RealNetworks Announces First Quarter Results

RealNetworks Announces First Quarter Results

Reports Record Revenue of $129.5 Million

SEATTLE, May 2 /PRNewswire-FirstCall/ -- RealNetworks(R), Inc. (NASDAQ:RNWK), the leading creator of digital media services and software, today announced results for the first quarter ended March 31, 2007.

Quarterly Highlights:
-- Record revenue of $129.5 million
-- Net income of $40.0 million or $0.22 per diluted share
-- Adjusted net income of $10.4 million or $0.06 per diluted share

"2007 is off to an excellent start," said Rob Glaser, CEO of RealNetworks. "Our first quarter results reflect good progress on several fronts, including successfully integrating WiderThan into Real, continued games innovation, and strengthening our music subscription business and the Rhapsody.com web experience."

For the first quarter of 2007, revenue grew 50% to $129.5 million compared to $86.6 million for the first quarter of 2006. For the first quarter of 2007, revenue in the Consumer Products and Services segment was as follows: Games revenue was $23.9 million, a 28% increase over the first quarter of 2006; Music revenue was $34.1 million, an 18% increase over the first quarter of 2006; and Media Software and Services revenue was $27.0 million, a 1% decrease from the first quarter of 2006. In the Technology Products and Solutions segment, revenue was $44.4 million, a 277% increase over the first quarter of 2006, mostly due to the acquisition of WiderThan. Foreign currency exchange rate fluctuations positively impacted 2007 first quarter revenue by approximately $1.4 million compared to the first quarter of 2006.

Net income for the first quarter of 2007 was $40.0 million or $0.22 per diluted share, compared to $24.9 million or $0.14 per diluted share in the first quarter of 2006. Both periods' results include payments related to Real's antitrust settlement and commercial agreements with Microsoft. The first quarter of 2007 reflects the final payment to be received under the agreements. Further information regarding these payments can be found in Real's SEC filings. Adjusted net income, described below in Real's description of non-GAAP measures, was $10.4 million or $0.06 per diluted share for the first quarter of 2007, compared to $3.9 million or $0.02 per diluted share in the first quarter of 2006. Adjusted EBITDA for the first quarter of 2007 was $11.9 million compared to $1.7 million in the first quarter of 2006. A reconciliation of GAAP net income to adjusted net income and adjusted EBITDA is provided in the financial tables that accompany this release.

Gross margin was 65% in the first quarter of 2007 compared to 69% in the first quarter of 2006. Operating expenses for the first quarter of 2007 were $29.8 million, compared to $28.3 million in the prior year's quarter. First quarter 2007 and 2006 operating expenses include benefits related to payments under Real's settlement and commercial agreements with Microsoft. Adjusted operating expenses in the first quarter of 2007 were $79.0 million compared to $62.2 million in the first quarter of 2006. A reconciliation of GAAP operating expenses to adjusted operating expenses is provided in the financial tables that accompany this release. For the first quarter of 2007, Real's effective tax rate was approximately 36.8%.

Additional $100 million Stock Repurchase Program Authorized

Today, Real also announced that its Board of Directors has approved an additional $100 million stock repurchase program. Under the program, Real is authorized to repurchase up to $100 million of outstanding shares of common stock from time to time, depending on market conditions, share price and other factors. Repurchases may be made in the open market or through private transactions, in accordance with SEC requirements. Real may enter into a Rule 10(b)5-1 plan designed to facilitate the repurchase of all or a portion of the repurchase amount. Further, the repurchase program does not require Real to acquire a specific number of shares and may be terminated under certain conditions.

Real completed a previous $100 million stock repurchase program in the first quarter of 2007, repurchasing approximately 9.8 million shares for $78.5 million. Since the beginning of 2005, Real has repurchased approximately 30.3 million shares, or approximately 16% of its outstanding shares, through its repurchase programs for $231.7 million.

Business Outlook

The following forward-looking statements reflect RealNetworks' expectations as of May 2, 2007. The Company currently does not intend to update these forward-looking statements until its next quarterly results announcement.

