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Share Name | Share Symbol | Market | Type |
---|---|---|---|
RealNetworks Inc | NASDAQ:RNWK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.73 | 0.6552 | 0.73 | 0 | 01:00:00 |
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Washington
|
|
91-1628146
|
(State of incorporation)
|
|
(I.R.S. Employer Identification Number)
|
1501 First Avenue South, Suite 600, Seattle, Washington, 98134
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
Common Stock, Par Value $0.001 per share
Preferred Share Purchase Rights
|
|
The NASDAQ Stock Market
The NASDAQ Stock Market
|
Large accelerated filer
¨
|
|
|
|
Accelerated filer
þ
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Non-accelerated filer
¨
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(Do not check if a smaller reporting company)
|
|
Smaller reporting company
¨
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|
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|
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Emerging growth company
¨
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Page
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||
PART I
|
||
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
||
PART II
|
||
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
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||
Item 9B.
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||
|
||
PART III
|
||
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
||
PART IV
|
||
Item 15.
|
||
•
|
the expected benefits and other consequences of our growth plans, strategic initiatives, and restructurings;
|
•
|
our expected introduction, and related monetization, of new and enhanced products, services and technologies across our businesses;
|
•
|
future revenues, operating expenses, income and other taxes, tax benefits, net income (loss) per diluted share available to common shareholders, acquisition costs and related amortization, and other measures of results of operations;
|
•
|
the effects of our past acquisitions, including our January 18, 2019 acquisition of a controlling interest in Napster, and expectations for future acquisitions and divestitures;
|
•
|
plans, strategies and expected opportunities for future growth, increased profitability and innovation;
|
•
|
the expected financial position, performance, growth and profitability of, and investment in, our businesses and the availability of resources;
|
•
|
the effects of legislation, regulations, administrative proceedings, court rulings, settlement negotiations and other factors that may impact our businesses;
|
•
|
the continuation and expected nature of certain customer relationships;
|
•
|
impacts of competition and certain customer relationships on the future financial performance and growth of our businesses;
|
•
|
our involvement in potential claims, legal proceedings and government investigations, and the potential outcomes and effects of such potential claims, legal proceedings and governmental investigations on our business, prospects, financial condition or results of operations;
|
•
|
the effects of U.S. and foreign income and other taxes on our business, prospects, financial condition or results of operations; and
|
•
|
the effect of economic and market conditions on our business, prospects, financial condition or results of operations.
|
Item 1.
|
Business
|
Item 1A.
|
Risk Factors
|
•
|
reduced prices or margins,
|
•
|
loss of current and potential customers, or partners and potential partners who distribute our products and services or who provide content that we distribute to our customers,
|
•
|
changes to our products, services, technologies, licenses or business practices or strategies,
|
•
|
lengthened sales cycles,
|
•
|
inability to meet demands for more rapid sales or development cycles,
|
•
|
industry-wide changes in content distribution to customers or in trends in consumer consumption of digital media products and services,
|
•
|
pressure to prematurely release products or product enhancements, or
|
•
|
degradation in our stature or reputation in the market.
|
•
|
periodic local or geographic economic downturns and unstable political conditions;
|
•
|
price and currency exchange controls;
|
•
|
fluctuation in the relative values of currencies;
|
•
|
difficulty in repatriating money, whether as a result of tax laws or otherwise;
|
•
|
compliance with current and changing tax laws, and the coordination of compliance with U.S. tax laws and the laws of any of the jurisdictions in which we do business;
|
•
|
difficulties protecting intellectual property;
|
•
|
compliance with labor laws and other laws governing employees;
|
•
|
local labor disputes;
|
•
|
changes in trading policies, regulatory requirements, tariffs and other barriers, or the termination or renegotiation of existing trade agreements;
|
•
|
impact of changes in immigration or other policies impacting our ability to attract, hire, and retain key talent; and
|
•
|
difficulties in managing a global enterprise, including staffing, collecting accounts receivable, and managing suppliers, distributors and representatives.
|
•
|
difficulties and expenses in assimilating the operations, products, technology, information systems, and/or personnel of the acquired company;
|
•
|
retaining key management or employees of the acquired company;
|
•
|
entrance into unfamiliar markets, industry segments, or types of businesses;
|
•
|
operating, managing and integrating acquired businesses in remote locations or in countries in which we have little or no prior experience;
|
•
|
diversion of management time and other resources from existing operations;
|
•
|
impairment of relationships with employees, affiliates, advertisers or content providers of our business or acquired business;
|
•
|
assumption of known and unknown liabilities of the acquired company, including intellectual property claims; and
|
•
|
potential impacts to our system of internal controls and disclosure controls and procedures.
|
•
|
elect or defeat the election of our directors;
|
•
|
amend or prevent amendment of our articles of incorporation or bylaws;
|
•
|
effect or prevent a merger, sale of assets or other corporate transaction; and
|
•
|
control the outcome of any other matter submitted to the shareholders for vote.
|
•
|
adopt a plan of merger;
|
•
|
authorize the sale, lease, exchange or mortgage of assets representing more than 50% of the book value of our assets prior to the transaction or on which our long-term business strategy is substantially dependent;
|
•
|
authorize our voluntary dissolution; or
|
•
|
take any action that has the effect of any of the above.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Location
|
|
Area leased
(sq. feet)
|
|
Lease expiration
|
Seattle, Washington (1)
|
|
73,000
|
|
August 2024, with an option to
renew for two five-year periods
|
Eindhoven, Netherlands (2)
|
|
23,000
|
|
June 2022
|
(1)
|
As of December 31, 2018, we have reduced our use of the facility by 63%. The space which we no longer occupy is currently under sublease for all or a portion of the remaining lease term. For further information, please see
Note 12.
Lease Exit and Related Charges in this 10-K.
|
(2)
|
This facility is utilized only by our Games segment.
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Financial Data
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
(In thousands, except per share data)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
|
$
|
69,510
|
|
|
$
|
78,718
|
|
|
$
|
81,479
|
|
|
$
|
92,448
|
|
|
$
|
122,343
|
|
Cost of revenue
|
|
17,727
|
|
|
23,164
|
|
|
27,548
|
|
|
39,520
|
|
|
46,109
|
|
|||||
Extinguishment of liability
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,580
|
)
|
|||||
Gross profit
|
|
51,783
|
|
|
55,554
|
|
|
53,931
|
|
|
52,928
|
|
|
86,814
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Research and development
|
|
30,789
|
|
|
29,710
|
|
|
29,923
|
|
|
43,626
|
|
|
52,765
|
|
|||||
Sales and marketing
|
|
21,140
|
|
|
22,953
|
|
|
31,608
|
|
|
48,231
|
|
|
66,926
|
|
|||||
General and administrative
|
|
20,706
|
|
|
20,996
|
|
|
27,415
|
|
|
24,549
|
|
|
34,001
|
|
|||||
Restructuring and other charges
|
|
1,873
|
|
|
2,526
|
|
|
1,489
|
|
|
5,279
|
|
|
4,992
|
|
|||||
Lease exit and related charges
|
|
