Investor Presentation | November 2020
Safe harbor statement
This presentation contains forward-looking statements that involve risks and uncertainties, including statements relating to our current expectations regarding our future growth, profitability, and market position, our financial condition and liquidity, our strategic focus and initiatives, product plans, agreements with partners, and expectations and contingencies relating to the sale of Napster. All statements contained in this presentation that do not relate to matters of historical fact should be considered forward-looking statements. These statements reflect our expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results for RealNetworks, on a consolidated basis, to differ from the results predicted include: our ability to realize operating efficiencies, growth and other benefits from the implementation of our growth initiatives and restructuring efforts; cash usage and conservation, and the pursuit of additional funding sources; successful monetization of our products and services; competitive risks, including the emergence or growth of competing technologies, products and services; potential outcomes and effects of claims and legal proceedings; risks associated with key customer or strategic relationships and business acquisitions; challenges caused by the COVID-19 pandemic; disruptions in the global financial markets, including changes in consumer spending and impacts to credit availability; fluctuations in foreign currencies; and unique risk factors that relate to our Napster segment, such as risks stemming from its streaming music service and related music royalties. More information about potential risk factors that could affect our business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, 2019, its quarterly reports on Form 10-Q and in other reports and documents filed by RealNetworks from time to time with the Securities and Exchange Commission. 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 revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. RealNetworks assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.
SAFR™, Kontxt™, RealMedia® HD, RealPlayer®, GameHouse®, RealVideo®, RealAudio®, RealTimes®, LISTEN®, and other trademarks of
ours are used throughout this presentation.
SLIDE | 2
About us
RealNetworks, the inventor of the streaming media category, creates next-generation products that employ best-in-class artificial intelligence and machine learning to enhance and secure our daily lives.
SLIDE | 3
Investment highlights
- Emerging turnaround story
- Continued legacy of innovation
- Diverse business portfolio
- Promising new products in market to drive top-line growth
- Fostering worldwide technology and distribution partnerships
- Aligning and rightsizing business operations to enhance profitability
SLIDE | 4
2002
1995
Helix DNA | |||
RealAudio brings | 1998 | transcodes media | |
streaming audio to | into multiple | ||
the web | RealJukebox lets | formats | 2007 |
The streaming | users download | Ringback Tones | First DVR-like |
media category is | and manage digital | enhance the | recording of |
born | music | mobile experience | internet video |
2015 | ||
RealTimes uses AI to | 2020 | |
automate the creation of | ||
2018 | ||
sharable videos from photo | Rhapsody | |
libraries | ||
SAFR facial | acquisition by | |
MelodyVR Group | ||
GameHouse Original Stories | recognition offers | |
PLC announced | ||
brings unique narrative | advanced AI to | |
and supported by | ||
games to engage and | improve secure access | |
RealNetworks | ||
entertain | and convenience | |
1997 | 2000 | 2003 |
RealVideo brings | First video | Rhapsody is the |
mainstream TV to | streaming | first music |
the internet | subscription | subscription |
service | service to stream | |
music from the top | ||
five labels |
A legacy of innovation
2013 | 2017 |
RealPlayer Cloud | Kontxt AI gives mobile |
lets users move, | carriers class-of-service |
watch, and share | message handling |
video content | RealMedia HD next- |
LISTEN offers | generation codec achieves |
more ways to use | unprecedented size and |
ringback tones | quality with 4K video |
streaming |
2019
Rhapsody became majority owned by RealNetworks after it doubled its stake to become 84% owner of Napster
SLIDE | 5
A diversified business portfolio
The premier facial recognition platform for live video in the real world
Intelligent message classification and analysis to drive new revenue and stop spam
High quality, low overhead 8K video codec delivered to any screen without taxing networks, bandwidth, or batteries