For the second quarter of 2007, Real expects revenue in the range of $130 million to $134 million, GAAP net income per diluted share of $(0.01) to $0.01 and adjusted net income per diluted share of $0.04 to $0.06. This guidance assumes an effective tax rate of approximately 37%.

For the full year 2007, Real expects revenue in the range of $547 million to $563 million. Real expects 2007 GAAP net income per diluted share of $0.24 to $0.27 and adjusted net income per diluted share of $0.23 to $0.25.

See complete reconciliation of estimated GAAP net income per diluted share to adjusted net income per diluted share, provided in the financial tables that accompany this press release.

About Non-GAAP Financial Measures

To supplement RealNetworks' consolidated financial statements presented in accordance with GAAP, we present investors with certain non-GAAP financial measures, including adjusted net income and adjusted net income per share, adjusted EBITDA, adjusted cost of revenue and adjusted operating expenses.

-- Adjusted net income consists of net income excluding the impact of the
following: stock-based compensation expense; income and expenses
including charitable contributions related to the Microsoft agreements;
equity investment gains and losses from sale or impairments;
acquisition costs, including amortization of intangible assets and
expenses for employee stock options that were converted to cash rights;
an estimate of the income taxes from the aforementioned items; and
changes in deferred tax asset valuation allowances.
-- Adjusted net income per share is calculated by dividing adjusted net
income by GAAP weighted average diluted shares outstanding.
-- Adjusted EBITDA consists of net income excluding the impact of the
following: interest income, net; income taxes; depreciation;
amortization; stock-based compensation; expenses for employee stock
options that were converted to cash rights; equity investment gains and
losses from sale or impairments; and income and expenses including
charitable contributions related to the Microsoft agreements.
-- Adjusted cost of revenue consists of GAAP cost of revenue excluding
stock-based compensation expenses, and acquisition costs including
amortization of intangible assets and expenses for employee stock
options that were converted to cash rights.
-- Adjusted operating expenses consist of GAAP operating expenses
excluding stock-based compensation expenses, antitrust litigation
expenses (benefits) and acquisition costs including amortization of
intangible assets and expenses for employee stock options that were
converted to cash rights.

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

Internally, adjusted net income and adjusted net income per share, adjusted EBITDA, adjusted cost of revenue, and adjusted operating expenses are significant measures used by management for purposes of:

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

Adjusted net income is used by RealNetworks as a broad measure of financial performance that encompasses our operating performance, cash, capital structure and investment management, and income tax planning effectiveness. Adjusted EBITDA is used by management as a way to isolate our operating performance and to compare it to that of other companies.

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

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

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income to adjusted net income and adjusted EBITDA, GAAP cost of revenue to adjusted cost of revenue and GAAP operating expenses to adjusted operating expenses for the relevant periods.

Webcast and Conference Call Information

The Company will host a webcast and conference call today at 5:00pm (Eastern)/2:00pm (Pacific). The live webcast featuring slides and audio, will be available at http://investor.realnetworks.com/.

Listeners will require RealPlayer(R) to listen to the conference call, which can be downloaded for free at www.real.com.

The on-demand webcast will be available approximately two hours following the conclusion of the live webcast. Participants may access the conference call by dialing 800-857-5305 (773-681-5857 for international callers). The passcode is "First Quarter Earnings," and the leader is Rob Glaser. A telephonic replay will be available until 8:00pm (Eastern) on May 9, 2007 and may be accessed by dialing 888-335-7280 (203-369-3717 for international callers).

RNWK-F

ABOUT REALNETWORKS

RealNetworks, Inc. is a leading creator of digital media services and software including Rhapsody(R), RealPlayer(R) 10, and casual PC and mobile games. Broadcasters, network operators, media companies and enterprises use RealNetworks' products and services to create and deliver digital media to PCs, mobile phones and consumer electronics devices. Consumers can access and experience audio/video programming and download RealNetworks' consumer software at http://www.real.com/.

RealNetworks' corporate information is located at http://www.realnetworks.com/.