(454
|
)
|
|
—
|
|
|
2,239
|
|
|
2,501
|
|
|
880
|
|
|||||
Total operating expenses
|
|
74,054
|
|
|
76,185
|
|
|
92,674
|
|
|
124,186
|
|
|
159,564
|
|
|||||
Operating income (loss)
|
|
(22,271
|
)
|
|
(20,631
|
)
|
|
(38,743
|
)
|
|
(71,258
|
)
|
|
(72,750
|
)
|
|||||
Other income (expense)
|
|
(516
|
)
|
|
439
|
|
|
1,746
|
|
|
(13,494
|
)
|
|
(1,382
|
)
|
|||||
Income (loss) from continuing operations before income taxes
|
|
(22,787
|
)
|
|
(20,192
|
)
|
|
(36,997
|
)
|
|
(84,752
|
)
|
|
(74,132
|
)
|
|||||
Income tax expense (benefit)
|
|
2,202
|
|
|
(2,778
|
)
|
|
776
|
|
|
(1,290
|
)
|
|
489
|
|
|||||
Net income (loss) from continuing operations
|
|
(24,989
|
)
|
|
(17,414
|
)
|
|
(37,773
|
)
|
|
(83,462
|
)
|
|
(74,621
|
)
|
|||||
Net income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
1,109
|
|
|
1,223
|
|
|
1,615
|
|
|
2,806
|
|
|||||
Net income (loss)
|
|
$
|
(24,989
|
)
|
|
$
|
(16,305
|
)
|
|
$
|
(36,550
|
)
|
|
$
|
(81,847
|
)
|
|
$
|
(71,815
|
)
|
Net income (loss) per share - diluted:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
(0.66
|
)
|
|
(0.47
|
)
|
|
(1.02
|
)
|
|
(2.31
|
)
|
|
(2.08
|
)
|
|||||
Discontinued operations
|
|
—
|
|
|
0.03
|
|
|
0.03
|
|
|
0.05
|
|
|
0.08
|
|
|||||
Net income (loss) per share - diluted
|
|
$
|
(0.66
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(2.26
|
)
|
|
$
|
(2.00
|
)
|
Shares used to compute diluted net income (loss) per share
|
|
37,582
|
|
|
37,163
|
|
|
36,781
|
|
|
36,165
|
|
|
35,947
|
|
|
|
As of December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, and short-term investments
|
|
$
|
35,585
|
|
|
$
|
59,975
|
|
|
$
|
77,052
|
|
|
$
|
99,129
|
|
|
$
|
161,706
|
|
Working capital
|
|
33,481
|
|
|
55,157
|
|
|
66,304
|
|
|
91,373
|
|
|
136,429
|
|
|||||
Total assets
|
|
80,319
|
|
|
121,496
|
|
|
130,437
|
|
|
161,343
|
|
|
250,299
|
|
|||||
Shareholders’ equity
|
|
56,840
|
|
|
79,173
|
|
|
88,581
|
|
|
120,683
|
|
|
197,198
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Total revenue
|
|
$
|
69,510
|
|
|
$
|
78,718
|
|
|
$
|
81,479
|
|
|
$
|
(9,208
|
)
|
|
(12
|
)%
|
|
$
|
(2,761
|
)
|
|
(3
|
)%
|
Cost of revenue
|
|
17,727
|
|
|
23,164
|
|
|
27,548
|
|
|
(5,437
|
)
|
|
(23
|
)%
|
|
(4,384
|
)
|
|
(16
|
)%
|
|||||
Gross profit
|
|
51,783
|
|
|
55,554
|
|
|
53,931
|
|
|
(3,771
|
)
|
|
(7
|
)%
|
|
1,623
|
|
|
3
|
%
|
Gross margin
|
|
74
|
%
|
|
71
|
%
|
|
66
|
%
|
|
3
|
%
|
|
|
|
5
|
%
|
|
|
|||||||
Total operating expenses
|
|
74,054
|
|
|
76,185
|
|
|
92,674
|
|
|
(2,131
|
)
|
|
(3
|
)%
|
|
(16,489
|
)
|
|
(18
|
)%
|
|||||
Operating income (loss)
|
|
$
|
(22,271
|
)
|
|
$
|
(20,631
|
)
|
|
$
|
(38,743
|
)
|
|
$
|
(1,640
|
)
|
|
(8
|
)%
|
|
$
|
18,112
|
|
|
47
|
%
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Total revenue
|
|
$
|
18,168
|
|
|
$
|
22,569
|
|
|
$
|
25,051
|
|
|
$
|
(4,401
|
)
|
|
(20
|
)%
|
|
$
|
(2,482
|
)
|
|
(10
|
)%
|
Cost of revenue
|
|
3,858
|
|
|
4,460
|
|
|
7,074
|
|
|
(602
|
)
|
|
(13
|
)%
|
|
(2,614
|
)
|
|
(37
|
)%
|
|||||
Gross profit
|
|
14,310
|
|
|
18,109
|
|
|
17,977
|
|
|
(3,799
|
)
|
|
(21
|
)%
|
|
132
|
|
|
1
|
%
|
|||||
Gross margin
|
|
79
|
%
|
|
80
|
%
|
|
72
|
%
|
|
(1
|
)%
|
|
|
|
8
|
%
|
|
|
|||||||
Total operating expenses
|
|
14,419
|
|
|
14,530
|
|
|
18,399
|
|
|
(111
|
)
|
|
(1
|
)%
|
|
(3,869
|
)
|
|
(21
|
)%
|
|||||
Operating income (loss)
|
|
$
|
(109
|
)
|
|
$
|
3,579
|
|
|
$
|
(422
|
)
|
|
$
|
(3,688
|
)
|
|
NM
|
|
|
$
|
4,001
|
|
|
NM
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Total revenue
|
|
$
|
29,670
|
|
|
$
|
30,752
|
|
|
$
|
31,289
|
|
|
$
|
(1,082
|
)
|
|
(4
|
)%
|
|
$
|
(537
|
)
|
|
(2
|
)%
|
Cost of revenue
|
|
8,623
|
|
|
10,021
|
|
|
12,606
|
|
|
(1,398
|
)
|
|
(14
|
)%
|
|
(2,585
|
)
|
|
(21
|
)%
|
|||||
Gross profit
|
|
21,047
|
|
|
20,731
|
|
|
18,683
|
|
|
316
|
|
|
2
|
%
|
|
2,048
|
|
|
11
|
%
|
|||||
Gross margin
|
|
71
|
%
|
|
67
|
%
|
|
60
|
%
|
|
4
|
%
|
|
|
|
7
|
%
|
|
|
|||||||
Total operating expenses
|
|
28,066
|
|
|
27,970
|
|
|
34,439
|
|
|
96
|
|
|
—
|
%
|
|
(6,469
|
)
|
|
(19
|
)%
|
|||||
Operating income (loss)
|
|
$
|
(7,019
|
)
|
|
$
|
(7,239
|
)
|
|
$
|
(15,756
|
)
|
|
$
|
220
|
|
|
3
|
%
|
|
$
|
8,517
|
|
|
54
|
%
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Total revenue
|
|
$
|
21,672
|
|
|
$
|
25,397
|
|
|
$
|
25,139
|
|
|
$
|
(3,725
|
)
|
|
(15
|
)%
|
|
$
|
258
|
|
|
1
|
%
|
Cost of revenue
|
|
6,123
|
|
|
8,710
|
|
|
7,919
|
|
|
(2,587
|
)
|
|
(30
|
)%
|
|
791
|
|
|
10
|
%
|
|||||
Gross profit
|
|
15,549
|
|
|
16,687
|
|
|
17,220
|
|
|
(1,138
|
)
|
|
(7
|
)%
|
|
(533
|
)
|
|
(3
|
)%
|
|||||
Gross margin
|
|
72
|
%
|
|
66
|
%
|
|
68
|
%
|
|
6
|
%
|
|
|
|
(2
|
)%
|
|
|
|||||||
Total operating expenses
|
|
20,324
|
|
|
20,401
|
|
|
19,644
|
|
|
(77
|
)
|
|
—
|
%
|
|
757
|
|
|
4
|
%
|
|||||
Operating income (loss)
|
|
$
|
(4,775
|
)
|
|
$
|
(3,714
|
)
|
|
$
|
(2,424
|
)
|
|
$
|
(1,061
|
)
|
|
(29
|
)%
|
|
$
|
(1,290
|
)
|
|
(53
|
)%
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Cost of revenue
|
|
$
|
(877
|
)
|
|
$
|
(27
|
)
|
|
$
|
(51
|
)
|
|
$
|
(850
|
)
|
|
NM
|
|
|
$
|
24
|
|
|
(47
|
)%
|
Total operating expenses
|
|
11,245
|
|
|
13,284
|
|
|
20,192
|
|
|
(2,039
|
)
|
|
(15
|
)%
|
|
(6,908
|
)
|
|
(34
|
)%
|
|||||
Operating income (loss)
|
|
$
|
(10,368
|
)
|
|
$
|
(13,257
|
)
|
|
$
|
(20,141
|
)
|
|
$
|
2,889
|
|
|
22
|
%
|
|
$
|
6,884
|
|
|
34
|
%
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Research and development
|
|
$
|
30,789
|
|
|
$
|
29,710
|
|
|
$
|
29,923
|
|
|
$
|
1,079
|
|
|
4
|
%
|
|
$
|
(213
|
)
|
|
(1
|
)%
|
Sales and marketing
|
|
21,140
|
|
|
22,953
|
|
|
31,608
|
|
|
(1,813
|
)
|
|
(8
|
)%
|
|
(8,655
|
)
|
|
(27
|
)%
|
|||||
General and administrative
|
|
20,706
|
|
|
20,996
|
|
|
27,415
|
|
|
(290
|
)
|
|
(1
|
)%
|
|
(6,419
|
)
|
|
(23
|
)%
|
|||||
Restructuring and other charges
|
|
1,873
|
|
|
2,526
|
|
|
1,489
|
|
|
(653
|
)
|
|
(26
|
)%
|
|
1,037
|
|
|
70
|
%
|
|||||
Lease exit and related charges
|
|
(454
|
)
|
|
—
|
|
|
2,239
|
|
|
(454
|
)
|
|
NM
|
|
|
(2,239
|
)
|
|
NM
|
|
|||||
Total consolidated operating expenses
|
|
$
|
74,054
|
|
|
$
|
76,185
|
|
|
$
|
92,674
|
|
|
$
|
(2,131
|
)
|
|
(3
|
)%
|
|
$
|
(16,489
|
)
|
|
(18
|
)%
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018-2017
Change
|
|
%
Change
|
|
2017-2016
Change
|
|
%
Change
|
||||||||||||
Interest income, net
|
|
$
|
344
|
|
|
$
|
436
|
|
|
$
|
449
|
|
|
$
|
(92
|
)
|
|
(21
|
)%
|
|
$
|
(13
|
)
|
|
(3
|
)%
|
Gain (loss) on investments, net
|
|
—
|
|
|
4,500
|
|
|
8,473
|
|
|
(4,500
|
)
|
|
(100
|
)%
|
|
(3,973
|
)
|
|
NM
|
|
|||||
Equity in net loss of Napster
|
|
(757
|
)
|
|
(3,991
|
)
|
|
(6,533
|
)
|
|
3,234
|
|
|
(81
|
)%
|
|
2,542
|
|
|
(39
|
)%
|
|||||
Other income (expense), net
|
|
(103
|
)
|
|
(506
|
)
|
|
(643
|
)
|
|
403
|
|
|
(80
|
)%
|
|
137
|
|
|
(21
|
)%
|
|||||
Total other income (expense), net
|
|
$
|
(516
|
)
|
|
$
|
439
|
|
|
$
|
1,746
|
|
|
$
|
(955
|
)
|
|
218
|
%
|
|
$
|
(1,307
|
)
|
|
75
|
%
|
•
|
The Tax Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we have recorded a decrease related to deferred tax assets and liabilities, with a corresponding adjustment to the valuation allowance. The impact of the corporate tax rate change was not material and did not change from our provisional adjustments.
|
•
|
The Tax Act repeals corporate AMT for tax years beginning January 1, 2018, and provides that existing AMT credit carryovers are refundable beginning in 2018. The Company has approximately $3.6 million of AMT credit carryovers that are expected to be fully refunded by 2022. As there was a valuation allowance against the Company’s AMT credit deferred tax asset, the repeal of corporate AMT resulted in an income tax benefit for the year ended December 31, 2017. The impact of the repeal of corporate AMT did not change materially from our provisional adjustments.
|
•
|
The Tax Act provides for a one-time deemed repatriation transition tax on previously untaxed accumulated and current earnings and profits (E&P) of certain foreign subsidiaries. To determine the amount of tax, the Company determined the amount of post-1986 E&P of relevant subsidiaries, which was estimated to be zero. There was no change to this estimate and the Company will not have transition tax.
|
•
|
The Tax Act creates a new requirement that certain income (i.e. GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.
