Thu, 05/02/2019

    RealNetworks Announces First Quarter 2019 Financial Results

    SEATTLE, May 2, 2019 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in digital media software and services, today announced its financial results for the first quarter ended March 31, 2019. The results below reflect the consolidation of Napster's financial results into RealNetworks' financial statements for the first quarter of 2019 following the closing of the acquisition on January 18, 2019. Napster is reported as a new segment in RealNetworks' financial statements and related disclosures for the first quarter of 2019.

    • First quarter revenue of $39.5 million
    • Positive net income of $1.5 million, driven by one-time gain associated with acquisition of Napster to 84% majority owner
    • Announced SAFR for Security, integrating Real's best-of-breed video facial recognition product with leading Video Management Systems

    Management Commentary

    "We continued to drive forward with SAFR, which we believe is our single largest growth opportunity," said Rob Glaser, Chairman and CEO of RealNetworks. "Most notably, we launched SAFR for Security, which delivers tremendous value to security professionals by integrating our best-of-breed facial recognition solution with market leading Video Management Systems such as Genetec, Milestone Systems, and Digifort. We also significantly strengthened our senior management team by bringing in Jay Burrell as RealNetworks' Chief Revenue Officer for Computer Vision."

    Mr. Glaser added, "Our majority stake in Napster adds significant scale to our business. We look forward to continuing to work closely with Napster's CEO, Bill Patrizio, and the rest of the Napster management team to build on the great work they have done in the past year-and-a-half turning Napster around."

    First Quarter 2019 Financial Highlights

    • Revenue was $39.5 million (inclusive of $24.3 million from Napster) and compared to $16.6 million in the prior quarter and $19.7 million in the prior year period. Revenue for the first quarter of 2019 included a $0.6 million reduction to Napster's revenue as a result of purchase accounting.
    • Gross margin was 37%, down from 77% in the prior quarter and 74% in the prior year period. Napster's gross margin for the first quarter of 2019 was 16%.
    • Operating expenses increased $7.1 million, or 39%, from the prior quarter and increased $6.0 million, or 31%, from the prior year period. Napster's operating expenses were $5.5 million for the first quarter of 2019. Included in total operating expenses were $0.8 million of transaction costs related to the acquisition of Napster.
    • Net income attributable to RealNetworks was $1.5 million, or $0.04 per share, compared to net loss of $(6.9) million, or $(0.18) per share, in the prior quarter and a net loss of $(5.2) million, or $(0.14) per share, in the prior year period. Included in net income attributable to RealNetworks was of a gain of $12.3 million in the first quarter of 2019 related to the acquisition of Napster.
    • Adjusted EBITDA was a loss of $(7.9) million compared to a loss of $(4.1) million in the prior quarter and a loss of $(3.0) million in the prior year period. A reconciliation of GAAP net income (loss) including noncontrolling interests to adjusted EBITDA, a non-GAAP measure, is provided in the financial tables that accompany this release.
    • At March 31, 2019, the Company had $36.9 million in unrestricted cash and cash equivalents compared to $35.6 million at December 31, 2018. Napster's cash and cash equivalents were $10.1 million at the time of acquisition.

    Business Outlook

    For the second quarter of 2019, RealNetworks expects to achieve the following results including noncontrolling interests:

    • Total revenue is expected to be in the range of $43.0 million to $46.0 million.
    • Adjusted EBITDA loss is expected to be in the range of $(4.5) million to $(7.5) million.

    Acquisition of Napster

    As previously disclosed, on January 18, 2019, RealNetworks completed the acquisition of additional debt and equity interests in Rhapsody International, Inc., which does business as Napster, bringing RealNetworks' interest in Napster to 84% following the acquisition. RealNetworks committed to pay $1.0 million cash in connection with the closing and, subject to certain conditions, up to an additional $14.0 million over the following five years, with additional consideration depending on subsequent events, for a potential total of up to $40.0 million. Napster will continue to run as an independent subsidiary of RealNetworks with its own board of directors, strategy, and management team.