Forward-Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to: (a) Real's future revenue, GAAP and adjusted net income per diluted share, amortization of intangible assets, stock based compensation expense and income tax rate; and (b) the continuing growth in demand for Real's consumer products and business technologies. Actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: development and consumer acceptance of legal online music distribution services generally and RealNetworks' content services in particular because these are relatively new and unproven business models and markets; risks associated with acquisitions generally, and the acquisition of WiderThan in particular, including the risks of integration, unknown liabilities and operations in new markets and geographies, as well as risks specifically associated with WiderThan's business; the potential that we will be unable to continue to enter into commercially attractive agreements with third parties for the provision of compelling content for our subscription service offerings; the emergence of new entrants and competition in the market for digital media subscription offerings and online music sales; the impact on our gross margins of content costs and from the mix of subscribers to subscription offerings with higher content costs than others; competitive risks, including competing technologies, products and services, and the competitive activities of our larger competitors, some of which have strong ties to streaming media users through other products; risks associated with the introduction of new products and services; risks inherent in strategic relationships, especially with competitors, and technology and service integration efforts; and risks relating to the ability of Real's strategic partners to generate subscribers for Real's digital content services. More information about potential risk factors that could affect RealNetworks' business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, and its quarterly reports on Form 10-Q and from time to time in other reports filed by RealNetworks with the Securities and Exchange Commission. The preparation of our financial statements and forward-looking financial guidance requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. The Company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

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

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

Quarters Ended March 31,
2007 2006
(in thousands, except per share data)

Net revenue $129,472 $86,602

Cost of revenue 45,943 26,753

Gross profit 83,529 59,849

Operating expenses:
Research and development 23,479 18,099
Sales and marketing 49,700 36,083
General and administrative 17,354 13,226
Loss on excess office facilities (A) - 738

Subtotal operating expenses 90,533 68,146

Antitrust litigation benefit, net (B) (60,747) (39,835)

Total operating expenses 29,786 28,311

Operating income 53,743 31,538

Other income (expenses):
Interest income, net 9,102 7,979
Equity in net loss of investments (132) -
Other income 467 117

Other income, net 9,437 8,096

Income before income taxes 63,180 39,634
Income taxes (23,219) (14,751)

Net income $39,961 $24,883

Basic net income per share $0.25 $0.15
Diluted net income per share $0.22 $0.14

Shares used to compute basic net
income per share 161,350 160,887
Shares used to compute diluted net
income per share 178,053 176,923

(A) The loss on unoccupied excess office facilities represents an increase
in the estimate of loss from building operating costs that are not
expected to be recovered.
(B) Consists of amounts received under the Settlement and Commercial
agreements with Microsoft, net of certain legal fees, personnel costs,
public relations and other professional service fees incurred related
to antitrust complaints against Microsoft, including proceedings in
the European Union.

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

March 31, December 31,
2007 2006
(in thousands)
ASSETS

Current assets:
Cash and cash equivalents $511,212 $525,232
Short-term investments 152,199 153,688
Trade accounts receivable, net 56,038 65,751
Deferred costs, current portion 3,298 1,643
Deferred tax assets, net, current portion 891 891
Prepaid expenses and other current assets 22,373 21,990

Total current assets 746,011 769,195

Equipment, software, and
leasehold improvements, at cost:
Equipment and software 84,456 83,587
Leasehold improvements 30,271 29,665
Total equipment, software, and
leasehold improvements 114,727 113,252
Less accumulated depreciation and amortization 67,833 65,509

Net equipment, software, and
leasehold improvements 46,894 47,743

Restricted cash equivalents 15,500 17,300
Equity investments 17,835 22,649
Other assets 5,983 5,148
Deferred tax assets, net, non-current portion 27,150 27,150
Other intangible assets, net 100,507 105,109
Goodwill 310,735 309,122

Total assets $1,270,615 $1,303,416

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $40,795 $52,097
Accrued and other liabilities 116,379 104,328
Deferred revenue, current portion 26,793 24,137
Accrued loss on excess office
facilities, current portion 4,522 4,508