Original subscription and free-to-play mobile games to engage and entertain
Napster is a music and audio streaming platform that provides consumer subscriptions and a B2B platform as a service
Also: Inter Carrier Messaging, Ringback Tones
MOBILE SERVICES
Also: RealPlayer, RMVB
CONSUMER MEDIA
Also: Zylom.com
GAMES
DIGITAL MUSIC
SLIDE | 6
The premier facial recognition platform for live video in the real world
- SAFR ranks as one of the fastest and most accurate facial recognition systems in the world
- SAFR is a top growth focus for RealNetworks
- Focused primarily on the traditional security and safety markets
- Creating innovations focused on new needs at the intersection of public health and public safety
The facial recognition market is expected to grow by an average of 21.3% over the next four years, to $9.6 billion by 2022*
*Allied Market Research
SLIDE | 7
Intelligent message classification and analysis to drive new revenue and stop spam
- Unmanaged mobile message delivery represents estimated carrier revenue loss of $15 billion annually
- Yearly A2P message volume will surge to 3.5 trillion by 2023*
- Enables new carrier service tiers and revenue streams eg 10DLC services in USA
- Next-generationspam filtering and gray route protection
*According to Juniper Research https://www.juniperresearch.com/press/press-releases/a2p-business-messages-to-reach-3-5-tn-2023
Traffic Analytics | Inline Spam Detection | Revenue growth enablement | ||||||
Content Classification | Offline Spam Detection | Antispam | ||||||
Clustering | Smishing Detection | |||||||
Policy Control | Compliance | |||||||
MSISDN Registry | ||||||||
SLIDE | 8
Best-in-class streaming media codec delivering crystal-clear 8K video at half the bitrate, allowing crisp and smooth playback on any device
- Ideal balance of quality vs. efficiency
- Higher compression efficiency, faster encoding time, and lower costs
- Mobile friendly, with low CPU consumption
Commercial deployment in China with CIBN OTT TV, reaching 110 million subscribers
SLIDE | 9
A unique category of narrative games with rich character development and engaging storylines
- Growth continues to be driven by the success of free- to-play casual mobile games
- Three live free-to play games in market
- Two new games in development
- 40+ story games
- Four wholly owned studios
- 160+ million downloads
- 3 million players per month
- $70M in mobile revenue
SLIDE | 10
RealNetworks announced support for the acquisition of Rhapsody International, Inc., which does business as Napster, by MelodyVR Group PLC on August 24, 2020
- RealNetworks is the majority owner of Napster, with an approximate 84% stake
- Transaction value: $70M (comprising payment by MelodyVR of $26.3M in combined cash and MelodyVR stock at closing, and assumption by MelodyVR of approximately $44M in Napster liabilities)
- Consideration payable to RealNetworks is subject to several factors, including deal costs, Napster repaying $3.9 million in debt, an escrow of $3.0 million, the mix of cash vs Melody stock and the market value of that stock, and payment to Columbus Nova that's tied to the January 2019 acquisition of CN's stake in Napster.
- The acquisition is expected to close in the fourth quarter of 2020
The Napster platform began
2020 with over 3 million users on four continents, delivering more than 90 million licensed tracks to consumers and the many B2B and Platform-as-a- Service partners. It served
10.8 billion streams in 2019 with revenues of $113 million.
SLIDE | 11
Quarterly revenue by business
$10.0 | ||||||||
6.9 7.2 | 7.5 | 7.6 | ||||||
7.0 | ||||||||
6.9 | 6.9 | 6.3 6.6 | 6.7 6.6 | 6.5 | ||||
6.4 | ||||||||
Millions | 6.0 | |||||||
5.6 | 5.7 | |||||||
$5.0 | 4.4 | |||||||
$ | 4.1 | 3.6 | ||||||
3.5 | 3.2 | |||||||
2.5 | 2.6 | 2.5 | ||||||
$0.0 | ||||||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | 3Q20 |
Consumer Media
Mobile Services
Games
Notes: In the third quarter of 2020, RealNetworks announced its support for the acquisition of Napster by MelodyVR Group. The transaction is expected to close in the fourth quarter of 2020. Napster is treated as a discontinued operation for accounting and disclosure purposes; therefore, results relate to the continuing operations of RealNetworks, which exclude Napster.
SLIDE | 12
Equity snapshot | Nasdaq: RNWK
Share Price(1): | $1.31 |
Shares Outstanding(2): | 38.3M |
Market Capitalization(1): | $50.1M |
Net Debt(3): | ($6.5)M |
Enterprise Value(1): | $43.7M |
- Values for Share Price, Market Capitalization and Enterprise Value are based off the closing share price on FactSet on November 4, 2020.