    RealNetworks recorded 100% of the estimated fair value of the assets acquired and liabilities assumed as of January 18, 2019, with the 16% of Napster that it does not own accounted for as a noncontrolling interest in the consolidated financial statements. Napster's results of operations and cash flows are included in the Company's consolidated results from the acquisition date forward. As part of this consolidation, the acquisition accounting treatment resulted in a non-cash gain of $12.3 million in the first quarter of 2019. RealNetworks' consolidated balance sheet reflects the estimated fair value of recognized intangibles (after amortization post-acquisition) totaling $22.7 million and residual goodwill of $48.5 million at March 31, 2019, and Napster's working capital deficit, which results in a consolidated working capital deficit.

    Due to the limited time since the closing of the transaction and the complexity of the transaction, the purchase price allocation is preliminary and subject to change, which may result from additional information becoming available and additional analyses being performed on these acquired assets and assumed liabilities. Such changes could impact the estimated fair value of any of the assets and liabilities assumed, noncontrolling interests, and gain recognized from consolidation.

    For additional details on the Napster acquisition, see RealNetworks' Annual Report on Form 10-K for the year ended December 31, 2018 and its upcoming 10-Q for the quarter ended March 31, 2019.

    New Lease Accounting Standard

    As of January 1, 2019, RealNetworks adopted the new accounting guidance related to leases, using the modified retrospective transition method, under which prior periods presented have not been recast to reflect adoption of the new guidance. As a result of this new guidance, the Company now capitalizes its operating leases, which previously were off-balance sheet obligations subject to disclosure but not recognition. Capitalization of the operating leases resulted in the recognition of a material amount of Operating lease assets and related Operating lease liabilities on its consolidated balance sheet, but did not impact its consolidated statement of operations.

    For additional details on the impact of the new guidance, see the Company's upcoming 10-Q for the quarter ended March 31, 2019.

    Conference Call and Webcast Information

    The Company will host a conference call today to review results and discuss its performance shortly after 4:30 p.m. ET / 1:30 p.m. PT. You may join the conference call by calling 1-877-451-6152 (United States) or 1-201-389-0879 (International). A telephonic replay of the call will also be available shortly after the completion of the call, until 11:59 pm ET on Thursday, May 23, 2019, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13689686.

    A live webcast will be available on RealNetworks' Investor Relations site under Events at http://investor.realnetworks.com and will be archived online upon completion of the conference call.

    About RealNetworks

    Building on a legacy of digital media expertise and innovation, RealNetworks has created a new generation of products that employ best-in-class artificial intelligence and machine learning to enhance and secure our daily lives. SAFR (www.safr.com) is the world's premier facial recognition platform for live video. Leading in real-world performance and accuracy as evidenced in testing by NIST, SAFR enables new applications for security, convenience, and analytics. Kontxt (www.kontxt.com) is the foremost platform for categorizing A2P messages to help mobile carriers build customer loyalty and drive new revenue through text message classification and antispam. For information about our other products, visit www.realnetworks.com.

    About Non-GAAP Financial Measures

    To supplement RealNetworks' consolidated financial information presented in accordance with GAAP in this press release, the company also discloses certain non-GAAP financial measures, including adjusted EBITDA and contribution margin by reportable segment, which management believes provide investors with useful information.

    In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) including noncontrolling interests to adjusted EBITDA and operating income (loss) by reportable segment to contribution margin by reportable segment.

    The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the quarterly earnings materials.  Please refer to Exhibit 99.2 ("Information Regarding Non-GAAP Financial Measures") to the company's report on Form 8-K, which is being submitted today to the SEC.

    Forward-Looking Statements

    This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to our current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our strategic focus and initiatives, agreements with partners, and the growth and future prospects relating to our Napster segment. All statements contained in this press release 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; 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; 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, 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.