Total current liabilities 188,489 185,070

Deferred revenue, non-current portion 3,468 3,440
Accrued loss on excess office facilities,
non-current portion 9,036 9,993
Deferred rent 4,388 4,331
Deferred tax liabilities, net,
non-current portion 23,132 27,076
Convertible debt 100,000 100,000
Other long-term liabilities 7,425 3,740

Total liabilities 335,938 333,650

Total shareholders' equity 934,677 969,766

Total liabilities and
shareholders' equity $1,270,615 $1,303,416

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

Quarters Ended March 31,
2007 2006
(in thousands)

Cash flows from operating activities:
Net income $39,961 $24,883
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 9,933 4,252
Stock-based compensation 5,685 3,638
Equity in net loss of investments 132 --
Loss on disposal of equipment, software,
and leasehold improvements 41 77
Excess tax benefit from stock option exercises (294) --
Accrued loss on excess office facilities (943) (702)
Deferred income taxes (3,944) 12,882
Other 26 29
Net change in certain assets and
liabilities, net of acquisitions 11,492 (47,088)

Net cash provided by (used in)
operating activities 62,089 (2,029)

Cash flows from investing activities:
Purchases of equipment, software,
and leasehold improvements (3,839) (2,568)
Purchases of short-term investments (55,432) (58,884)
Proceeds from sales and maturities of
short-term investments 57,124 55,180
Purchases of intangible assets (2,038) --
Decrease in restricted cash equivalents 1,800 --
Cash used in acquisitions, net of cash acquired -- (6,799)

Net cash used in investing activities (2,385) (13,071)

Cash flows from financing activities:
Net proceeds from sales of common stock
under employee stock purchase plan and
exercise of stock options 3,776 7,614
Excess tax benefit from stock option exercises 294 --
Repurchase of common stock (78,481) (76,988)

Net cash used in financing activities (74,411) (69,374)

Effect of exchange rate changes on cash 687 669

Net decrease in cash and cash equivalents (14,020) (83,805)

Cash and cash equivalents, beginning of period 525,232 651,971

Cash and cash equivalents, end of period $511,212 $568,166

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

2007 2006
Q1 Q4 Q3 Q2 Q1
(in thousands)
Net Revenue by
Line of Business:
Consumer products
and services (A) $85,040 $88,022 $82,497 $77,442 $74,811
Technology
products and
solutions (B) 44,432 37,552 11,179 11,967 11,791

Total net
revenue $129,472 $125,574 $93,676 $89,409 $86,602

Consumer Products
and Services:
Subscriptions (C) $51,490 $50,835 $50,878 $47,452 $47,832
Media
properties (D) 15,932 18,815 13,883 11,546 9,484
E-commerce
and other (E) 17,618 18,372 17,736 18,444 17,495

Total consumer
products and
services
revenue $85,040 $88,022 $82,497 $77,442 $74,811

Consumer Products
and Services:
Music (F) $34,127 $33,623 $30,375 $30,118 $28,918
Media software
and services (G) 27,011 30,513 29,586 26,127 27,277
Games (H) 23,902 23,886 22,536 21,197 18,616

Total consumer
products and
services
revenue $85,040 $88,022 $82,497 $77,442 $74,811

Net Revenue by
Geography:
United States $84,554 $81,758 $69,433 $66,542 $65,700
Rest of world 44,918 43,816 24,243 22,867 20,902

Total net
revenue $129,472 $125,574 $93,676 $89,409 $86,602

Gross Margin by
Line of Business:
Consumer products
and services 67% 70% 68% 68% 67%
Technology products
and solutions 59% 58% 81% 81% 83%
Total gross margin 65% 66% 70% 70% 69%

Subscribers (presented
as greater than) *
Total
Subscribers (I) 24,550 22,700 2,450 2,400 2,400
Technology Products
and Solutions
Application
Services
Subscribers (J) 21,900 20,200
Total Music
Subscribers (K) 2,675 2,550 1,650 1,625 1,575

* Beginning the quarter ended December 31, 2006, total subscribers
reflect the inclusion of subscribers related to wireless carrier
application subscription services. Total Music Subscribers includes
subscribers from our Technology Products and Solutions Application
Subscription Services, such as music-on-demand, as well as our Consumer
Music Services, such as Rhapsody and Premium Radio. Although music-on-
demand subscribers are included in the Technology Products and
Solutions Application Services subscribers and total music subscribers,
these subscribers are only counted once as part of our Total
Subscribers.