- Shares Outstanding is the number of shares of RNWK Common Stock as of October 29, 2020, as reported on Form 10-Q for the Fiscal Quarter ended September 30, 2020.
- Net Debt is total debt of $6.8M less the combined total of cash and cash equivalents of $13.2M, which is ($6.5)M, for the Fiscal Quarter ended September 30, 2020.
SLIDE | 13
Executive Management
Rob Glaser | Mike Ensing | Judd Lee | Michael Parham |
Founder, Chairman and CEO | President and COO | SVP, CFO | SVP, General Counsel |
Mr. Glaser has long been intrigued with | Mr. Ensing joined RealNetworks in | Mr. Lee serves as SVP, CFO, and | Mr. Parham has served as |
the nexus of media, computing, and | August 2020 as President and COO. | Treasurer of RealNetworks since April | RealNetworks' General Counsel and |
communications. Since founding Real | He served as RealNetworks' interim | 2020. Mr. Lee worked as an | Corporate Secretary since August |
in 1994, Mr. Glaser has played an | CFO and a strategic advisor from | independent consultant from March | 2012, and previously had served as |
integral role in the transformation of the | January through early May 2020. Mr. | 2019 until joining Real, prior to which | Associate General Counsel since |
internet into the next great mass | Ensing is a skilled business leader with | he was CFO of desktop virtualization | January 2004. Prior to joining |
medium. By creating innovative | over 25 years of experience in | provider Parallels Inc. from November | RealNetworks in March 2000, Mr. |
technology and services that make it | executive finance and operations at | 2016 until March 2019, after its | Parham was an attorney with IBM, |
easy for people to connect with and | large-scale organizations. | December 2018 sale to Corel | serving as Regional Counsel for IBM's |
enjoy digital media, RealNetworks and | Corporation. | Midwest region in Chicago. | |
Mr. Glaser are at the forefront of the | |||
digital media revolution. |
SLIDE | 14
Board of Directors
Rob Glaser | Bruce Jaffe | Chris Jones | Dawn G. Lepore |
Mr. Glaser has long been intrigued with | Mr. Jaffe has been a director of | Mr. Jones has been a director of | Ms. Lepore has been a director of |
the nexus of media, computing, and | RealNetworks since October 2015. He | RealNetworks since 2016. He currently | RealNetworks since October 2013. Ms. |
communications. Since founding Real in | is a consultant and investor with Three | serves as SVP of Product for Amperity, | Lepore served as interim Chief |
1994, Mr. Glaser has played an integral | Point Group, LLC, which he founded in | Inc., a privately held company providing | Executive Officer of Prosper |
role in the transformation of the internet | 2008 and which focuses on early stage | the world's first intelligent customer data | Marketplace, Inc., a privately held peer- |
into the next great mass medium. By | and growth technology companies. | platform. | to-peer lending marketplace, from |
creating innovative technology and | March 2012 to January 2013. | ||
services that make it easy for people to | |||
connect with and enjoy digital media, | |||
RealNetworks and Mr. Glaser are at the | |||
forefront of the digital media revolution. |
Erik Prusch | Michael Slade | Tim Wan |
Mr. Prusch has been a director of | Mr. Slade has been a director of | Mr. Wan has been a director of |
RealNetworks since December 2019. He | RealNetworks since November 2011. Mr. | RealNetworks since December 2019. He |
has served as Chief Executive Officer at | Slade is a co-founder of Second Avenue | is currently the Chief Financial Officer at |
several companies, including Harland | Partners, a provider of management, | Asana, Inc., a publicly traded company |
Clarke Holdings Corp., Outerwall Inc. | strategy and capital for early stage | that develops and offers a SaaS-based |
(formerly, Coinstar, Inc.), NetMotion | companies, where he has served as a | work management platform. |
Wireless, Inc., Lumension Security, Inc., | partner since 2000. | |
Clearwire Corporation, and Borland | ||
Software Corporation. |
SLIDE | 15
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RealNetworks Inc. published this content on 13 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 November 2020 18:20:01 UTC