NetServices, GameTrust, Trymedia and Exomi in particular, including the risks of integration, unknown liabilities and operations in new markets and geographies; the potential that we will be unable to continue to enter into commercially attractive agreements with third parties for the provision of compelling content for our subscription service offerings; the emergence of new entrants and competition in the market for digital media subscription offerings and online music sales; the impact on our gross margins of content costs and from the mix of subscribers to subscription offerings with higher content costs than others; competitive risks, including competing technologies, products and services, and the competitive activities of our larger competitors, some of which have strong ties to streaming media users through other products; risks associated with the introduction of new products and services; risks inherent in strategic relationships, especially with competitors, and technology and service integration efforts; and risks relating to the ability of Real's strategic partners to generate subscribers for Real's digital content services. More information about potential risk factors that could affect RealNetworks' business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, and its quarterly reports on Form 10-Q and from time to time in other reports filed by RealNetworks with the Securities and Exchange Commission. More information about risks relating to the potential spin off of the games business is listed in the safe harbor for forward looking statements contained in the press release announcing the proposed spin off transaction as well as in our Form 10-Q to be filed for the quarter ended June 30, 2008. The preparation of our financial statements and forward-looking financial guidance requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. The Company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

RealNetworks, Rhapsody, RealPlayer and RealArcade are trademarks or registered trademarks of RealNetworks, Inc. or its subsidiaries. All other companies or products listed herein are trademarks or registered trademarks of their respective owners.



                     RealNetworks, Inc. and Subsidiaries
               Condensed Consolidated Statements of Operations
                                 (Unaudited)

                                         Quarters Ended     Six Months Ended
                                            June 30,             June 30,
                                         2008      2007       2008      2007
                                        (in thousands, except per share data)

     Net revenue                      $152,648  $136,171   $300,211  $265,643

     Cost of revenue                    55,645    49,199    111,038    95,142

       Gross profit                     97,003    86,972    189,173   170,501

     Operating expenses:
       Research and development         29,065    25,005     54,071    48,484
       Sales and marketing              53,054    50,081    106,650    99,781
       Advertising with related
        party (A)                        9,240       -       16,580       -
       General and administrative       18,337    17,063     35,421    34,417
       Restructuring charge                -         -          686       -

         Subtotal operating expenses   109,696    92,149    213,408   182,682

       Antitrust litigation benefit,
        net (B)                            -         -          -     (60,747)

         Total operating expenses      109,696    92,149    213,408   121,935

     Operating (loss) income           (12,693)   (5,177)   (24,235)   48,566

     Other income (expenses):
       Interest income, net              3,375     8,065      8,333    17,167
       Equity in net loss of investments  (107)      -         (198)     (132)
       Gain on sale of equity investment,
        net                                222       132        222       132
       Minority interest in Rhapsody
        America (C)                      8,177       -       16,792       -
       Gain on sale of interest in
        Rhapsody America (D)             3,371       -        7,097       -
       Other income                         50       485        818       952

         Other income, net              15,088     8,682     33,064    18,119

     Income before income taxes          2,395     3,505      8,829    66,685
     Income taxes                       (3,700)   (2,178)    (7,708)  (25,397)

     Net income                        $(1,305)   $1,327     $1,121   $41,288

     Basic net income per share         $(0.01)    $0.01      $0.01     $0.26
     Diluted net income per share       $(0.01)    $0.01      $0.01     $0.24

     Shares used to compute basic net
      income per share                 142,905   153,880    142,946   157,929
     Shares used to compute diluted
      net income per share             142,905   169,033    156,000   173,822


    (A) Consists of advertising purchased by Rhapsody America from MTV
        Networks (MTVN).  MTVN has a 49% ownership interest in Rhapsody
        America.

    (B) Consists of amounts received under the Settlement and Commercial
        agreements with Microsoft, net of certain legal fees, personnel costs,
        public relations and other professional service fees incurred related
        to antitrust complaints against Microsoft, including proceedings in
        the European Union.

    (C) Minority interest reflects MTVN's 49% ownership share in the losses of
        Rhapsody America.

    (D) Consists of gains realized from MTVN's note payments to Rhapsody
        America.