    For More Information:

    Investor Relations for RealNetworks

    Kimberly Orlando, Addo Investor Relations

    310-829-5400

    IR@realnetworks.com

    RNWK-F

    RealNetworks, Inc. and Subsidiaries

    Condensed Consolidated Statements of Operations

    (Unaudited)

     
     

    Quarter Ended

    March 31,

     

    2019

     

    2018

     

     (in thousands, except per

    share data)

           

     Net revenue

    $

    39,472

       

    $

    19,650

     

     Cost of revenue

    24,870

       

    5,136

     

               Gross profit

    14,602

       

    14,514

     
           

     Operating expenses:

         

           Research and development

    8,833

       

    7,694

     

           Sales and marketing

    8,142

       

    5,997

     

           General and administrative

    8,364

       

    5,601

     

           Restructuring and other charges

    167

       

    501

     

           Lease exit and related benefit

       

    (325)

     
           

               Total operating expenses

    25,506

       

    19,468

     
           

     Operating loss

    (10,904)

       

    (4,954)

     
           

     Other income (expenses):

         

           Interest expense

    (166)

       

     

           Interest income

    77

       

    87

     

           Gain (loss) on equity investment, net

    12,338

       

     

           Other income (expenses), net

    127

       

    (41)

     
           

               Total other income (expenses), net

    12,376

       

    46

     
           

     Income (loss) before income taxes

    1,472

       

    (4,908)

     

     Income tax expense

    258

       

    270

     
           

    Net income (loss) including noncontrolling interests

    1,214

       

    (5,178)

     

    Net income (loss) attributable to noncontrolling interests

    (319)

       

     

    Net income (loss) attributable to RealNetworks

    $

    1,533

       

    $

    (5,178)

     
           

    Net income (loss) per share attributable to RealNetworks- Basic:

    $

    0.04

       

    $

    (0.14)

     

    Net income (loss) per share attributable to RealNetworks- Diluted:

    $

    0.04

       

    $

    (0.14)

     
           

     Shares used to compute basic net income (loss) per share

    37,820

       

    37,449

     

     Shares used to compute diluted net income (loss) per share

    37,912

       

    37,449

     

    RealNetworks, Inc. and Subsidiaries

    Condensed Consolidated Balance Sheets

    (Unaudited)

     
     

    March 31,

    2019

     

    December 31,

    2018

     

     (in thousands)

    ASSETS

     Current assets:

         

     Cash and cash equivalents

    $

    36,897

       

    $

    35,561

     

     Short-term investments

       

    24

     

     Trade accounts receivable, net

    32,427

       

    11,751

     

     Deferred costs, current portion

    299

       

    331

     

     Prepaid expenses and other current assets

    21,210

       

    5,911

     

     Total current assets

    90,833

       

    53,578

     
           

     Equipment and software

    35,779

       

    37,458

     

     Leasehold improvements

    3,207

       

    3,292

     

     Total equipment, software, and leasehold improvements

    38,986

       

    40,750

     

     Less accumulated depreciation and amortization

    35,923

       

    37,996

     

     Net equipment, software, and leasehold improvements

    3,063

       

    2,754

     
           

     Operating lease assets

    13,943

       

     

     Restricted cash equivalents

    4,045

       

    1,630

     

     Other assets

    2,687

       

    3,997

     

     Deferred costs, non-current portion

    372

       

    528

     

     Deferred tax assets, net

    846

       

    851

     

     Other intangible assets, net

    22,692

       

    26

     

     Goodwill

    65,368

       

    16,955

     
           

     Total assets

    $

    203,849

       

    $

    80,319

     
           

     LIABILITIES AND SHAREHOLDERS' EQUITY

           

     Current liabilities:

         

     Accounts payable

    $

    4,564

       

    $

    3,910

     

     Accrued royalties, fulfillment and other current liabilities

    97,890

       

    11,312

     

     Commitment to Napster

       

    2,750

     

     Deferred revenue, current portion

    6,031

       

    2,125

     

     Notes payable

    13,313

       

     

     Total current liabilities

    121,798

       

    20,097

     
           

     Deferred revenue, non-current portion

    225

       

    268

     

     Deferred rent

       

    986

     

     Deferred tax liabilities, net

    1,268

       

    1,168

     

     Long-term lease liabilities

    10,929

       

     

     Other long-term liabilities

    10,875

       

    960

     
           

     Total liabilities

    145,095

       

    23,479

     
           

     Total shareholders' equity

    58,415

       

    56,840

     
           

    Noncontrolling interests

    339

       

     
           

     Total equity

    58,754

       

    56,840

     
           

     Total liabilities and equity

    $

    203,849

       

    $

    80,319

     

