RealNetworks, Inc.

Greetings and welcome to the Real Networks Incorporated fourth quarter and full year 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with Addo Investor Relations. Thank you, Kim. You may begin.

Thank you, and welcome to Real Network's fourth quarter and full year 2020 financial results conference call. Before we begin, I'd like to remind you that some matters discussed today are forward-looking, including statements regarding Real Network's operating expenses on a consolidated basis and trends affecting its businesses and prospects for future growth and profitability, liquidity, and financial condition. Other forward-looking statements include the company's plans to implement its strategy, invest in its products and initiatives, and restructuring efforts, as well as the expected growth, profitability, and other benefits from these activities. In addition, today's call contains certain forward-looking statements that relate to the sale of 84% owned Rhapsody International Inc., which does business as Napster, to Melody VR Group PLC. Effective as of the third quarter of 2020, Napster is presented as a discontinued operation for accounting and disclosure purposes and comparable historical periods have been recast to conform to this presentation. Statements that express our belief and expectations and all statements other than statements of historical facts are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. We describe these and other risks in our SEC filings, including in the risk factors set forth in our most recent report on Form 10-K, and Form 10-Q, and in other reports. A copy of those filings can be obtained from the SEC or from the Investor Relations section of our corporate website. Forward-looking statements made today reflect Real Network's expectations as of today, February 21. The company undertakes no duty to update or revise any forward-looking statements made during this call, whether as a result of new information, future events, or any other reasons. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the information included in our press release and in our form 8K dated and submitted to the SEC today, both of which can be found on our corporate website at investor.realnetworks.com under the financials tab. With me today are Rob Glazer, Chairman and CEO, Mike Ensign, President and COO, and Judd Lee, Senior Vice President and CFO. Rob will discuss the company's strategy and operational performance in 2020. Mike will then discuss our full year 2020 performance and our major priorities moving forward, and Judd will conclude with a review of our fourth quarter 2020 financial results. After today's prepared remarks, Rob, Mike, and Judd will be pleased to answer questions. With that, I will hand the call over to Rob.