                     RealNetworks, Inc. and Subsidiaries
                    Condensed Consolidated Balance Sheets
                                 (Unaudited)

                                                  June 30,        December 31,
                                                    2008              2007
                                                       (in thousands)
                                ASSETS

     Current assets:
       Cash and cash equivalents                  $415,805          $476,697
       Short-term investments                      106,862            79,932
       Trade accounts receivable, net               71,177            84,674
       Deferred costs, current portion               8,598             6,408
       Prepaid expenses and other current assets    39,168            33,845

         Total current assets                      641,610           681,556

     Equipment, software, and leasehold
      improvements, at cost:
       Equipment and software                      124,406           109,621
       Leasehold improvements                       30,875            30,632
       Total equipment, software, and leasehold
        improvements                               155,281           140,253
       Less accumulated depreciation and
        amortization                                94,763            83,756

         Net equipment, software, and leasehold
          improvements                              60,518            56,497

     Restricted cash equivalents and investments    14,670            15,509
     Equity investments                              8,126             9,976
     Other assets                                   16,419            10,161
     Deferred tax assets, net, non-current portion  40,169            40,913
     Other intangible assets, net                   90,506           107,677
     Goodwill                                      341,551           353,153

         Total assets                           $1,213,569        $1,275,442

    LIABILITIES AND SHAREHOLDERS' EQUITY

     Current liabilities:
       Accounts payable                            $29,748           $56,160
       Accrued and other liabilities               106,654           114,136
       Deferred revenue, current portion            40,680            39,564
       Related party payable (A)                     9,992            17,241
       Convertible debt                            100,000           100,000
       Accrued loss on excess office facilities,
        current portion                              4,311             3,389

         Total current liabilities                 291,385           330,490

     Deferred revenue, non-current portion           1,608             2,663
     Accrued loss on excess office facilities, non-
      current portion                                4,797             7,311
     Deferred rent                                   4,675             4,518
     Deferred tax liabilities, net, non-
      current portion                               18,311            22,060
     Other long-term liabilities                    10,152            13,683

         Total liabilities                         330,928           380,725

     Minority interest (B)                          10,931            19,613

     Shareholders' equity                          871,710           875,104

         Total liabilities and shareholders'
          equity                                $1,213,569        $1,275,442

    (A) Related party payable reflects amounts owed to MTVN.

    (B) Minority interest reflects MTVN's 49% ownership interest in the net
        assets of Rhapsody America.



                     RealNetworks, Inc. and Subsidiaries
               Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)

                                                   Six Months Ended June 30,
                                                    2008              2007
                                                        (in thousands)
     Cash flows from operating activities:
     Net income                                     $1,121           $41,288
     Adjustments to reconcile net income to net
      cash (used in) provided by operating
      activities:
       Depreciation and amortization                25,701            20,905
       Stock-based compensation                     11,520            11,307
       Loss on disposal of equipment, software,
        and leasehold improvements                     182               163
       Equity in net loss of investments               198               132
       Gain on sale of equity investment, net         (222)             (132)
       Excess tax benefit from stock option
        exercises                                      (88)             (596)
       Accrued loss on excess office facilities     (1,593)           (1,795)
       Unrealized gain on trading securities           -              (2,102)
       Purchase of trading securities                  -            (270,000)
       Deferred income taxes                        (2,138)           (6,069)
       Minority interest in Rhapsody America       (16,792)              -
       Gain on sale of interest in Rhapsody
        America                                     (7,097)              -
       Other                                            89                51
       Net change in certain assets and
        liabilities, net of acquisitions           (39,159)              552

       Net cash used in operating activities       (28,278)         (206,296)

     Cash flows from investing activities:
       Purchases of equipment, software, and
        leasehold improvements                     (15,231)          (11,525)
       Purchases of short-term investments         (95,671)          (38,768)
       Proceeds from sales and maturities
        of short-term investments                   68,741            70,343
       Purchases of intangible assets                  -              (2,060)
       Proceeds from the sales of equity
        investments                                  1,225             1,615
       Payment of acquisition costs, net of
        cash acquired                              (10,164)          (25,351)
       Decrease in restricted cash equivalents
        and investments                                839             1,800

         Net cash used in investing activities     (50,261)           (3,946)

     Cash flows from financing activities:
       Net proceeds from sales of common
        stock under employee stock purchase
        plan and exercise of stock options           6,041            12,277
       Net proceeds from sales of interest
        in Rhapsody America                         14,607               -
       Excess tax benefit from stock option
        exercises                                       88               596
       Repurchase of common stock                     (681)         (107,905)

         Net cash provided by (used in)
          financing activities                      20,055           (95,032)

     Effect of exchange rate changes on cash        (2,408)             (410)

         Net decrease in cash and cash
          equivalents                              (60,892)         (305,684)