(A) Revenue is derived from consumer digital media subscription services,
RealPlayer Plus and related products, sales and distribution of third
party software products, content such as games and music and
advertising.
(B) Revenue is derived from carrier application services such as ringback
tones and music-on-demand, media delivery system software, support
and maintenance services, broadcast hosting services and consulting
services.
(C) Revenue is derived from consumer digital media subscription services
including: SuperPass, RadioPass, Rhapsody, GamePass and stand-alone
subscriptions.
(D) Revenue is derived from advertising and through the distribution of
third party products.
(E) Revenue is derived from RealPlayer Plus and related products, sales
of third party software products, and content such as games and
music.
(F) Revenue is derived from Rhapsody and RadioPass subscription services
and sales of music content, advertising generated from our music and
music related websites and the distribution of third party products.
(G) Revenue is derived from SuperPass subscriptions, RealPlayer Plus and
related products, stand-alone subscription services, sales and
distribution of third-party software products and advertising related
to our non-game and non-music related web properties.
(H) Revenue is derived from GamePass subscription service, sales of
games, advertising generated from our games and game-related websites
and the distribution of third-party products.
(I) Total subscribers include Technology Products and Solutions
application services and consumer subscription services including:
Ringback Tones, Music-on-Demand, Video-on-Demand, Rhapsody,
Rhapsody-to-Go, RadioPass, SuperPass, GamePass, and stand-alone
subscriptions.
(J) Technology Products and Solutions application service subscribers
include: Ringback Tones, Music-on-Demand and Video-on-Demand.
(K) Music subscribers represent an aggregate of all of our music services
and include both Technology Products and Solutions application
services subscribers and consumer subscription services. Music
subscribers include: Rhapsody, Rhapsody-to-Go, premium radio, and
Music-on-Demand. Revenue from Technology Products and Solutions
application services, including Music-on-Demand, are included in our
Technology Products and Solutions revenue.

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

Reconciliation of GAAP net income to
adjusted net income is as follows:

Quarters Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
2007 2006 2006 2006 2006
(in thousands, except per share data)

Net income in
accordance
with GAAP $39,961 $39,302 $42,153 $38,878 $24,883
Stock-based
compensation 5,685 5,819 5,021 3,673 3,638
Loss (gain)
on equity
investments -- 3,116 -- (2,286) --
Conversion of
WiderThan stock
options to a
cash equivalent 845 641 -- -- --
Acquisitions
related
intangible asset
amortization* 5,312 3,530 569 445 727
Expenses (benefit)
related to
antitrust
litigation:
Income (61,000) (61,000) (62,000) (58,000) (40,000)
Expenses 471 1,026 1,000 997 971
Charitable
contributions 1,921 2,009 1,889 1,805 1,225
Tax impact of
above pro
forma items* 20,051 18,428 20,370 19,569 12,446
Change in income
tax valuation
allowance (2,805) (2,662) -- -- --

Adjusted net
income $10,441 $10,209 $9,002 $5,081 $3,890

GAAP basic net
income per
share $0.25 $0.24 $0.26 $0.24 $0.15
GAAP diluted
net income
per share $0.22 $0.22 $0.24 $0.22 $0.14

Adjusted basic
net income
per share* $0.06 $0.06 $0.06 $0.03 $0.02
Adjusted
diluted net
income per
share* $0.06 $0.06 $0.05 $0.03 $0.02

Shares used to
compute basic
net income
per share 161,350 162,130 160,578 159,938 160,887
Shares used to
compute diluted
net income
per share 178,053 180,919 178,913 177,337 176,923

* 2006 results have been restated to include acquisition related
intangible asset amortization and related tax impact to conform to the
pro forma presentation for 2007.