Thanks, Kim. Good afternoon, everyone, and thanks for joining us today. As I typically do at year-end, I'll begin with my overall assessment of our 2020 performance. I'll then add a few comments about our go-forward strategy and our two most significant growth initiatives, Safer and Free-to-Play Mobile Games. Then I'll close by commenting on a few personnel matters before passing the baton to Mike and Judd to go into the financials in more detail. I'd also like to note that the financials presented today focus on our continuing operations, which includes our games, consumer media, and mobile service segments. As you know, in late December, we completed the sale of Napster to Melody VR for $70 million in total consideration, which included our 84% interest in Napster. While we remain a minority shareholder of Melody VR, we no longer include Napster in our results from continuing operations. I consider 2020 to have been a very solid year for Real Network. Our overall top-line revenue grew modestly, up 3% over 2019. But that number masks three notable achievements. First, our two growth initiatives, Free to Pay Mobile Games and Saper, grew their revenue by over 110% combined compared to 2019. Second, we substantially improved our bottom-line results. Our 2020 adjusted EBITDA loss from continuing operations was negative $8.6 million, an improvement of $11.4 million over 2019. Moreover, as Mike and Judd will discuss in a few minutes, we finished 2020 strong and had an excellent fourth quarter. This included our sixth consecutive quarter of year-over-year improvement and our adjusted EBITDA loss. Third, we achieved both of these results in a year when the world was turned upside down by the global COVID-19 pandemic. The pandemic affected how we work, how our customers work, how we communicate with and serve our customers, and the level of economic activity in several sectors in which we do business. I'm deeply appreciative of the resilience and resourcefulness our team exhibited in the face of the pandemic. I'm also grateful for our customers who continue to work closer with us in spite of the disruptions that they were experiencing. A big contributor to our success in 2020 was our progress in simplifying Reel. We're very pleased to have completed the sale of our 84% stake in Napster to Melody VR Group, a leading creator of live virtual reality music experiences. Now that the sale is complete, Melody recently announced its intention to rebrand itself as Napster. We believe the sale of Napster not only helps streamline REEL, but also deepens our focus on our key growth initiatives and will help us create great products, serve our customers well, and create long-term shareholder value. The Napster sale also contributed to a meaningful increase in our cash balance from the prior year. We're very proud of our Napster team's hard work over the past 17 years and deeply appreciate the opportunity to work closely with them and all of the other stakeholders in the music industry for all these years. We look forward to being an ongoing stakeholder in Melody VR slash Napster's success. Now I'd like to share a few details about our strategy going forward and our success with Safer and free-to-play mobile games in 2020. Real is in the middle of a transformation from being a traditional technology-based digital media company to being an AI-based digital media company. Over the last four years, we've gone from being a company with great digital media technology to a company that also has deep expertise and talent in machine learning applied to digital media. This has been a conscious multi-year transition that applies in different ways to each of our businesses. The two most significant examples of this transition are our context natural language processing platform and our safer computer vision platform. Context, which is earlier in its transition, is leveraging our very high throughput Metcalfe inter-carrier messaging platform to create AI-based products and services that help our customers deliver better messaging-based services and experiences. Safer, which has been in the market for two and a half years, initially leveraged our globally popular digital media products to create computer vision products and services that are highly accurate, super fast, and very small. Safer also excelled at having very low bias because of excellent and conscious engineering that was built on a large global data set. Let me now talk a bit about Safer's commercial results in 2020. Safer had its best year so far, despite significant headwinds with some of the market segments caused by the pandemic. We saw particularly strong growth in the U.S. federal market and also in Japan and South Korea. Regarding our U.S. federal business, we've continued to execute on two direct-to-Phase II small business innovation research, or CIBR, contracts that were ordered in Q2, both with the United States Air Force. We began delivering on these deals in Q3 and will continue to do so in the first half of 2021. In Japan, one of our key partners is Docomo. SAFER is now part of the Docomo Innovation Cloud, which has led to multiple customer engagements in Japan. In Korea, T-Money, a smart mobility and payment services company, is leveraging Safer through a pilot program to provide touchless biometric payments for public transportation. Improving the speed of payments through facial recognition will help both save passengers time and help reduce the risk of being exposed to illness in public transport centers. In addition to regular commercial uses of Safer, we also see a civic opportunity to use Safer to help improve safety during the pandemic and to help us all get to the post-COVID future. In December 2020, we introduced Mask Check, a free face mask compliance app, service, and data platform that helps communities and businesses operate and reopen with greater safety by encouraging and assessing face mask compliance. We released Mask Check in partnership with the COVID-19 International Research Team, who have been a terrific partner. Going forward, we expect to continue to sharpen our focus with Safer and see significant growth opportunities in front of us in 2021 and beyond. Regarding games, 2020 was the first full year of our two flagship free-to-play mobile games, Delicious Bed and Breakfast and Delicious World. These two mobile games were downloaded and played by 6.7 million users in 2020. We think both titles have strong futures ahead of them. Our GameHouse team has continued to work on enhancing them as well as developing a few additional titles. Finally, I'd like to touch on two people-related matters. As announced last week, we appointed Christine Chambers to the position of Senior Vice President, Chief Financial Officer, and Treasurer. Effective March 1st, Christine will replace Judd Lee, who will be transitioning out of the company in March. Christine will be rejoining Real after working for the company for over a decade, most recently as our VP of Finance, and will be reporting to our President and COO, Mike Ensign. We're very happy to have Christine rejoin Real. She's very bright and brings deep knowledge of our people and the financial drivers of our business. I also want to thank Judd for his many contributions to Real through the unprecedented pandemic year. We wish Judd well in his future endeavors. In summary, I'm very pleased with the progress we made in 2020. We have a lot of work ahead of us and a number of challenges, including the uncertainty of not knowing when the pandemic will recede and how the world will change in its wake. That said, I draw a lot of confidence for how our team weathered and in many ways thrived in 2020. With that, I will turn the call over to Mike to discuss our 2020 financial results and to share some thoughts on our key priorities going forward. Mike?