Under GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (“the period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (“the deferred method”). We have selected the period cost method, and did not expect to have GILTI inclusion. There was no change to this estimate, and the Company does not have any GILTI inclusion of its foreign subsidiaries in the period ending December 31, 2018.
|
•
|
Prior to the Tax Act, the Company had not provided for U.S. income taxes on undistributed earnings and other outside basis differences of its foreign subsidiaries as it was the Company's intention for these tax basis differences to remain indefinitely reinvested. As a result of the Tax Act and other factors in the Company's strategic plan, the Company reevaluated its assertion and no longer intends to indefinitely reinvest substantially all of the Company's non-U.S. current and undistributed earnings in all foreign jurisdictions. As a result of this change, we have recorded deferred taxes of $1.0 million as of December 31, 2018 to reflect local country foreign withholding taxes associated with a future repatriation of such foreign earnings.
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Working capital
|
|
$
|
33,481
|
|
|
$
|
55,157
|
|
Cash, cash equivalents, and short-term investments
|
|
35,585
|
|
|
59,975
|
|
||
Restricted cash and investments
|
|
1,630
|
|
|
2,400
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash provided by (used in) operating activities
|
|
$
|
(19,221
|
)
|
|
$
|
(21,350
|
)
|
|
$
|
(24,328
|
)
|
Cash provided by (used in) investing activities
|
|
3,798
|
|
|
36,818
|
|
|
11,362
|
|
|||
Cash provided by (used in) financing activities
|
|
(62
|
)
|
|
(117
|
)
|
|
(345
|
)
|
•
|
Revenue recognition;
|
•
|
Estimating losses on excess office facilities;
|
•
|
Valuation of equity method investments;
|
•
|
Valuation of definite-lived assets and goodwill; and
|
•
|
Accounting for income taxes.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
35,561
|
|
|
$
|
51,196
|
|
Short-term investments
|
24
|
|
|
8,779
|
|
||
Trade accounts receivable, net of allowances
|
11,751
|
|
|
12,689
|
|
||
Deferred costs, current portion
|
331
|
|
|
426
|
|
||
Prepaid expenses and other current assets
|
5,911
|
|
|
3,715
|
|
||
Current assets of discontinued operations
|
—
|
|
|
17,456
|
|
||
Total current assets
|
53,578
|
|
|
94,261
|
|
||
|
|
|
|
||||
Equipment and software
|
37,458
|
|
|
46,417
|
|
||
Leasehold improvements
|
3,292
|
|
|
3,536
|
|
||
Total equipment, software, and leasehold improvements
|
40,750
|
|
|
49,953
|
|
||
Less accumulated depreciation and amortization
|
37,996
|
|
|
46,093
|
|
||
Net equipment, software, and leasehold improvements
|
2,754
|
|
|
3,860
|
|
||
Restricted cash equivalents and investments
|
1,630
|
|
|
2,400
|
|
||
Other assets
|
3,997
|
|
|
5,588
|
|
||
Deferred costs, non-current portion
|
528
|
|
|
955
|
|
||
Deferred tax assets, net
|
851
|
|
|
1,047
|
|
||
Other intangible assets, net
|
26
|
|
|
325
|
|
||
Goodwill
|
16,955
|
|
|
13,060
|
|
||
Total assets
|
$
|
80,319
|
|
|
$
|
121,496
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
3,910
|
|
|
$
|
3,785
|
|
Accrued and other current liabilities
|
11,312
|
|
|
12,365
|
|
||
Commitment to Napster
|
2,750
|
|
|
2,750
|
|
||
Deferred revenue, current portion
|
2,125
|
|
|
3,097
|
|
||
Current liabilities of discontinued operations
|
—
|
|
|
17,107
|
|
||
Total current liabilities
|
20,097
|
|
|
39,104
|
|
||
Deferred revenue, non-current portion
|
268
|
|
|
443
|
|
||
Deferred rent
|
986
|
|
|
982
|
|
||
Deferred tax liabilities
|
1,168
|
|
|
19
|
|
||
Other long-term liabilities
|
960
|
|
|
1,775
|
|
||
Total liabilities
|
23,479
|
|
|
42,323
|
|
||
Commitments and contingencies
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.001 par value, no shares issued and outstanding:
|
|
|
|
||||
Series A: authorized 200 shares
|
—
|
|
|
—
|
|
||
Undesignated series: authorized 59,800 shares
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value authorized 250,000 shares; issued and outstanding 37,728 shares in 2018 and 37,341 shares in 2017
|
37
|
|
|
37
|
|
||
Additional paid-in capital
|
641,930
|
|
|
638,727
|
|
||
Accumulated other comprehensive loss
|
(61,118
|
)
|
|
(59,547
|
)
|
||
Retained deficit
|
(524,009
|
)
|
|
(500,044
|
)
|
||
Total shareholders’ equity
|
56,840
|
|
|
79,173
|
|
||
Total liabilities and shareholders’ equity
|
$
|
80,319
|
|
|
$
|
121,496
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenue (A)
|
$
|
69,510
|
|
|
$
|
78,718
|
|
|
$
|
81,479
|
|
Cost of revenue (B)
|
17,727
|
|
|
23,164
|
|
|
27,548
|
|
|||
Gross profit
|
51,783
|
|
|
55,554
|
|
|
53,931
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Research and development
|
30,789
|
|
|
29,710
|
|
|
29,923
|
|
|||
Sales and marketing
|
21,140
|
|
|
22,953
|
|
|
31,608
|
|
|||
General and administrative
|
20,706
|
|
|
20,996
|
|
|
27,415
|
|
|||
Restructuring and other charges
|
1,873
|
|
|
2,526
|
|
|
1,489
|
|
|||
Lease exit and related charges
|
(454
|
)
|
|
—
|
|
|
2,239
|
|
|||
Total operating expenses
|
74,054
|
|
|
76,185
|
|
|
92,674
|
|
|||
Operating income (loss) from continuing operations
|
(22,271
|
)
|
|
(20,631
|
)
|
|
(38,743
|
)
|
|||
Other income (expenses):
|
|
|
|
|
|
||||||
Interest income, net
|
344
|
|
|
436
|
|
|
449
|
|
|||
Gain (loss) on sale of equity and other investments, net
|
—
|
|
|
4,500
|
|
|
8,473
|
|
|||
Equity in net loss of Napster investment
|
(757
|
)
|
|
(3,991
|
)
|
|
(6,533
|
)
|
|||
Other income (expense), net
|
(103
|
)
|
|
(506
|
)
|
|
(643
|
)
|
|||
Total other income (expenses), net
|
(516
|
)
|
|
439
|
|
|
1,746
|
|
|||
Income (loss) from continuing operations before income taxes
|
(22,787
|
)
|
|
(20,192
|
)
|
|
(36,997
|
)
|
|||
Income tax expense (benefit)
|
2,202
|
|
|
(2,778
|
)
|
|
776
|
|
|||
Net income (loss) from continuing operations
|
(24,989
|
)
|
|
(17,414
|
)
|
|
(37,773
|
)
|
|||
Net income (loss) from discontinued operations, net of tax
|
—
|
|
|
1,109
|
|
|
1,223
|
|
|||
Net income (loss)
|
$
|
(24,989
|
)
|
|
$
|
(16,305
|
)
|
|
$
|
(36,550
|
)
|
Net income (loss) per share - Basic:
|
|
|
|
|
|
||||||
Continuing operations
|
(0.66
|
)
|
|
(0.47
|
)
|
|
(1.02
|
)
|
|||
Discontinued operations
|
—
|
|
|
0.03
|
|
|
0.03
|
|
|||
Net income (loss) per share - Basic
|
$
|
(0.66
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.99
|
)
|
Net income (loss) per share - Diluted:
|
|
|
|
|
|
||||||
Continuing operations
|
(0.66
|
)
|
|
(0.47
|
)
|
|
(1.02
|
)
|
|||
Discontinued operations
|
—
|
|
|
0.03
|
|
|
0.03
|
|
|||
Net income (loss) per share - Diluted
|
$
|
(0.66
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.99
|
)
|
Shares used to compute basic net income (loss) per share
|
37,582
|
|
|
37,163
|
|
|
36,781
|
|
|||
Shares used to compute diluted net income (loss) per share
|
37,582
|
|
|
37,163
|
|
|
36,781
|
|
|||
Comprehensive income (loss):
|
|
|
|
|
|
||||||
Unrealized investment holding gains (losses), net of reclassification adjustments