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

Quarters Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
2007 2006 2006 2006 2006
(in thousands)

Net income in
accordance
with GAAP $39,961 $39,302 $42,153 $38,878 $24,883
Interest
income, net (9,102) (9,644) (10,618) (9,381) (7,979)
Stock-based
compensation 5,685 5,819 5,021 3,673 3,638
Loss (gain) on
equity
investments -- 3,116 -- (2,286) --
Conversion of
WiderThan stock
options to a
cash equivalent 845 641 -- -- --
Depreciation and
amortization 4,621 4,970 3,692 3,522 3,525
Acquisitions
related
intangible asset
amortization 5,312 3,530 569 445 727
Expenses (benefit)
related to
antitrust
litigation:
Income (61,000) (61,000) (62,000) (58,000) (40,000)
Expenses 471 1,026 1,000 997 971
Charitable
contributions 1,921 2,009 1,889 1,805 1,225
Income taxes 23,219 19,357 25,908 22,521 14,751

Adjusted
EBITDA $11,933 $9,126 $7,614 $2,174 $1,741

Quarter Ended March 31, 2007
WiderThan
Acquisitions Options
Related Converted
Stock- Intangible to a Antitrust
As Based Asset Cash Litigation
Reported Compensation Amortization Equivalent Related Adjusted
(in thousands)
Expenses in
accordance
with GAAP

Cost of
revenue $45,943 $(159) $(2,144) $(127) $-- $43,513

Operating
expenses:
Research and
development $23,479 $(1,772) $-- $(151) $-- $21,556
Sales and
marketing 49,700 (2,387) (3,168) (349) -- 43,796
General and
adminis-
trative 17,354 (1,367) -- (218) (2,139) 13,630
Antitrust
litigation
benefit,
net (60,747) -- -- -- 60,747 --

Total adjusted
operating
expenses,
net $29,786 $(5,526) $(3,168) $(718) $58,608 $78,982

Quarter Ended March 31, 2006
Acquisitions
Related
Stock- Intangible Antitrust
As Based Asset Litigation
Reported Compensation Amortization* Related Adjusted
(in thousands)
Expenses in
accordance
with GAAP

Cost of revenue* $26,753 $(50) $(381) $-- $26,322

Operating expenses:
Research and
development $18,099 $(1,369) $-- $-- $16,730
Sales and
marketing* 36,083 (1,359) (346) -- 34,378
General and
administrative 13,226 (860) -- (2,031) 10,335
Loss on excess
office facilities 738 -- -- -- 738
Antitrust
litigation
benefit, net (39,835) -- -- 39,835 --

Total adjusted
operating
expenses, net* $28,311 $(3,588) $(346) $37,804 $62,181

* 2006 results have been restated to include acquisition related
intangible asset amortization to conform to the pro forma presentation
for 2007.

Forward Looking Guidance

A reconciliation of GAAP net income per diluted share guidance for the
quarter ending June 30, 2007 and the full year ending December 31, 2007 to
adjusted net income per diluted share guidance is as follows:

Quarter Ending Year Ending
June 30, 2007 December 31, 2007
Low High Low High

Net income per diluted
share in accordance
with GAAP $(0.01) $0.01 $0.24 $0.27
Stock based compensation 0.04 0.04 0.16 0.14
Conversion of WiderThan
stock options to
a cash equivalent 0.00 0.00 0.02 0.02
Acquisitions related
intangible asset
amortization 0.04 0.04 0.13 0.13
Net benefit related
to antitrust litigation -- -- (0.34) (0.33)
Tax impact of above
pro forma items (0.03) (0.03) 0.04 0.04
Change in income tax
valuation allowance -- -- (0.02) (0.02)

Total adjusted
net income $0.04 $0.06 $0.23 $0.25

FCMN Contact: meggers@real.com

Source: RealNetworks, Inc.

CONTACT: media, Bill Hankes, +1-206-892-6614, or bhankes@real.com, or
investors, Caroline Hughes, +1-206-892-6718, or carolinehughes@real.com, both
of RealNetworks

Web site:

http://www.realnetworks.com/

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Profile: intent