RealNetworks, Inc.

Greetings, and welcome to Real Networks, Inc. Second Quarter 2022 Earnings Call. At this time, all participants are on a listen-only mode. If anyone should require operator assistance during a 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, Brian Pranovo, Investor Relations for Real Networks. Thank you. You may begin.

Thank you, Doug, and welcome to Real Network's second quarter 2022 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 future revenue, operating expenses, and adjusted EBITDA, as well as trends affecting its businesses and prospects for future growth, profitability, liquidity, and financial condition. Other forward-looking statements include include the company's plans to implement its strategy, investments, products, and initiatives, and restructuring efforts, the pending merger agreement as disclosed in the 8K we filed with the SEC on July 28, 2022, as well as the expected growth, profitability, and other benefits from these activities. In addition, today's call contains certain forward-looking statements, 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 reports on Form 10-K and Form 10-Q and in other reports. 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 expectations as of today, July 28, 2022. 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 reason. 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 us today are Rob Glazer, Chairman and CEO, and Christine Chambers, Senior Vice President, CFO, and Treasurer. Rob will discuss the company's strategy and the progress the company made during the second quarter of 2022. Christine will conclude with a more detailed review of the financial results. With that, I will hand the call over to Rob.

Thanks, Brian. Good afternoon, everyone, and thanks for joining us. Let me start with a recap of the announcement we made this morning. Then I'll summarize our Q2 business and financial results. Then finally, I'll discuss how we're organizing the company for success going forward. After I conclude, Christine Chambers will discuss our detailed financial results. First, this morning's announcement. Earlier today, we announced that Real Networks and I have entered into a definitive merger agreement whereby my affiliates and I will buy the outstanding shares of the company for 73 cents per share. The company shareholders will be asked to vote upon the adoption of the merger agreement and approval of the merger at a shareholders meeting called for such purpose on a date to be announced. The transaction is expected to close in the fourth quarter of 2022. In our announcement, I explained my thinking in the following way. Quote, I founded Real Networks 28 years ago because I believe that the Internet represented a once-in-a-generation transformational opportunity for digital media. I believe that machine learning-based artificial intelligence represents a similar transformational opportunity today, albeit one that will take time and resources to fully realize. I'm happy that the Real Networks Board and I could reach alignment and agreement on a path to pursue this transformation with focus, efficiency, and speed by turning Real back into a private company and in a way that is fair to all shareholders. Because we're going through a highly structured process, we're limited as to what we can say publicly. Accordingly, we will not be taking questions upon the conclusion of today's call. Next topic is our quarterly results. Revenue in the second quarter was $11.9 million, down from $14.6 million in the second quarter of 2021. Earnings per diluted share was a loss of 11 cents compared to a loss of 3 cents per diluted share in the prior year period. In the second quarter of 2022, adjusted EBITDA was a loss of $4.2 million compared to an adjusted EBITDA loss of $4.3 million in the prior year period. Our results reflect steady progress with Contact, expected results in games, and significant softness with Safer. Regarding Contacts, we're seeing steady progress in adding additional customers and products. In June, we began a pilot program with Vodafone Germany, a company that are testing Vodafone Call Protect, which is based on our Contacts for Voice product. This program will warn Vodafone Germany customers of potential fraudulent scam or spam-type calls. Regarding Safer, we had a disappointing second quarter and overall first half of 2022. We have a clear plan to address Safer's issues, centered on our launch in May of Safer Scan and the hiring of Paul DePeso, who has just joined us as president of Safer. Paul brings a wealth of experience in the physical security space and is a proven leader with a track record of building and growing significant businesses in the access control industry. He was most recently executive vice president and general manager of Phoenix and access controls a service software solutions company, that he co-ran from his founding and was recently acquired by Acre. We believe Paul is the right leader to build a large and successful business based on our excellent Safer platform and the exciting Safer Scan product. In addition to Paul joining us, we've also announced a change in our CFO position. Brian McClain joined us in July, and we officially begin as interim CFO and treasurer on August 1st. Brian most recently served as president and CFO of Pelco Inc., a leading computer security company where we manage customer care, supply chain, purchasing, engineering, development, finance, human resources, IT, and sales. Brian has over 25 years of experience in various finance and leadership roles. Brian has a great skill set and relevant experiences that will help us transition from pure software to a combination of software and ad software-based hardware products. With the addition of Paul Bryan, as well as Mike McCooley, who joined us in April in heads messaging, and Simonetta Louie, who joined us last October and runs GameHouse, We now have a strong set of leaders for our growth businesses. REAL has now transitioned to a decentralized structure with presidents for each of our growth initiatives who report directly to me. We've also consolidated all of our foundation businesses under a longtime REAL executive, Frederick Savoy. We believe this structure will help us focus better and move faster to achieve success. Before moving the call on to Christine, I want to take a moment to thank both Mike Ensign and Christine Chambers for their hard work and dedication to REAL Networks. They helped lead real through and during the heart of the pandemic and have helped set us up for our next chapter. I wish each of them the best in their future endeavors. And with that, I'll turn the phone over to Christine to review the second quarter financial results in detail. Christine?