|
$
|
17
|
|
|
$
|
8
|
|
|
$
|
(1,303
|
)
|
Foreign currency translation adjustments, net of reclassification adjustments
|
(1,588
|
)
|
|
2,090
|
|
|
(862
|
)
|
|||
Total other comprehensive income (loss)
|
(1,571
|
)
|
|
2,098
|
|
|
(2,165
|
)
|
|||
Net income (loss)
|
(24,989
|
)
|
|
(16,305
|
)
|
|
(36,550
|
)
|
|||
Comprehensive income (loss)
|
$
|
(26,560
|
)
|
|
$
|
(14,207
|
)
|
|
$
|
(38,715
|
)
|
(A) Components of net revenue:
|
|
|
|
|
|
||||||
License and product revenue
|
$
|
22,602
|
|
|
$
|
28,919
|
|
|
$
|
27,846
|
|
Service revenue
|
46,908
|
|
|
49,799
|
|
|
53,633
|
|
|||
|
$
|
69,510
|
|
|
$
|
78,718
|
|
|
$
|
81,479
|
|
(B) Components of cost of revenue:
|
|
|
|
|
|
||||||
License and product revenue
|
$
|
6,109
|
|
|
$
|
6,663
|
|
|
$
|
6,062
|
|
Service revenue
|
11,618
|
|
|
16,501
|
|
|
21,486
|
|
|||
|
$
|
17,727
|
|
|
$
|
23,164
|
|
|
$
|
27,548
|
|
REALNETWORKS, INC. AND SUBSIDIARIES
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
(In thousands)
|
|||||||||||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(24,989
|
)
|
|
$
|
(16,305
|
)
|
|
$
|
(36,550
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
2,135
|
|
|
2,936
|
|
|
7,057
|
|
|||
Stock-based compensation
|
2,508
|
|
|
3,675
|
|
|
5,424
|
|
|||
Equity in net loss of Napster
|
757
|
|
|
3,991
|
|
|
6,533
|
|
|||
Lease exit and related charges
|
(454
|
)
|
|
—
|
|
|
2,239
|
|
|||
Deferred income taxes, net
|
1,170
|
|
|
(3,871
|
)
|
|
130
|
|
|||
Loss (gain) on investments, net
|
—
|
|
|
(4,500
|
)
|
|
(8,473
|
)
|
|||
Realized translation loss (gain)
|
—
|
|
|
—
|
|
|
272
|
|
|||
Fair value of warrants granted in 2015 and 2017, net of subsequent mark to market adjustments in 2018, 2017 and 2016
|
124
|
|
|
(216
|
)
|
|
280
|
|
|||
Net change in certain operating assets and liabilities:
|
|
|
|
|
|
||||||
Trade accounts receivable
|
17,971
|
|
|
(5,845
|
)
|
|
(129
|
)
|
|||
Deferred costs, prepaid expenses and other assets
|
(377
|
)
|
|
2,146
|
|
|
964
|
|
|||
Accounts payable
|
(15,125
|
)
|
|
(599
|
)
|
|
1,571
|
|
|||
Accrued and other liabilities
|
(2,941
|
)
|
|
(2,762
|
)
|
|
(3,646
|
)
|
|||
Net cash provided by (used in) operating activities
|
(19,221
|
)
|
|
(21,350
|
)
|
|
(24,328
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of equipment, software, and leasehold improvements
|
(765
|
)
|
|
(734
|
)
|
|
(2,438
|
)
|
|||
Proceeds from sale of equity and other investments
|
—
|
|
|
—
|
|
|
4,967
|
|
|||
Purchases of short-term investments
|
—
|
|
|
(13,905
|
)
|
|
(75,766
|
)
|
|||
Proceeds from sales and maturities of short-term investments
|
8,755
|
|
|
48,457
|
|
|
84,249
|
|
|||
Acquisitions, net of cash acquired
|
(4,192
|
)
|
|
—
|
|
|
(150
|
)
|
|||
Advance to Napster
|
—
|
|
|
(1,500
|
)
|
|
(3,500
|
)
|
|||
Proceeds from the sale of Slingo and social casino business
|
—
|
|
|
4,500
|
|
|
4,000
|
|
|||
Net cash provided by (used in) investing activities
|
3,798
|
|
|
36,818
|
|
|
11,362
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock (stock options and stock purchase plan)
|
199
|
|
|
239
|
|
|
535
|
|
|||
Tax payments from shares withheld upon vesting of restricted stock
|
(261
|
)
|
|
(356
|
)
|
|
(880
|
)
|
|||
Net cash provided by (used in) financing activities
|
(62
|
)
|
|
(117
|
)
|
|
(345
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(920
|
)
|
|
1,824
|
|
|
(473
|
)
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
(16,405
|
)
|
|
17,175
|
|
|
(13,784
|
)
|
|||
Cash, cash equivalents, and restricted cash, beginning of year
|
53,596
|
|
|
36,421
|
|
|
50,205
|
|
|||
Cash, cash equivalents, and restricted cash, end of year
|
$
|
37,191
|
|
|
$
|
53,596
|
|
|
$
|
36,421
|
|
|
|
|
|
|
|
REALNETWORKS, INC. AND SUBSIDIARIES
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
|
|||||||||||
(In thousands)
|
|||||||||||
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash received from income tax refunds
|
$
|
308
|
|
|
$
|
420
|
|
|
$
|
534
|
|
Cash paid for income taxes
|
$
|
1,198
|
|
|
$
|
1,244
|
|
|
$
|
2,072
|
|
Non-cash investing activities:
|
|
|
|
|
|
||||||
Increase (decrease) in accrued purchases of equipment, software, and leasehold improvements
|
$
|
10
|
|
|
$
|
(86
|
)
|
|
$
|
26
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Retained
Earnings
(Deficit)
|
|
Total
Shareholders’
Equity
|
|||||||||||||
Shares
|
|
Amount
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances, December 31, 2015
|
|
36,298
|
|
|
$
|
36
|
|
|
$
|
627,316
|
|
|
$
|
(59,480
|
)
|
|
$
|
(447,189
|
)
|
|
$
|
120,683
|
|
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock
|
|
1,203
|
|
|
1
|
|
|
(345
|
)
|
|
—
|
|
|
—
|
|
|
(344
|
)
|
|||||
Share of Napster equity transactions
|
|
—
|
|
|
—
|
|
|
1,533
|
|
|
—
|
|
|
—
|
|
|
1,533
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5,424
|
|
|
—
|
|
|
—
|
|
|
5,424
|
|
|||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,165
|
)
|
|
—
|
|
|
(2,165
|
)
|
|||||
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,550
|
)
|
|
(36,550
|
)
|
|||||
Balances, December 31, 2016
|
|
37,501
|
|
|
$
|
37
|
|
|
$
|
633,928
|
|
|
$
|
(61,645
|
)
|
|
$
|
(483,739
|
)
|
|
$
|
88,581
|
|
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock
|
|
(160
|
)
|
|
—
|
|
|
(117
|
)
|
|
—
|
|
|
—
|
|
|
(117
|
)
|
|||||
Share of Napster equity transactions
|
|
—
|
|
|
—
|
|
|
1,241
|
|
|
—
|
|
|
—
|
|
|
1,241
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
3,675
|
|
|
—
|
|
|
—
|
|
|
3,675
|
|
|||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,098
|
|
|
—
|
|
|
2,098
|
|
|||||
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,305
|
)
|
|
(16,305
|
)
|
|||||
Balances, December 31, 2017
|
|
37,341
|
|
|
$
|
37
|
|
|
$
|
638,727
|
|
|
$
|
(59,547
|
)
|
|
$
|
(500,044
|
)
|
|
$
|
79,173
|
|
Cumulative effect of revenue recognition accounting change
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,024
|
|
|
1,024
|
|
|||||
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock
|
|
387
|
|
|
—
|
|
|
(62
|
)
|
|
—
|
|
|
—
|
|
|
(62
|
)
|
|||||
Share of Napster equity transactions
|
|
—
|
|
|
—
|
|
|
757
|
|
|
—
|
|
|
—
|
|
|
757
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
2,508
|
|
|
—
|
|
|
—
|
|
|
2,508
|
|
|||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,571
|
)
|
|
—
|
|
|
(1,571
|
)
|
|||||
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,989
|
)
|
|
(24,989
|
)
|
|||||
Balances, December 31, 2018
|
|
37,728
|
|
|
$
|
37
|
|
|
$
|
641,930
|
|
|
$
|
(61,118
|
)
|
|
$
|
(524,009
|
)
|
|
$
|
56,840
|
|
Note 1.
|
Description of Business and Summary of Significant Accounting Policies
|
•
|
Level 1: Quoted prices in active markets for identical assets or liabilities
|
•
|
Level 2: Directly or indirectly observed inputs for the asset or liability, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active
|
•
|
Level 3: Significant unobservable inputs that reflect our own estimates of assumptions that market participants would use
|
Note 2.