    RealNetworks, Inc. and Subsidiaries

    Condensed Consolidated Statements of Cash Flows

    (Unaudited)

     
     

    Three Months Ended

    March 31,

     

    2019

     

    2018

     

     (in thousands)

     

     Cash flows from operating activities:

         

     Net income (loss) including noncontrolling interests

    $

    1,214

       

    $

    (5,178)

     

     Adjustments to reconcile net income (loss) including noncontrolling interests to net cash used in operating activities:

         

    Depreciation and amortization

    1,482

       

    620

     

    Stock-based compensation

    1,384

       

    1,157

     

    Deferred income taxes, net

       

    (40)

     

    (Gain) loss on equity investment, net

    (12,338)

       

     

    Foreign currency (gain) loss

    (151)

       

     

    Mark to market adjustment of warrants

       

    21

     

    Net change in certain operating assets and liabilities

    (910)

       

    (2,005)

     

      Net cash used in operating activities

    (9,319)

       

    (5,425)

     

     Cash flows from investing activities:

         

    Purchases of equipment, software, and leasehold improvements

    (482)

       

    (316)

     

    Proceeds from sales and maturities of short-term investments

    24

       

    4,231

     

    Acquisition, net of cash acquired

    12,260

       

     

     Net cash provided by investing activities

    11,802

       

    3,915

     

     Cash flows from financing activities:

         

    Tax payments from shares withheld upon vesting of restricted stock

    (271)

       

    (232)

     

    Proceeds from notes payable

    9,733

       

     

    Repayments of notes payable

    (8,437)

       

     

    Other financing activities

    450

       

     

     Net cash provided by (used in) financing activities

    1,475

       

    (232)

     

     Effect of exchange rate changes on cash, cash equivalents and restricted cash

    (207)

       

    331

     

     Net increase (decrease) in cash, cash equivalents and restricted cash

    3,751

       

    (1,411)

     

     Cash, cash equivalents and restricted cash, beginning of period

    37,191

       

    53,596

     

     Cash, cash equivalents and restricted cash, end of period

    $

    40,942

       

    $

    52,185

     

    RealNetworks, Inc. and Subsidiaries

    Supplemental Financial Information

    (Unaudited)

     
     

    2019

     

    2018

     

    Q1

     

     Q4

     

     Q3

     

     Q2

     

     Q1

     

     (in thousands)

    Net Revenue by Segment

                     

    Consumer Media (A)

    $

    2,486

       

    $

    4,068

       

    $

    4,733

       

    $

    3,884

       

    $

    5,483

     

    Mobile Services (B)

    6,939

       

    6,899

       

    7,348

       

    6,719

       

    8,704

     

    Games (C)

    5,710

       

    5,590

       

    5,498

       

    5,121

       

    5,463

     

    Napster (D)

    24,337

       

       

       

       

     

         Total net revenue

    $

    39,472

       

    $

    16,557

       

    $

    17,579

       

    $

    15,724

       

    $

    19,650

     
                       

    Net Revenue by Product

                     

    Consumer Media

                     

    - Software License (E)

    $

    735

       

    $

    2,049

       

    $

    2,746

       

    $

    1,808

       

    $

    3,337

     

    - Subscription Services (F)

    1,088

       

    1,153

       

    1,232

       

    1,225

       

    1,285

     

    - Product Sales (G)

    219

       

    257

       

    281

       

    299

       

    340

     

    - Advertising & Other (H)

    444

       

    609

       

    474

       

    552

       

    521

     
                       

    Mobile Services

                     

    - Software License (I)

    599

       

    514

       

    520

       

    469

       

    1,335

     

    - Subscription Services (J)

    6,340

       

    6,385

       

    6,828

       

    6,250

       

    7,369

     
                       

    Games

                     

    - Subscription Services (K)

    2,985

       

    3,014

       

    2,745

       

    2,689

       

    2,693

     

    - Product Sales (L)

    1,988

       

    2,013

       

    2,279

       

    1,953

       

    2,402

     

    - Advertising & Other (M)

    737

       

    563

       

    474

       

    479

       

    368

     
                       

    Napster

                     

    - Subscription Services (N)

    24,337

       