     Cash and cash equivalents, beginning
      of period                                    476,697           525,232

     Cash and cash equivalents, end of period     $415,805          $219,548



                     RealNetworks, Inc. and Subsidiaries
                      Supplemental Financial Information
                                 (Unaudited)

                             2008                          2007
                         Q2         Q1       Q4        Q3       Q2       Q1
                                           (in thousands)
     Net Revenue by
      Line of Business:
     Consumer
      products and
      services (A)    $101,353   $96,286  $96,998    $91,824  $87,115  $85,040
     Technology
      products and
      solutions (B)     51,295    51,277   59,884     53,271   49,056   44,432

     Total net
      revenue         $152,648  $147,563 $156,882   $145,095 $136,171 $129,472

     Consumer
      Products and
      Services:
     Subscriptions (C) $55,658   $55,193  $54,784    $55,551  $51,091  $51,490
     Media
      properties (D)    23,472    18,702   20,438     16,071   17,748   15,932
     E-commerce and
      other (E)         22,223    22,391   21,776     20,202   18,276   17,618

     Total
      consumer
      products and
      services
      revenue         $101,353   $96,286  $96,998    $91,824  $87,115  $85,040

     Consumer
      Products and
      Services:
     Music (F)         $37,170   $38,079  $40,540    $37,658  $36,801  $34,127
     Media software
      and services (G)  29,238    26,409   25,572     25,346   25,419   27,011
     Games (H)          34,945    31,798   30,886     28,820   24,895   23,902

     Total consumer
      products and
      services
      revenue         $101,353   $96,286  $96,998    $91,824  $87,115  $85,040

     Net Revenue by
      Geography:
     United States    $100,898   $99,169  $96,806    $91,281  $88,035  $84,554
     Rest of world      51,750    48,394   60,076     53,814   48,136   44,918

     Total net
      revenue         $152,648  $147,563 $156,882   $145,095 $136,171 $129,472

    Subscribers
     (presented
     as greater
     than) *:
    Total
     subscribers (I)    35,000    32,200   30,200     29,250   26,150   24,550
    Technology
     products and
     solutions
     application
     services
     subscribers (J)    32,450    29,500   27,600     26,600   23,600   21,900
    Music
     subscribers:
      Consumer
       music
       subscribers (K)   1,875     1,875    1,900      1,925    1,850    1,875
      Technology products
       and solutions
       application
       services music
       subscribers (L)     800       800      825        825      825      800
    Total Music
     Subscribers**       2,675     2,675    2,725      2,750    2,675    2,675

    *     Beginning the quarter ended December 31, 2006, total subscribers
          reflect the inclusion of subscribers related to wireless carrier
          application subscription services. Total music subscribers includes
          subscribers from our technology products and solutions application
          subscription services, such as music-on-demand, as well as our
          consumer music services, such as Rhapsody and Premium Radio.
          Although music-on-demand subscribers are included in the technology
          products and solutions application services subscribers and total
          music subscribers, these subscribers are only counted once as part
          of our total subscribers.


    **    Prior periods have been changed to reflect current period
          presentation. Totals may not equal due to rounding convention.


    (A)   Revenue is derived from consumer digital media subscription
          services, RealPlayer Plus and related products, sales and
          distribution of third party software products, content such as games
          and music and advertising.

    (B)   Revenue is derived from carrier application services such as
          ringback tones and music-on-demand, media delivery system software,
          support and maintenance services, broadcast hosting services and
          consulting services.

    (C)   Revenue is derived from consumer digital media subscription services
          including:  SuperPass, RadioPass, Rhapsody, GamePass and stand-alone
          subscriptions.

    (D)   Revenue is derived from advertising and through the distribution of
          third party products.

    (E)   Revenue is derived from RealPlayer Plus and related products, sales
          of third party software products, and content such as games and
          music.
    (F)   Revenue is derived from Rhapsody and RadioPass subscription services
          and sales of music content, advertising generated from our music and
          music related websites and the distribution of third party products.

    (G)   Revenue is derived from SuperPass subscriptions, RealPlayer Plus and
          related products, stand-alone subscription services, sales and
          distribution of third-party software products and advertising
          related to our non-game and non-music related web properties.

    (H)   Revenue is derived from GamePass subscription service, sales of
          games, advertising generated from our games and game-related
          websites and the distribution of third-party products.