|
Recent Accounting Pronouncements
|
Note 3.
|
Revenue Recognition
|
|
|
Year ended December 31, 2018
|
||||||||||||||||
|
|
Consumer Media
|
|
Mobile Services
|
|
Games
|
||||||||||||
Business Line
|
|
|
|
|
|
|
||||||||||||
Software License
|
|
$
|
9,940
|
|
|
$
|
2,838
|
|
|
$
|
—
|
|
||||||
Subscription Services
|
|
4,895
|
|
|
26,832
|
|
|
11,141
|
|
|||||||||
Product Sales
|
|
1,177
|
|
|
—
|
|
|
8,647
|
|
|||||||||
Advertising and Other
|
|
2,156
|
|
|
—
|
|
|
1,884
|
|
|||||||||
Total
|
|
$
|
18,168
|
|
|
$
|
29,670
|
|
|
$
|
21,672
|
|
|
|
Year ended December 31, 2018
|
||||||||||||||||
|
|
Consumer Media
|
|
Mobile Services
|
|
Games
|
||||||||||||
Sales Channel
|
|
|
|
|
|
|
||||||||||||
Business to Business
|
|
$
|
12,096
|
|
|
$
|
29,081
|
|
|
$
|
3,225
|
|
||||||
Direct to Consumer
|
|
6,072
|
|
|
589
|
|
|
18,447
|
|
|||||||||
Total
|
|
$
|
18,168
|
|
|
$
|
29,670
|
|
|
$
|
21,672
|
|
Note 4.
|
Acquisitions and Disposals
|
Note 5.
|
Napster Joint Venture
|
|
|
Year ended December 31,
2018 |
|
Year ended December 31,
2017 |
|
Year ended December 31,
2016 |
||||||
Net revenue
|
|
$
|
143,844
|
|
|
$
|
172,391
|
|
|
$
|
208,085
|
|
Gross profit
|
|
37,093
|
|
|
27,173
|
|
|
38,407
|
|
|||
Operating income (loss)
|
|
16,137
|
|
|
(8,256
|
)
|
|
(12,433
|
)
|
|||
Net income (loss)
|
|
10,327
|
|
|
(13,087
|
)
|
|
(14,913
|
)
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||
Current assets
|
|
$
|
44,821
|
|
|
$
|
43,028
|
|
Non-current assets
|
|
17,679
|
|
|
16,874
|
|
||
Current liabilities
|
|
111,332
|
|
|
119,826
|
|
||
Non-current liabilities
|
|
390
|
|
|
1,231
|
|
Note 6.
|
Fair Value Measurements
|
|
Fair Value Measurements as of
|
|
Amortized Cost as of
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2018
|
||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
||||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
$
|
22,853
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,853
|
|
|
$
|
22,853
|
|
Money market funds
|
12,708
|
|
|
—
|
|
|
—
|
|
|
12,708
|
|
|
12,708
|
|
|||||
Total cash and cash equivalents
|
35,561
|
|
|
—
|
|
|
—
|
|
|
35,561
|
|
|
35,561
|
|
|||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate notes and bonds
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
|
24
|
|
|||||
Total short-term investments
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
|
24
|
|
|||||
Restricted cash equivalents and investments
|
—
|
|
|
1,630
|
|
|
—
|
|
|
1,630
|
|
|
1,630
|
|
|||||
Warrants issued by Napster (included in Other assets)
|
—
|
|
|
—
|
|
|
865
|
|
|
865
|
|
|
—
|
|
|||||
Total
|
$
|
35,561
|
|
|
$
|
1,654
|
|
|
$
|
865
|
|
|
$
|
38,080
|
|
|
$
|
37,215
|
|
|
Fair Value Measurements as of
|
|
Amortized Cost as of
|
||||||||||||||||
|
December 31, 2017
|
|
December 31, 2017
|
||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
||||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
$
|
31,065
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,065
|
|
|
$
|
31,065
|
|
Money market funds
|
20,131
|
|
|
—
|
|
|
—
|
|
|
20,131
|
|
|
20,131
|
|
|||||
Total cash and cash equivalents
|
51,196
|
|
|
—
|
|
|
—
|
|
|
51,196
|
|
|
51,196
|
|
|||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate notes and bonds
|
—
|
|
|
8,779
|
|
|
—
|
|
|
8,779
|
|
|
8,779
|
|
|||||
Total short-term investments
|
—
|
|
|
8,779
|
|
|
—
|
|
|
8,779
|
|
|
8,779
|
|
|||||
Restricted cash equivalents and investments
|
—
|
|
|
2,400
|
|
|
—
|
|
|
2,400
|
|
|
2,400
|
|
|||||
Warrant issued by Napster (included in Other assets)
|
—
|
|
|
—
|
|
|
989
|
|
|
989
|
|
|
—
|
|
|||||
Total
|
$
|
51,196
|
|
|
$
|
11,179
|
|
|
$
|
989
|
|
|
$
|
63,364
|
|
|
$
|
62,375
|
|
Note 7.
|
Allowance for Doubtful Accounts Receivable and Sales Returns
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
|
$
|
725
|
|
|
$
|
633
|
|
|
$
|
765
|
|
Addition (reduction) to allowance
|
|
(224
|
)
|
|
(14
|
)
|
|
36
|
|
|||
Amounts written off
|
|
—
|
|
|
—
|
|
|
(152
|
)
|
|||
Effects of foreign currency translation
|
|
(26
|
)
|
|
106
|
|
|
(16
|
)
|
|||
Balance, end of year
|
|
$
|
475
|
|
|
$
|
725
|
|
|
$
|
633
|
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
|
$
|
212
|
|
|
$
|
169
|
|
|
$
|
158
|
|
Addition (reduction) to allowance
|
|
(126
|
)
|
|
55
|
|
|
15
|
|
|||
Amounts written off
|
|
—
|
|
|
(11
|
)
|
|
(3
|
)
|
|||
Effects of foreign currency translation
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
Balance, end of year
|
|
$
|
85
|
|
|
$
|
212
|
|
|
$
|
169
|
|
Total, Allowance for Doubtful Accounts Receivable and Sales Returns
|
|
$
|
560
|
|
|
$
|
937
|
|
|
$
|
802
|
|
Note 8.
|
Other Intangible Assets
|
|
|
|
As of December 31,
|
||||||||||||||||||||||
|
|
|
2018
|
|
2017
|
||||||||||||||||||||
|
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Customer relationships
|
|
$
|
30,993
|
|
|
$
|
30,993
|
|
|
$
|
—
|
|
|
$
|
32,286
|
|
|
$
|
31,997
|
|
|
$
|
289
|
|
|
Developed technology
|
|
24,446
|
|
|
24,446
|
|
|
—
|
|
|
25,177
|
|
|
25,177
|
|
|
—
|
|
||||||
|
Patents, trademarks and tradenames
|
|
3,765
|
|
|
3,765
|
|
|
—
|
|
|
3,932
|
|
|
3,896
|
|
|
36
|
|
||||||
|
Service contracts
|
|
5,538
|
|
|
5,512
|
|
|
26
|
|
|
5,576
|
|
|
5,576
|
|
|
—
|
|
||||||
|
Total
|
|
$
|
64,742
|
|
|
$
|
64,716
|
|
|
$
|
26
|
|
|
$
|
66,971
|
|
|
$
|
66,646
|
|
|
$
|
325
|
|
|
|
||
2019
|
26
|
|
|
Total
|
$
|
26
|
|
Note 9.
|
Goodwill
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Balance, beginning of year
|
|
|
|
|
||||
Goodwill
|
|
$
|
323,713
|
|
|
$
|
323,510
|
|
Accumulated impairment losses
|
|
(310,653
|
)
|
|
(310,653
|
)
|
||
|
|
13,060
|
|
|
12,857
|
|
||
|
|
|
|
|
||||
Increases (decreases) due to current year acquisitions (disposals)
|
|
4,367
|
|
|
—
|
|
||
Effects of foreign currency translation
|
|
(472
|
)
|
|
203
|
|
||
|
|
3,895
|
|
|
203
|
|
||
Balance, end of year
|
|
|
|
|
||||
Goodwill
|
|
327,608
|
|
|
323,713
|
|
||
Accumulated impairment losses
|
|
(310,653
|
)
|
|
(310,653
|
)
|
||
|
|
$
|
16,955
|
|
|
$
|
13,060
|
|
Note 10.
|
Accrued and Other Current Liabilities
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Royalties and other fulfillment costs
|
$
|
1,989
|
|
|
$
|
2,965
|
|
Employee compensation, commissions and benefits
|
4,444
|
|
|
4,384
|
|
||
Sales, VAT and other taxes payable
|
785
|
|
|
1,782
|
|
||
Other
|
4,094
|
|
|
3,234
|
|
||
Total accrued and other current liabilities
|
$
|
11,312
|
|
|
$
|
12,365
|
|
Note 11.
