RealNetworks, Inc. revenue dropped on 11.7% and EBITDA Margin decreased on 6.5 pp from -22.5% to -29.0%
02/06/2019 • About RealNetworks, Inc. (
$RNWK) • By InTwits
RealNetworks, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- RealNetworks, Inc. is a company in decline: 2018 revenue growth was -11.7%, 5 years revenue CAGR was -19.5%
- The company operates at negative EBITDA Margin: -29.0%
- RealNetworks, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 0.0% while average EBITDA Margin was -36.3% for the sames years
- RealNetworks, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $1m in 2018, $1m in 2017, $2m in 2016, $1m in 2015, $2m in 2014
- The company has unprofitable business model: ROIC is -32.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 11.7%. Revenue decline showed acceleration in 18Q4 - it was 12.2% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 10.9 pp from -15.1% to -4.2% in FY2018.
Gross Margin increased on 3.9 pp from 70.6% to 74.5% in 2018. Gross Margin stuck to a growing trend at 7.3 pp per annum in the last 5 years. SG&A as a % of Revenue increased on 4.4 pp from 55.8% to 60.2% in 2018.
Net Income margin dropped on 15.2 pp from -20.7% to -36.0% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 1.1%. The company's CAPEX/Revenue showed almost no change from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 1.7%.
Return on investment
The company operates at negative ROIC (-32.0%) and ROE (-36.7%). ROIC decreased on 7.9 pp from -24.1% to -32.0% in 2018. ROE dropped on 17.3 pp from -19.4% to -36.7% in 2018.
Leverage (Debt)
The company has no debt. Cash dropped on 30.5%.
Management team
RealNetworks, Inc.'s CEO Robert D Glaser "Rob" is a founder and has spent 7 years with the company. The company's CFO is Cary L Baker. Cary L Baker has 2 years tenure at the company.
Financial and operational results
FY ended 12/31/2018
RealNetworks, Inc. ($RNWK) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 156.2 | 125.3 | 81.5 | 78.7 | 69.5 | -11.7% |
| Gross Profit | 79.8 | 55.0 | 53.9 | 55.6 | 51.8 | -6.8% |
| SG&A | 100.9 | 72.8 | 59.0 | 43.9 | 41.8 | -4.8% |
| EBITDA | -57.2 | -58.8 | -31.7 | -17.7 | -20.1 | |
| Net Income | -71.8 | -81.8 | -36.6 | -16.3 | -25.0 | |
Balance Sheet
|
|---|
| Cash | 103.3 | 47.3 | 33.7 | 51.2 | 35.6 | -30.5% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 2.5 | 1.3 | 2.4 | 0.7 | 0.8 | 4.2% |
Ratios
|
|---|
| Revenue growth | -24.2% | -19.8% | -35.0% | -3.4% | -11.7% | |
| EBITDA growth | 9.9% | 2.8% | -46.1% | -44.2% | 13.8% | |
|
|---|
| Gross Margin | 51.1% | 43.9% | 66.2% | 70.6% | 74.5% | 3.9% |
| EBITDA Margin | -36.6% | -46.9% | -38.9% | -22.5% | -29.0% | -6.5% |
| SG&A, % of revenue | 64.6% | 58.1% | 72.4% | 55.8% | 60.2% | 4.4% |
| Net Income Margin | -46.0% | -65.3% | -44.9% | -20.7% | -36.0% | -15.2% |
| CAPEX, % of revenue | 1.6% | 1.1% | 3.0% | 0.9% | 1.1% | 0.2% |
|
|---|
| ROIC | -28.6% | -42.0% | -36.1% | -24.1% | -32.0% | -7.9% |
| ROE | -30.8% | -51.5% | -34.9% | -19.4% | -36.7% | -17.3% |
RealNetworks, Inc. ($RNWK) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 20 | 16 | 18 | 17 | | -35.7% | -52.5% | -5.3% | -12.2% |
| EBITDA | -4 | -6 | -4 | -5 | | | | | |
| Net Income | -5 | -7 | -6 | -7 | | | | | -922.9% |
Balance Sheet
|
|---|
| Cash | 50 | 39 | 38 | 36 | | 29.3% | 3.2% | -16.7% | -30.5% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 73.9% | 70.6% | 75.9% | 77.5% | | 30.4% | 22.8% | 4.7% | 3.8% |
| EBITDA Margin | -22.1% | -39.6% | -25.1% | -31.2% | | 1.4% | -34.1% | -4.6% | -8.8% |
| Net Income Margin | -26.4% | -44.1% | -34.0% | -41.7% | | 4.5% | -33.8% | -10.6% | -46.1% |
Peers in Application Software
Below you can find RealNetworks, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| RealNetworks, Inc. ($RNWK) | | -19.8% | -35.0% | -3.4% | -11.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 63.4% | 61.9% | 63.8% | 64.4% | 65.7% |
|---|
| RealNetworks, Inc. ($RNWK) | 51.1% | 43.9% | 66.2% | 70.6% | 74.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.1% | -9.4% | -4.7% | -3.3% | -3.2% |
|---|
| RealNetworks, Inc. ($RNWK) | -36.6% | -46.9% | -38.9% | -22.5% | -29.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| RealNetworks, Inc. ($RNWK) | 1.6% | 1.1% | 3.0% | 0.9% | 1.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.2% | -11.2% | -9.2% | -10.2% | -9.3% |
|---|
| RealNetworks, Inc. ($RNWK) | -28.6% | -42.0% | -36.1% | -24.1% | -32.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (70 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