    (I)   Total subscribers include technology products and solutions
          application services and consumer subscription services including:
          ringback tones, music-on-demand, video-on-demand, Rhapsody,
          Rhapsody-to-Go, RadioPass, SuperPass, GamePass, and stand-alone
          subscriptions.
    (J)   Technology products and solutions application service subscribers
          include: ringback tones, music-on-demand and video-on-demand.

    (K)   Consumer music subscribers include: Rhapsody, Rhapsody-to-Go,
          premium radio, and music-on-demand.


    (L)   Technology products and solutions application services music
          subscribers include subscribers from application services including
          music-on-demand.



                     RealNetworks, Inc. and Subsidiaries
                      Supplemental Financial Information
                                 (Unaudited)

    Reconciliation of GAAP net income (loss) to adjusted EBITDA is as follows:

                                        Quarters Ended

                      June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
                        2008     2008     2007      2007      2007     2007
                                           (in thousands)

     Net income (loss)
      in accordance
      with GAAP        $(1,305)  $2,426   $2,685    $4,342   $1,327  $39,961
     Interest income,
      net               (3,375)  (4,958)  (6,417)   (7,290)  (8,065)  (9,102)
     Stock-based
      compensation       6,031    5,489    6,627     5,984    5,622    5,685
     Loss (gain) on
      equity
      investments, net    (222)     -         34        -       (132)     -
     Conversion of
      WiderThan stock
      options to a cash
      equivalent            26       89      190       413      614      845
     Depreciation and
      amortization (net
      of minority
      interest effect)   6,186    6,282    5,703     6,210    5,661    4,621
     Acquisitions
      related intangible
      asset amortization
      (net of minority
      interest effect)   6,171    6,315    6,639     5,583    5,311    5,312
     Gain on initial
      formation of
      Rhapsody America     -        -        -      (3,866)     -        -
     Expenses (benefit)
      related to
      antitrust
      litigation:
       Income              -        -        -         -        -    (61,000)
       Expenses            202      202      179       201      202      471
       Charitable
        contributions      -        -        -         -        -      1,921
     Income taxes        3,700    4,008       47     2,012    2,178   23,219

     Adjusted EBITDA   $17,414  $19,853  $15,687   $13,589  $12,718  $11,933



                     RealNetworks, Inc. and Subsidiaries
                        Segment Results of Operations
                                 (Unaudited)

                                    Quarter Ended June 30, 2008

                                                                        Grand
                            Music (A)  Consumer (B)   TPS (C)  Other    Total
                                                (in thousands)

    Net revenue               $37,170     $64,183    $51,295    $-   $152,648

    Cost of revenue            20,693      14,362     20,590     -     55,645

    Gross profit               16,477      49,821     30,705     -     97,003
    Gross margin                   44%         78%        60%    -         64%

    Operating expenses:
      Advertising with related
       party                    9,240         -          -       -      9,240
      Other operating expenses 23,412      44,029     32,778     237  100,456
        Total operating
         expenses              32,652      44,029     32,778     237  109,696

    Income (loss) from
     operations               (16,175)      5,792     (2,073)   (237) (12,693)

    Other income (expenses):
      Interest income, net        -           -          -     3,375    3,375
      Minority interest         8,177         -          -       -      8,177
      Equity in net loss of
       investments                -           -          -      (107)    (107)
      Gain on sale of equity
       investment, net            -           -          -       222      222
      Gain on sale of interest
       in  Rhapsody America     3,371         -          -       -      3,371
      Other income                -           -          -        50       50

        Other income, net      11,548         -          -     3,540   15,088

    Income (loss) before income
     taxes                    $(4,627)     $5,792    $(2,073) $3,303   $2,395



    Reconciliation of segment GAAP income (loss) before taxes to segment
    adjusted EBITDA is as follows:

      Income (loss) before income
       taxes                  $(4,627)     $5,792    $(2,073) $3,303   $2,395
      Interest income, net        -           -           -   (3,375)  (3,375)
      Stock-based compensation  1,089       2,331      2,611     -      6,031
      Conversion of WiderThan
       stock options to a cash
       equivalent                 -           -           26     -         26
      Acquisitions related
       intangible asset
       amortization (D)           384         914      4,873            6,171
      Gain on initial formation
       of Rhapsody America        -           -          -       -        -
      Gain on sale of equity
       investments, net           -           -          -      (222)    (222)
      Depreciation and
       amortization (D)         1,262       1,815      3,109     -      6,186
      Expenses (benefit)       related to
      antitrust litigation:
        Income                    -           -          -       -        -
        Expenses                  -           -          -       202      202
        Charitable
         contributions            -           -          -       -        -
           Adjusted EBITDA    $(1,892)    $10,852     $8,546    $(92) $17,414