|
Restructuring Charges
|
|
Employee Separation Costs
|
||
Costs incurred and charged to expense for the year ended December 31, 2018
|
$
|
1,873
|
|
Costs incurred and charged to expense for the year ended December 31, 2017
|
$
|
2,526
|
|
Costs incurred and charged to expense for the year ended December 31, 2016
|
$
|
1,489
|
|
|
Employee Separation Costs
|
||
Accrued liability as of December 31, 2015
|
$
|
1,404
|
|
Costs incurred and charged to expense for the year ended December 31, 2016
|
1,489
|
|
|
Cash payments
|
(2,684
|
)
|
|
Accrued liability as of December 31, 2016
|
209
|
|
|
Costs incurred and charged to expense for the year ended December 31, 2017
|
2,526
|
|
|
Cash payments
|
(2,491
|
)
|
|
Accrued liability as of December 31, 2017
|
244
|
|
|
Costs incurred and charged to expense for the year ended December 31, 2018
|
1,873
|
|
|
Cash payments
|
(1,362
|
)
|
|
Accrued liability as of December 31, 2018
|
$
|
755
|
|
Note 12.
|
Lease Exit and Related Charges
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Accrued loss, beginning of year
|
|
$
|
2,058
|
|
|
$
|
3,186
|
|
|
$
|
2,595
|
|
Additions and adjustments to the lease loss accrual, including estimated sublease income
|
|
(454
|
)
|
|
—
|
|
|
2,428
|
|
|||
Less amounts paid, net of sublease income
|
|
(382
|
)
|
|
(1,128
|
)
|
|
(1,837
|
)
|
|||
Accrued loss, end of year
|
|
1,222
|
|
|
2,058
|
|
|
3,186
|
|
|||
Less current portion (included in Accrued and other current liabilities)
|
|
(346
|
)
|
|
(341
|
)
|
|
(1,024
|
)
|
|||
Accrued loss, non-current portion (included in Other long term liabilities)
|
|
$
|
876
|
|
|
$
|
1,717
|
|
|
$
|
2,162
|
|
Note 13.
|
Shareholders’ Equity
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Investments
|
|
|
|
|
|
|
|||||||
|
Accumulated other comprehensive income (loss), beginning of period
|
|
$
|
2
|
|
|
$
|
(6
|
)
|
|
$
|
1,297
|
|
|
Unrealized gains (losses), net of tax effects of $18, $4, and $10
|
|
17
|
|
|
8
|
|
|
1,647
|
|
|||
|
Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $0, $0, and $0
|
|
—
|
|
|
—
|
|
|
(2,950
|
)
|
|||
|
Net current period other comprehensive income (loss)
|
|
17
|
|
|
8
|
|
|
(1,303
|
)
|
|||
|
Accumulated other comprehensive income (loss) balance, end of period
|
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
(6
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|||||||
|
Accumulated other comprehensive loss, beginning of period
|
|
$
|
(59,549
|
)
|
|
$
|
(61,639
|
)
|
|
$
|
(60,777
|
)
|
|
Translation adjustments
|
|
(1,588
|
)
|
|
2,090
|
|
|
(1,134
|
)
|
|||
|
Reclassification adjustments for losses (gains) included in other income (expense)
|
|
—
|
|
|
—
|
|
|
272
|
|
|||
|
Net current period other comprehensive income (loss)
|
|
(1,588
|
)
|
|
2,090
|
|
|
(862
|
)
|
|||
|
Accumulated other comprehensive loss balance, end of period
|
|
$
|
(61,137
|
)
|
|
$
|
(59,549
|
)
|
|
$
|
(61,639
|
)
|
Total accumulated other comprehensive loss, end of period
|
|
$
|
(61,118
|
)
|
|
$
|
(59,547
|
)
|
|
$
|
(61,645
|
)
|
Note 14.
|
Employee Stock and Benefit Plans
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Total stock-based compensation expense
|
|
$
|
2,508
|
|
|
$
|
3,675
|
|
|
$
|
5,424
|
|
|
|
Years ended December 31,
|
|||||||
|
|
2018
|
|
2017
|
|
2016
|
|||
Expected dividend yield
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Risk-free interest rate
|
|
2.71
|
%
|
|
1.99
|
%
|
|
1.59
|
%
|
Expected term (years)
|
|
4.3
|
|
|
5.3
|
|
|
5.1
|
|
Volatility
|
|
35
|
%
|
|
36
|
%
|
|
35
|
%
|
|
Number of Shares
|
Weighted Average Grant Date Fair Value Per Share
|
Total Grant Date Fair Value of Vested Awards (000's)
|
|||||
Nonvested shares, December 31, 2015
|
324
|
|
$
|
5.94
|
|
|
||
Granted
|
832
|
|
3.75
|
|
|
|||
Vested
|
(802
|
)
|
3.83
|
|
$
|
3,069
|
|
|
Forfeited/Canceled
|
(22
|
)
|
5.61
|
|
|
|||
Nonvested shares, December 31, 2016
|
332
|
|
$
|
5.59
|
|
|
||
Granted
|
230
|
|
4.66
|
|
|
|||
Vested
|
(347
|
)
|
5.64
|
|
$
|
1,957
|
|
|
Forfeited/Canceled
|
(23
|
)
|
4.38
|
|
|
|||
Nonvested shares, December 31, 2017
|
192
|
|
$
|
4.53
|
|
|
||
Granted
|
943
|
|
2.56
|
|
|
|||
Vested
|
(402
|
)
|
3.18
|
|
$
|
1,278
|
|
|
Forfeited/Canceled
|
(35
|
)
|
4.69
|
|
|
|||
Nonvested shares, December 31, 2018
|
698
|
|
$
|
2.63
|
|
|
|
|
|
Options Outstanding
|
|
Weighted Average Grant Date Fair Value
|
|||||||
Number
of Shares
|
|
Weighted
Average
Exercise Price
|
|
|||||||||
Outstanding, December 31, 2015
|
|
|
5,517
|
|
|
$
|
7.58
|
|
|
|
||
Options granted at common stock price
|
|
|
1,230
|
|
|
4.50
|
|
|
$
|
1.51
|
|
|
Options cancelled as part of stock option exchange
|
|
|
(1,961
|
)
|
|
8.11
|
|
|
|
|||
Options granted as part of stock option exchange
|
|
|
1,961
|
|
|
4.73
|
|
|
$
|
0.74
|
|
|
Options exercised
|
|
|
(90
|
)
|
|
3.69
|
|
|
|
|||
Options cancelled
|
|
|
(796
|
)
|
|
8.81
|
|
|
|
|||
Outstanding, December 31, 2016
|
|
|
5,861
|
|
|
$
|
5.73
|
|
|
|
||
Options granted at common stock price
|
|
|
993
|
|
|
4.29
|
|
|
$
|
1.51
|
|
|
Options exercised
|
|
|
(21
|
)
|
|
3.51
|
|
|
|
|||
Options cancelled
|
|
|
(757
|
)
|
|
6.00
|
|
|
|
|||
Outstanding, December 31, 2017
|
|
|
6,076
|
|
|
$
|
5.47
|
|
|
|
||
Options granted at common stock price
|
|
|
2,339
|
|
|
3.17
|
|
|
$
|
1.01
|
|
|
Options exercised
|
|
|
—
|
|
|
—
|
|
|
|
|||
Options cancelled
|
|
|
(1,087
|
)
|
|
6.68
|
|
|
|
|||
Outstanding, December 31, 2018
|
|
|
7,328
|
|
|
$
|
4.56
|
|
|
|
||
Exercisable, December 31, 2018
|
|
|
4,078
|
|
|
$
|
5.35
|
|
|
|
||
Vested and expected to vest, December 31, 2018
|
|
|
6,260
|
|
|
$
|
4.73
|
|
|
|
Note 15.