       

       

       

     
                       

         Total net revenue

    $

    39,472

       

    $

    16,557

       

    $

    17,579

       

    $

    15,724

       

    $

    19,650

     
                       

    Net Revenue by Geography

                     

    United States

    $

    18,970

       

    $

    7,697

       

    $

    9,026

       

    $

    7,646

       

    $

    11,434

     

    Rest of world

    20,502

       

    8,860

       

    8,553

       

    8,078

       

    8,216

     

         Total net revenue

    $

    39,472

       

    $

    16,557

       

    $

    17,579

       

    $

    15,724

       

    $

    19,650

     
     

    Net Revenue by Segment

    (A) The Consumer Media segment primarily includes revenue from the licensing of our portfolio of video codec technologies. Also included is RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software to consumers, and consumer subscriptions such as RealPlayer Plus and SuperPass.

    (B) The Mobile Services segment primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.

    (C) The Games segment primarily includes revenue from sales of mobile and PC games, online games subscription services, player purchases of in-game virtual goods, and advertising on games sites and social network sites.

    (D) The Napster segment primarily includes revenue from subscription music offerings from on-demand streaming services and conditional downloads. Napster revenues are included in our consolidated results from the acquisition date forward.

     

    Net Revenue by Product

    (E) Software licensing revenue within Consumer Media includes revenues from licenses of our video codec technologies.

    (F) Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.

    (G) Product sales within Consumer Media includes sales of RealPlayer Plus software to consumers.

    (H) Advertising & other revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.

    (I) Software license revenue within Mobile Services includes revenue from our integrated RealTimes platform.

    (J) Subscription services revenue within Mobile Services includes revenue from ringback tones and our messaging platform services, as well as from related professional services provided to mobile carriers.

    (K) Subscription services revenue within Games includes revenue from online games subscriptions.

    (L) Product sales revenue within Games includes revenue from retail and wholesale games-related revenue, sales of mobile games, and player purchases of in-game virtual goods.

    (M) Advertising & other revenue within Games includes advertising on games sites and social network sites.

    (N) Subscription services revenue within Napster includes music tracks by way of on-demand streaming and conditional downloads offered directly to end consumers and distribution partners.

    RealNetworks, Inc. and Subsidiaries

    Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin

    (Unaudited)

     
     

    2019

     

    2018

     

    Q1

     

    Q4

     

    Q1

     

     (in thousands)

    Consumer Media

             
               

    Net revenue

    $

    2,486

       

    $

    4,068

       

    $

    5,483

     

    Cost of revenue

    833

       

    882

       

    993

     

    Gross profit

    1,653

       

    3,186

       

    4,490

     
               

    Gross margin

    66

    %

     

    78

    %

     

    82

    %

               

    Operating expenses

    3,119

       

    3,614

       

    3,918

     

    Operating income (loss), a GAAP measure

    $

    (1,466)

       

    $

    (428)

       

    $

    572

     

    Depreciation and amortization

    54

       

    49

       

    46

     
               

    Contribution margin, a non-GAAP measure

    $

    (1,412)

       

    $

    (379)

       

    $

    618

     
               

    Mobile Services

             
               

    Net revenue

    $

    6,939

       

    $

    6,899

       

    $

    8,704

     

    Cost of revenue

    2,048

       

    2,121

       

    2,316

     

    Gross profit

    4,891

       

    4,778

       

    6,388

     
               

    Gross margin

    70

    %

     

    69

    %

     

    73

    %

               

    Operating expenses

    7,561

       

    6,906

       

    7,366

     

    Operating income (loss), a GAAP measure

    $

    (2,670)

       

    $

    (2,128)

       

    $

    (978)

     

    Acquisitions related intangible asset amortization

       

    69

       

    92

     

    Depreciation and amortization

    231

       

    116

       

    180

     
               

    Contribution margin, a non-GAAP measure

    $

    (2,439)

       

    $

    (1,943)

       

    $

    (706)

     
               

    Games

             
               

    Net revenue

    $

    5,710

       

    $

    5,590

       

    $

    5,463

     

    Cost of revenue

    1,670

       

    1,622

       

    1,817

     

    Gross profit

    4,040

       