                                          Quarter Ended June 30, 2007
                                                                        Grand
                             Music (A)  Consumer (B)   TPS (C)  Other   Total
                                                (in thousands)

    Net revenue               $36,801     $50,314    $49,056    $-   $136,171

    Cost of revenue            19,804       9,436     19,959     -     49,199

    Gross profit               16,997      40,878     29,097     -     86,972
    Gross margin                   46%         81%        59%    -         64%

    Operating expenses:
      Other operating
       expenses                24,037      34,814     33,096     202   92,149
        Total operating
         expenses              24,037      34,814     33,096     202   92,149

    Income (loss) from
     operations                (7,040)      6,064     (3,999)   (202)  (5,177)

    Other income (expenses):
      Interest income, net        -           -          -     8,065    8,065
      Gain on sale of equity
       investments, net           -           -          -       132      132
      Other income                -           -          -       485      485

        Other income, net         -           -          -     8,682    8,682

    Income (loss) before
     income taxes             $(7,040)     $6,064    $(3,999) $8,480   $3,505


Reconciliation of segment GAAP income (loss) before taxes to segment adjusted EBITDA is as follows:

      Income (loss) before
       income taxes            $(7,040)     $6,064    $(3,999) $8,480  $3,505
      Interest income, net         -           -          -    (8,065) (8,065)
      Stock-based compensation   1,129       2,142      2,351     -     5,622
      Conversion of WiderThan
       stock options to a cash
       equivalent                  -           -          614     -       614
      Acquisitions related
       intangible asset
       amortization (D)             22         583      4,706     -     5,311
      Gain on sale of equity
       investments, net            -           -          -      (132)   (132)
      Depreciation and
       amortization (D)          1,214       1,461      2,986     -     5,661
      Expenses (benefit)
       related to
       antitrust litigation:
        Income                     -           -          -       -       -
        Expenses                   -           -          -       202     202
        Charitable contributions   -           -          -       -       -
           Adjusted EBITDA     $(4,675)    $10,250     $6,658    $485 $12,718

     Note:     Cost of revenue and operating expenses of the segments shown
               above include costs directly attributable to those segments and
               an allocation of general and administrative and other common or
               shared costs.

     (A)  The Music segment primarily includes revenue and related costs from:
          Rhapsody America's Rhapsody and Radiopass subscription services;
          sales of digital music content through the Rhapsody service and the
          RealPlayer music store; and advertising from music websites.

     (B)  The Consumer segment primarily includes revenue and related costs
          from: the sale of individual games through our RealArcade service
          and our Games related websites; our GamePass and FunPass
          subscription service; our SuperPass and stand-alone premium video
          subscription services; RealPlayer Plus and related products; sales
          and distribution of third-party software products; and all
          advertising other than that related directly to our Music
          businesses.

     (C)  TPS comprises our Technology Products and Solutions segment which
          includes revenue and related costs from: sales of ringback tone,
          music-on-demand, video-on-demand, messaging, and information
          services; sales of media delivery system software, including Helix
          system software and related authoring and publishing tools, both
          directly to customers and indirectly through original equipment
          manufacturer (OEM) channels; support and maintenance services sold
          to customers who purchase software products; broadcast hosting
          services; and consulting and professional services that are offered
          to customers.

     (D)  Net of minority interest effect within our Music segment.



                     RealNetworks, Inc. and Subsidiaries
                      Supplemental Financial Information
                                 (Unaudited)

                                    Quarter Ended June 30, 2008

                                           Acquis-  WiderThan
                                           itions    Options
                                           Related  Converted  Anti-
                                  Stock-  Intangible  to a     trust
                                  Based     Asset     Cash    Litiga-
                         As       Compen-  Amortiz-   Equiv-   tion
                      Reported    sation   ation(A)   alent   Related Adjusted
                                              (in thousands)
     Expenses in
     accordance
     with GAAP

     Cost of revenue   $55,645     $(662) $(2,282)    $(1)    $-      $52,700

     Operating expenses:
       Research
        and
        development    $29,065   $(2,146)    $-      $-       $-      $26,919
       Sales and
        marketing       53,054    (1,433)  (3,889)     (7)     -       47,725
       Advertising
        with related
        party            9,240      -         -       -        -        9,240
       General and
        administrative  18,337    (1,790)     -       (18)    (202)    16,327
       Restructuring
        charge             -        -         -       -        -         -