|
Income Taxes
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
United States operations
|
|
$
|
(16,144
|
)
|
|
$
|
(15,731
|
)
|
|
$
|
(34,100
|
)
|
Foreign operations
|
|
(6,643
|
)
|
|
(4,461
|
)
|
|
(2,897
|
)
|
|||
Income (loss) before income taxes
|
|
$
|
(22,787
|
)
|
|
$
|
(20,192
|
)
|
|
$
|
(36,997
|
)
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
|
||||||
United States federal
|
|
$
|
612
|
|
|
$
|
683
|
|
|
$
|
712
|
|
State and local
|
|
53
|
|
|
42
|
|
|
59
|
|
|||
Foreign
|
|
367
|
|
|
368
|
|
|
(125
|
)
|
|||
Total current
|
|
1,032
|
|
|
1,093
|
|
|
646
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
United States federal
|
|
338
|
|
|
(3,643
|
)
|
|
3
|
|
|||
State and local
|
|
—
|
|
|
2
|
|
|
1
|
|
|||
Foreign
|
|
832
|
|
|
(230
|
)
|
|
126
|
|
Total deferred
|
|
1,170
|
|
|
(3,871
|
)
|
|
130
|
|
|||
Total income tax expense (benefit)
|
|
$
|
2,202
|
|
|
$
|
(2,778
|
)
|
|
$
|
776
|
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
United States federal tax expense (benefit) at statutory rate
|
|
$
|
(4,785
|
)
|
|
$
|
(7,067
|
)
|
|
$
|
(12,949
|
)
|
State taxes, net of United States federal tax expense (benefit)
|
|
(694
|
)
|
|
(273
|
)
|
|
(533
|
)
|
|||
Change in valuation allowance
|
|
5,804
|
|
|
1,133
|
|
|
13,148
|
|
|||
Non-deductible stock compensation
|
|
448
|
|
|
587
|
|
|
144
|
|
|||
Impact of non-U.S. jurisdictional tax rate difference
|
|
(117
|
)
|
|
603
|
|
|
335
|
|
|||
Research and development tax credit
|
|
(12
|
)
|
|
—
|
|
|
(338
|
)
|
|||
Increase (reversal) of unrecognized tax benefits
|
|
—
|
|
|
—
|
|
|
135
|
|
|||
Basis difference in investment
|
|
159
|
|
|
1,397
|
|
|
538
|
|
|||
Non-U.S. withholding tax
|
|
470
|
|
|
435
|
|
|
452
|
|
|||
Change in indefinite reinvestment assertion
|
|
998
|
|
|
—
|
|
|
—
|
|
|||
Other
|
|
(69
|
)
|
|
407
|
|
|
(156
|
)
|
|||
Total income tax expense (benefit)
|
|
$
|
2,202
|
|
|
$
|
(2,778
|
)
|
|
$
|
776
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
|
||||
United States federal net operating loss carryforwards
|
|
$
|
62,983
|
|
|
$
|
59,457
|
|
Deferred expenses
|
|
660
|
|
|
926
|
|
||
Research and development tax credit carryforwards
|
|
24,523
|
|
|
24,499
|
|
||
Net unrealized loss on investments
|
|
62
|
|
|
62
|
|
||
Accrued loss on excess office facilities
|
|
291
|
|
|
489
|
|
||
Stock-based compensation
|
|
2,603
|
|
|
2,738
|
|
||
State net operating loss carryforwards
|
|
11,971
|
|
|
13,746
|
|
||
Foreign net operating loss carryforwards
|
|
31,254
|
|
|
32,759
|
|
||
Deferred revenue
|
|
67
|
|
|
108
|
|
||
Equipment, software, and leasehold improvements
|
|
2,642
|
|
|
3,119
|
|
||
Intangibles
|
|
13
|
|
|
2
|
|
||
Net unrealized gains and basis differences on investments
|
|
1,193
|
|
|
1,188
|
|
||
Other
|
|
486
|
|
|
183
|
|
||
Gross deferred tax assets
|
|
138,748
|
|
|
139,276
|
|
||
Less valuation allowance
|
|
137,246
|
|
|
137,117
|
|
||
Gross deferred tax assets, net of valuation allowance
|
|
$
|
1,502
|
|
|
$
|
2,159
|
|
Deferred tax liabilities:
|
|
|
|
|
||||
Other intangible assets
|
|
$
|
(155
|
)
|
|
$
|
(62
|
)
|
Undistributed foreign earnings
|
|
(1,001
|
)
|
|
—
|
|
||
Other
|
|
(479
|
)
|
|
(814
|
)
|
||
Prepaid expenses
|
|
(184
|
)
|
|
(254
|
)
|
||
Gross deferred tax liabilities
|
|
(1,819
|
)
|
|
(1,130
|
)
|
||
Net deferred tax assets (liabilities)
|
|
$
|
(317
|
)
|
|
$
|
1,029
|
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, beginning of year
|
|
$
|
358
|
|
|
$
|
493
|
|
|
$
|
320
|
|
Increases related to prior year tax positions
|
|
8
|
|
|
—
|
|
|
38
|
|
|||
Decreases related to prior year tax positions
|
|
—
|
|
|
(135
|
)
|
|
—
|
|
|||
Increases related to current year tax positions
|
|
8
|
|
|
—
|
|
|
135
|
|
|||
Balance, end of year
|
|
$
|
374
|
|
|
$
|
358
|
|
|
$
|
493
|
|
Note 16.
|
Earnings (Loss) Per Share
|
|
|
Years ended December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss) from continuing operations
|
|
$
|
(24,989
|
)
|
|
$
|
(17,414
|
)
|
|
$
|
(37,773
|
)
|
Weighted average common shares outstanding used to compute basic EPS
|
|
37,582
|
|
|
37,163
|
|
|
36,781
|
|
|||
Dilutive effect of stock based awards
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average common shares outstanding used to compute diluted EPS
|
|
37,582
|
|
|
37,163
|
|
|
36,781
|
|
|||
Basic EPS from continuing operations
|
|
$
|
(0.66
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
(1.02
|
)
|
Diluted EPS from continuing operations
|
|
$
|
(0.66
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
(1.02
|
)
|
Note 17.
|
Discontinued Operations
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenue
|
|
$
|
—
|
|
|
$
|
46,034
|
|
|
$
|
38,989
|
|
Cost of revenue
|
|
—
|
|
|
44,612
|
|
|
37,420
|
|
|||
Gross profit
|
|
—
|
|
|
1,422
|
|
|
1,569
|
|
|||
Income taxes
|
|
—
|
|
|
313
|
|
|
346
|
|
|||
Income from discontinued operations, net of tax
|
|
$
|
—
|
|
|
$
|
1,109
|
|
|
$
|
1,223
|
|
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Trade accounts receivable, net
|
|
$
|
—
|
|
|
$
|
17,456
|
|
Total current assets of discontinued operations
|
|
—
|
|
|
17,456
|
|
||
|
|
|
|
|
||||
Accounts payable
|
|
$
|
—
|
|
|
$
|
15,836
|
|
Accrued and other current liabilities
|
|
—
|
|
|
1,271
|
|
||
Total current liabilities of discontinued operations
|
|
$
|
—
|
|
|
$
|
17,107
|
|
Note 18.
|
Commitments and Contingencies
|
|
|
Office
Leases
|
||
2019
|
|
$
|
3,744
|
|
2020
|
|
3,049
|
|
|
2021
|
|
2,722
|
|
|
2022
|
|
2,424
|
|
|
2023
|
|
2,348
|
|
|
Thereafter
|
|
1,634
|
|
|
Total minimum payments (a)
|
|
$
|
15,921
|
|
Note 19.
|
Guarantees
|
Note 20.
|
Segment Information
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
|
$
|
18,168
|
|
|
$
|
22,569
|
|
|
$
|
25,051
|
|
Cost of revenue
|
|
3,858
|
|
|
4,460
|
|
|
7,074
|
|
|||
Gross profit
|
|
14,310
|
|
|
18,109
|
|
|
17,977
|
|
|||
Operating expenses
|
|
14,419
|
|
|
14,530
|
|
|
18,399
|
|
|||
Operating income (loss)
|
|
$
|
(109
|
)
|
|
$
|
3,579
|
|
|
$
|
(422
|
)
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
|
$
|
29,670
|
|
|
$
|
30,752
|
|
|
$
|
31,289
|
|
Cost of revenue
|
|
8,623
|
|
|
10,021
|
|
|
12,606
|
|
|||
Gross profit
|
|
21,047
|
|
|
20,731
|
|
|
18,683
|
|
|||
Operating expenses
|
|
28,066
|
|
|
27,970
|
|
|
34,439
|
|
|||
Operating income (loss)
|
|
$
|
(7,019
|
)
|
|
$
|
(7,239
|
)
|
|
$
|
(15,756
|
)
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
|
$
|
21,672
|
|
|
$
|
25,397
|
|
|
$
|
25,139
|
|
Cost of revenue
|
|
6,123
|
|
|
8,710
|
|
|
7,919
|
|
|||
Gross profit
|
|
15,549
|
|
|
16,687
|
|
|
17,220
|
|
|||
Operating expenses
|
|
20,324
|
|
|
20,401
|
|
|
19,644
|
|
|||
Operating income (loss)
|
|
$
|
(4,775
|
)
|
|
$
|
(3,714
|
)
|
|
$
|
(2,424
|
)
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
|
$
|
(877
|
)
|
|
$
|
(27
|
)
|
|
$
|
(51
|
)
|
Operating expenses
|
|
11,245
|
|
|
13,284
|
|
|
20,192
|
|
|||
Operating income (loss)
|
|
$
|
(10,368
|
)
|
|
$
|
(13,257
|
)
|
|
$
|
(20,141
|
)
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
United States
|
|
$
|
35,803
|
|
|
$
|
40,832
|
|
|
$
|
41,505
|
|
Europe
|
|
12,144
|
|
|
12,973
|
|
|
13,700
|
|
|||
Rest of the World
|
|
21,563
|
|
|
24,913
|
|
|
26,274
|
|
Total
|
|
$
|
69,510
|
|
|
$
|
78,718
|
|
|
$
|
81,479
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
United States
|
|
$
|
11,823
|
|
|
$
|
12,236
|
|
Europe
|
|
6,761
|
|
|
3,437
|
|
||
Rest of the World
|
|
1,151
|
|
|
1,572
|
|
||
Total long-lived assets
|
|
$
|
19,735
|
|
|
$
|
17,245
|
|
Note 21.
|
Related Party Transactions
|
Note 22.
|
Subsequent Event
|
Note 23.