    3,968

       

    3,646

     
               

    Gross margin

    71

    %

     

    71

    %

     

    67

    %

               

    Operating expenses

    5,037

       

    4,865

       

    4,917

     

    Operating income (loss), a GAAP measure

    $

    (997)

       

    $

    (897)

       

    $

    (1,271)

     

    Acquisitions related intangible asset amortization

    23

       

    23

       

     

    Depreciation and amortization

    83

       

    82

       

    165

     
               

    Contribution margin, a non-GAAP measure

    $

    (891)

       

    $

    (792)

       

    $

    (1,106)

     
               

    Napster

             
                           

    Net revenue

    $

    24,337

       

    $

       

    $

     

    Cost of revenue

    20,396

       

       

     

    Gross profit

    3,941

       

       

     
               

    Gross margin

    16

    %

     

    %

     

    %

               

    Operating expenses

    5,532

       

       

     

    Operating income (loss), a GAAP measure

    $

    (1,591)

       

    $

       

    $

     

    Acquisitions related intangible asset amortization

    943

       

       

     

    Depreciation and amortization

    115

       

       

     
               

    Contribution margin, a non-GAAP measure

    $

    (533)

       

    $

       

    $

     
               

    Corporate

             
               

    Cost of revenue

    $

    (77)

       

    $

    (898)

       

    $

    10

     

    Gross profit

    77

       

    898

       

    (10)

     
               

    Gross margin

    N/A

       

    N/A

       

    N/A

     
               

    Operating expenses

    4,257

       

    3,001

       

    3,267

     

    Operating income (loss), a GAAP measure

    $

    (4,180)

       

    $

    (2,103)

       

    $

    (3,277)

     

    Other income (expense), net

    127

       

    92

       

    (41)

     

    Foreign currency (gain) loss

    (151)

       

    (26)

       

    22

     

    Depreciation and amortization

    33

       

    58

       

    137

     

    Restructuring and other charges

    167

       

    553

       

    501

     

    Stock-based compensation

    1,384

       

    395

       

    1,157

     

    Lease exit and related benefit

       

       

    (325)

     
               

    Contribution margin, a non-GAAP measure (1)

    $

    (2,620)

       

    $

    (1,031)

       

    $

    (1,826)

     
     

    (1)2018 Corporate contribution margin was revised to exclude the impact of realized and unrealized foreign currency (gain) loss incurred in each respective period. Foreign currency (gain) loss is reported in Other income (expense), net, in our consolidated statement of operations.

    RealNetworks, Inc. and Subsidiaries

    Reconciliation of Net income (loss) including noncontrolling interests to adjusted EBITDA, a non-GAAP measure

    (Unaudited)

     
     

    2019

     

    2018

     

     Q1

     

     Q4

     

     Q1

     

    (in thousands)

               

    Reconciliation of GAAP Net income (loss) including noncontrolling interests to adjusted EBITDA:

               

    Net income (loss) including noncontrolling interests

    $

    1,214

       

    $

    (6,904)

       

    $

    (5,178)

     

    Income tax expense (benefit)

    258

       

    1,494

       

    270

     

    Interest expense

    166

       

       

     

    Interest income

    (77)

       

    (74)

       

    (87)

     

    (Gain) loss on equity investment, net

    (12,338)

       

       

     

    Foreign currency (gain) loss

    (151)

       

    (26)

       

    22

     

    Equity in net loss of Napster

       

    20

       

     

    Acquisitions related intangible asset amortization

    966

       

    92

       

    92

     

    Depreciation and amortization

    516

       

    305

       

    528

     

    Restructuring and other charges

    167

       

    553

       

    501

     

    Stock-based compensation

    1,384

       

    395

       

    1,157

     

    Lease exit and related benefit

       

       

    (325)

     

       Adjusted EBITDA, a non-GAAP measure (1)

    $

    (7,895)

       

    $

    (4,145)

       

    $

    (3,020)

     
     

    (1)2018 adjusted EBITDA was revised to exclude the impact of realized and unrealized foreign currency (gain) loss incurred in each respective period. Foreign currency (gain) loss is reported in Other income (expense), net, in our consolidated statement of operations.