         Total
          adjusted
          operating
          expenses,
          net         $109,696   $(5,369) $(3,889)   $(25)    $(202) $100,211



                                      Quarter Ended June 30, 2007

                                           Acquis-  WiderThan
                                           itions    Options
                                           Related  Converted  Anti-
                                  Stock-  Intangible  to a     trust
                                  Based     Asset     Cash    Litiga-
                         As       Compen-  Amortiz-   Equiv-   tion
                      Reported    sation    ation     alent   Related Adjusted
                                              (in thousands)
     Expenses in
      accordance
      with GAAP

    Cost of revenue    $49,199     $(154) $(1,988)  $(117)     $-     $46,940

    Operating expenses:
      Research and
       development     $25,005   $(1,641)    $-     $(128)     $-     $23,236
      Sales and
       marketing        50,081    (2,203)  (3,323)   (299)      -      44,256
      General and
       administrative   17,063    (1,624)     -       (70)     (202)   15,167
      Antitrust
       litigation
       benefit, net        -         -        -        -        -         -

        Total adjusted
         operating
         expenses,
         net           $92,149   $(5,468) $(3,323)   $(497)   $(202)  $82,659



                                    Six Months Ended June 30, 2008

                                           Acquis-  WiderThan
                                           itions    Options
                                           Related  Converted  Anti-
                                  Stock-  Intangible  to a     trust
                                  Based     Asset     Cash    Litiga-
                         As       Compen-  Amortiz-   Equiv-   tion
                      Reported    sation   ation(A)   alent   Related Adjusted
                                            (in thousands)
     Expenses in
      accordance
      with GAAP

    Cost of revenue   $111,038     $(896) $(4,597)    $(22)    $-    $105,523

    Operating expenses:
      Research and
       development     $54,071   $(4,059)    $-       $(46)    $-     $49,966
      Sales and
       marketing       106,650    (3,341)  (7,889)     (29)     -      95,391
      General and
       administrative   16,580       -        -        -        -      16,580
      Antitrust
       litigation
       benefit, net     35,421    (3,224)     -        (18)    (404)   31,775
      Restructuring
       charge              686       -        -        -        -         686

        Total adjusted
         operating
         expenses,
         net          $213,408  $(10,624) $(7,889)    $(93)   $(404) $194,398



                                    Six Months Ended June 30, 2007

                                           Acquis-  WiderThan
                                           itions    Options
                                           Related  Converted  Anti-
                                  Stock-  Intangible  to a     trust
                                  Based     Asset     Cash    Litiga-
                         As       Compen-  Amortiz-   Equiv-   tion
                      Reported    sation    ation     alent   Related Adjusted
                                             (in thousands)
     Expenses in
      accordance
      with GAAP

    Cost of revenue    $95,142     $(313) $(4,132)   $(244)    $-     $90,453

    Operating expenses:
      Research and
       development     $48,484   $(3,413)    $-      $(279)    $-     $44,792
      Sales and
       marketing        99,781    (4,590)  (6,491)    (648)     -      88,052
      General and
       administrative   34,417    (2,991)     -       (288)  (2,341)   28,797
      Antitrust
       litigation
       benefit, net    (60,747)      -        -        -      60,747      -

        Total
         adjusted
         operating
         expenses,
         net          $121,935  $(10,994) $(6,491) $(1,215) $58,406  $161,641



                     RealNetworks, Inc. and Subsidiaries
                      Supplemental Financial Information
                                 (Unaudited)

A reconciliation of GAAP net income (loss) guidance for the quarter ending September 30, 2008 and the full year ending December 31, 2008 to adjusted EBITDA guidance is as follows:

                                Quarter Ending               Year Ending
                               September 30, 2008          December 31, 2008
                                 Low         High           Low          High
     Net income (loss) in
      accordance with GAAP     $(7.2)       $(4.2)         $(9.0)       $(3.0)
     Interest income,
      net & other               (2.2)        (2.5)         (12.7)       (13.0)
     Stock-based
      compensation and
       conversion of
       WiderThan stock
       options to a
       cash equivalent           6.8          7.2           24.0         26.0
     Depreciation and
      amortization,
      including acquisitions
      related intangible
      asset amortization
      (net of minority
      interest effect)          14.0         13.5           53.7         51.0
     Income tax expense
      (benefit)                 (1.4)        (1.0)           7.0          9.0
       Total adjusted EBITDA   $10.0        $13.0          $63.0        $70.0

SOURCE RealNetworks, Inc.

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