|
Quarterly Information (Unaudited)
|
|
|
Total
|
|
Dec. 31 (2)
|
|
Sept. 30
|
|
June 30
|
|
Mar. 31
|
||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
|
$
|
69,510
|
|
|
$
|
16,557
|
|
|
$
|
17,579
|
|
|
$
|
15,724
|
|
|
$
|
19,650
|
|
Gross profit
|
|
51,783
|
|
|
12,830
|
|
|
13,340
|
|
|
11,099
|
|
|
14,514
|
|
|||||
Operating (loss) income
|
|
(22,271
|
)
|
|
(5,556
|
)
|
|
(4,928
|
)
|
|
(6,833
|
)
|
|
(4,954
|
)
|
|||||
Net income (loss)
|
|
(24,989
|
)
|
|
(6,904
|
)
|
|
(5,977
|
)
|
|
(6,930
|
)
|
|
(5,178
|
)
|
|||||
Basic net income (loss) per share (1):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) per share - basic
|
|
(0.66
|
)
|
|
(0.18
|
)
|
|
(0.16
|
)
|
|
(0.18
|
)
|
|
(0.14
|
)
|
|||||
Diluted net income (loss) per share (1):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) per share - diluted
|
|
(0.66
|
)
|
|
(0.18
|
)
|
|
(0.16
|
)
|
|
(0.18
|
)
|
|
(0.14
|
)
|
|||||
2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
|
$
|
78,718
|
|
|
$
|
18,865
|
|
|
$
|
18,557
|
|
|
$
|
21,605
|
|
|
$
|
19,691
|
|
Gross profit
|
|
55,554
|
|
|
13,900
|
|
|
13,214
|
|
|
15,318
|
|
|
13,122
|
|
|||||
Operating (loss) income
|
|
(20,631
|
)
|
|
(4,757
|
)
|
|
(4,459
|
)
|
|
(3,166
|
)
|
|
(8,249
|
)
|
|||||
Net income (loss) from continuing operations
|
|
(17,414
|
)
|
|
447
|
|
|
(4,532
|
)
|
|
(3,779
|
)
|
|
(9,550
|
)
|
|||||
Net income (loss) from discontinued operations
|
|
1,109
|
|
|
392
|
|
|
198
|
|
|
393
|
|
|
126
|
|
|||||
Net income (loss)
|
|
(16,305
|
)
|
|
839
|
|
|
(4,334
|
)
|
|
(3,386
|
)
|
|
(9,424
|
)
|
|||||
Basic net income (loss) per share (1):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
(0.47
|
)
|
|
0.01
|
|
|
(0.12
|
)
|
|
(0.10
|
)
|
|
(0.26
|
)
|
|||||
Discontinued operations
|
|
0.03
|
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|||||
Net income (loss) per share - basic
|
|
(0.44
|
)
|
|
0.02
|
|
|
(0.12
|
)
|
|
(0.09
|
)
|
|
(0.25
|
)
|
|||||
Diluted net income (loss) per share (1):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
(0.47
|
)
|
|
0.01
|
|
|
(0.12
|
)
|
|
(0.10
|
)
|
|
(0.26
|
)
|
|||||
Discontinued operations
|
|
0.03
|
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|||||
Net income (loss) per share - diluted
|
|
(0.44
|
)
|
|
0.02
|
|
|
(0.12
|
)
|
|
(0.09
|
)
|
|
(0.25
|
)
|
(1)
|
The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.
|
(2)
|
Included in fourth quarter 2017 net income was a
$4.5 million
pretax gain related to the 2015 sale of Slingo, described in
Note 4.
Acquisitions and Disposals
.
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|
Plan Category
|
|
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
(in 000’s)(a)
|
|
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
|
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
(in 000’s)(c)
|
|
|
||||
Equity compensation plans approved by security holders
|
|
8,026
|
|
|
$
|
4.56
|
|
|
3,196
|
|
|
(1)(2)
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
-
|
|
|
—
|
|
|
|
|
Total
|
|
8,026
|
|
|
$
|
4.56
|
|
|
3,196
|
|
|
(3)
|
(1)
|
On January 1, 2008, the 2007 ESPP became effective. Column (c) above excludes an aggregate of 0.2 million shares of the Company’s common stock that are authorized for issuance pursuant to the 2007 ESPP.
|
(2)
|
Includes shares available for future issuances pursuant to the RealNetworks, Inc. 2007 Director Compensation Stock Plan (2007 Director Plan), a sub-plan that operates and is administered under the 2005 Plan. Under the 2007 Director Plan, outside directors may elect to receive all or a portion of his or her quarterly director compensation in shares of the Company’s common stock in lieu of cash. Shares issued to directors under the 2007 Director Plan are issued from the shares reserved under the 2005 Plan.
|
(3)
|
The total securities in column (a) include 7,328 stock options and 698 restricted stock units and awards. The weighted average exercise prices in columns (b) relate to the stock options only; restricted stock units and awards have no exercise price.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
REALNETWORKS, INC.
|
||
|
|
|
BY:
|
|
/s/ ROBERT GLASER
|
|
|
Robert Glaser
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
Signature
|
|
Title
|
|
|
|
/s/ ______
ROBERT GLASER
________
Robert Glaser
|
|
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ _______
CARY BAKER
_________
Cary Baker
|
|
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ _______
BRUCE A. JAFFE
________
Bruce A. Jaffe
|
|
Director
|
|
|
|
/s/ __
CHRISTOPHER R. JONES_____
_
Christopher R. Jones
|
|
Director
|
|
|
|
/s/ _______
DAWN G. LEPORE
_______
Dawn G. Lepore
|
|
Director
|
|
|
|
/s/ _______
JANICE ROBERTS
_______
Janice Roberts
|
|
Director
|
|
|
|
/s/ ______
MICHAEL B. SLADE
______
Michael B. Slade
|
|
Director
|
|
|
|
/s/ ____
DOMINIQUE TREMPONT
____
Dominique Trempont
|
|
Director
|
|
|
|
Incorporated by Reference
|
|||
Exhibit
No.
|
|
Exhibit Description
|
Form
|
SEC File No.
|
Exhibit
|
Filing Date
|
2.1
|
|
8-K
|
000-23137
|
2.1
|
04/06/10
|
|
2.2
|
s
|
8-K
|
000-23137
|
2.1
|
01/30/12
|
|
3.1
|
|
10-Q
|
000-23137
|
3.1
|
08/11/00
|
|
3.2
|
|
8-K
|
000-23137
|
3.1
|
08/31/11
|
|
3.3
|
|
8-K
|
000-23137
|
3.1
|
07/29/10
|
|
4.1
|
|
8-K
|
001-37745
|
4.1
|
11/30/18
|
|
10.1
|
|
8-K
|
000-23137
|
10.1
|
04/15/16
|
|
10.2
|
†
|
S-8
|
333-63333
|
99.1
|
09/14/98
|
|
10.3
|
†
|
10-K
|
001-37745
|
10.3
|
02/27/17
|
|
10.4
|
†
|
10-Q
|
000-23137
|
10.2
|
08/13/01
|
|
10.5
|
†
|
8-K
|
000-23137
|
10.2
|
12/21/09
|
|
10.6
|
†
|
10-K
|
001-37745
|
10.6
|
02/27/17
|
|
10.7
|
†
|
10-Q
|
000-23137
|
10.2
|
07/25/02
|
|
10.8
|
†
|
10-Q
|
000-23137
|
10.1
|
11/14/02
|
|
10.9
|
†
|
10-Q
|
000-23137
|
10.2
|
11/14/02
|
|
10.10
|
†
|
10-Q
|
000-23137
|
10.3
|
11/14/02
|
|
10.11
|
†
|
10-K
|
000-23137
|
10.10
|
03/16/11
|
|
10.12
|
†
|
10-K
|
000-23137
|
10.9
|
02/29/08
|
|
10.13
|
†
|
10-K
|
001-37745
|
10.13
|
02/27/17
|
|
10.14
|
†
|
10-K
|
000-23137
|
10.13
|
03/18/13
|
|
10.15
|
†
|
10-K
|
000-23137
|
10.14
|
03/18/13
|
|
|
|
Incorporated by Reference
|
|||
Exhibit
No.
|
|
Exhibit Description
|
Form
|
SEC File No.
|
Exhibit
|
Filing Date
|
10.16
|
†
|
10-K
|
000-23137
|
10.15
|
03/18/13
|
|
10.17
|
|
10-Q
|
000-23137
|
10.2
|
08/08/13
|
|
10.18
|
†
|
S-1
|
333-36553
|
10.14
|
09/26/97
|
|
10.19
|
|
S-1
|
333-36553
|
10.17
|
09/26/97
|
|
10.20
|
|
S-1
|
333-36553
|
10.18
|
09/26/97
|
|
10.21
|
†
|
10-Q
|
000-23137
|
10.2
|
11/06/14
|
|
10.22
|
†
|
10-Q
|
000-23137
|
10.1
|
05/08/13
|
|
10.23
|
†
|
10-Q
|
000-23137
|
10.3
|
08/08/13
|
|
10.24
|
†
|
10-Q
|
001-37745
|
10.1
|
05/04/17
|
|
10.25
|
†
|
10-Q
|
000-23137
|
10.5
|
08/09/11
|
|
10.26
|
†
|
8-K
|
000-23137
|
10.1
|
05/03/16
|
|
10.27
|
†
|
8-K
|
001-37745
|
10.1
|
04/13/17
|
|
10.28
|
|
8-K
|
001-37745
|
10.1
|
04/27/18
|
|
10.29
|
s
|
10-K
|
000-23137
|
10.24
|
03/16/06
|
|
10.30
|
s
|
10-Q
|
000-23137
|
10.1
|
11/09/07
|
|
10.31
|
|
10-K
|
000-23137
|
10.43
|
02/29/12
|
|
10.32
|
s
|
8-K/A
|
000-23137
|
10.1
|
04/11/12
|
|
21.1
|
*
|
|
|
|
|
|
23.1
|
*
|
|
|
|
|
|
24.1
|
*
|
|
|
|
|
|
31.1
|
*
|
|
|
|
|
|
31.2
|
*
|
|
|
|
|
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