RLD Reald

RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its first quarter of fiscal 2014 ended June 30, 2013.

“We had a challenging first quarter, as moviegoers were more selective than expected regarding the films they chose to experience in 3D. Collaborating with our exhibitor and studio partners we have recently initiated a variety of new industry efforts to further promote the appeal of seeing films in RealD and the premium RealD experience,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD.

“Importantly, we continue to advance our international expansion initiatives, highlighted by today’s announcement of our largest new contract win in several years,” Lewis added, “as Cinemex, the sixth-largest exhibitor in the world, has selected RealD as its exclusive circuit-wide 3D technology provider and will equip RealD 3D technology in up to 700 auditoriums throughout the Cinemex circuit in Mexico. Approximately 540 alternative 3D systems will be replaced with RealD 3D within the next two years, ensuring that Cinemex audiences will experience the brightest and most immersive 3D available.”

First Quarter Fiscal 2014 Financial Highlights

• Total revenue was $59.2 million, comprised of license revenue of $37.3 million and product and other revenue of $21.9 million, for the first quarter of fiscal 2014. For the first quarter of fiscal 2013, total revenue was $68.2 million, comprised of license revenue of $41.2 million and product and other revenue of $27.0 million.
• GAAP net loss attributable to common stockholders was $1.5 million, or $0.03 per share, compared to GAAP net income attributable to common stockholders of $3.0 million, or $0.05 per diluted share, for the first quarter of fiscal 2013.
• Adjusted EBITDA was $16.0 million, compared to $22.0 million in the first quarter of fiscal 2013.
• As previously announced, RealD has modified its definition of Adjusted EBITDA for financial reporting purposes to align with the Adjusted EBITDA definition under RealD’s credit facility. As a result, the prior year calculation of Adjusted EBITDA was revised to conform with RealD’s new definition of Adjusted EBITDA.
• Adjusted EBITDA is defined within the section of this press release entitled “Use of Non-GAAP Financial Measures,” which includes a reconciliation to its most comparable GAAP measure, net income (loss).

Cash Flows and Balance Sheet Highlights

• For the quarter ended June 30, 2013, cash flows from operating activities were a negative $8.7 million and total capital expenditures were $10.1 million, resulting in negative free cash flow of $18.8 million. Cash flows were impacted by unfavorable movements in working capital items during the quarter (when compared to RealD’s balance sheet as of March 31, 2013 for the prior quarter), due primarily to timing considerations, including a $10.0 million increase in accounts receivable, a $3.8 million increase in inventory, and a $5.0 million decrease in accounts payable and accrued expenses.
• Free cash flow is defined within the section of this press release entitled “Use of Non-GAAP Financial Measures,” which includes a reconciliation to its most comparable GAAP measure, net cash provided by operating activities.
• As of June 30, 2013, $14.6 million remained available under RealD’s $75 million stock repurchase authorization. RealD did not repurchase shares during the quarter.
• As of June 30, 2013, cash and cash equivalents were $18.4 million and total debt was $52.5 million.

Key Metrics

• Estimated box office generated on RealD-enabled screens(1) for the first quarter of fiscal 2014 was $838 million ($431 million domestic, $407 million international). In the first quarter of fiscal 2013, estimated box office generated on RealD-enabled screens was $933 million ($444 million domestic, $489 million international).
• Eight 3D films were released in the first quarter of fiscal 2014, compared to 10 3D films in the first quarter of fiscal 2013. These figures reflect the number of 3D films released domestically during the periods.
• International markets generated 55% of license revenue and 27% of product and other revenue in the first quarter of fiscal 2014.
• As of June 30, 2013, RealD had deployed approximately 23,500 RealD-enabled screens, an increase of 14% from approximately 20,700 screens as of June 22, 2012, and an increase of 800 screens (300 domestic, 500 international), or 4%, from approximately 22,700 screens as of March 31, 2013.
• As of June 30, 2013, RealD had approximately 13,100 domestic screens at approximately 2,900 domestic theater locations and approximately 10,400 international screens at approximately 2,700 international theater locations.

(1)

 

Estimated domestic box office on RealD-enabled screens represents the estimated 3D box office generated on RealD-enabled domestic screens. Estimated international box office on RealD-enabled international screens is the estimated 3D box office generated on RealD-enabled international screens. RealD’s estimates of box office on RealD-enabled screens rely on box office tracking data. International box office reflects RealD’s estimates of international box office generated on RealD-enabled screens in 20 foreign countries where box office tracking is available. RealD estimates these countries represent approximately 85% of RealD’s international license revenues.

        3D Theatrical Release Schedule for Fiscal 2014 (As of August 7, 2013 – Domestic)                

Fiscal Q1 2014

Film

Domestic Release Date

(ended 6/30/13) Jurassic Park (re-release) 4/5/2013 Iron Man 3 5/3/2013 The Great Gatsby 5/10/2013 Star Trek Into Darkness 5/16/2013 Epic 5/24/2013 Man of Steel 6/14/2013 World War Z 6/21/2013 Monsters University 6/21/2013  

Fiscal Q2 2014

Film

Domestic Release Date

(ending 9/30/13) Despicable Me 2 7/3/2013 Pacific Rim 7/12/2013 Turbo 7/17/2013 R.I.P.D. 7/19/2013 The Wolverine 7/26/2013 The Smurfs 2 7/31/2013 Percy Jackson: Sea of Monsters 8/7/2013 Planes 8/9/2013 One Direction: This Is Us 8/30/2013 Battle of the Year: The Dream Team 9/20/2013 Cloudy With a Chance of Meatballs 2 9/27/2013  

Fiscal Q3 2014

Film

Domestic Release Date

(ending 12/31/13) Gravity 10/4/2013 Metallica: Through the Never 10/4/2013 Free Birds 11/1/2013 Thor: The Dark World 11/8/2013 Frozen 11/27/2013 Postman Pat: The Movie - You Know You're the One 11/27/2013 The Hobbit: The Desolation of Smaug 12/13/2013 Walking With Dinosaurs 12/20/2013 47 Ronin 12/25/2013  

Fiscal Q4 2014

Film

Domestic Release Date

(ending 3/31/14) The Nut Job 1/17/2014 Seventh Son 1/17/2014 I, Frankenstein 1/24/2014 The Lego Movie 2/7/2014 Pompeii 2/21/2014 Mr. Peabody and Sherman 3/7/2014 300: Rise of an Empire 3/7/2014                

Sources: Rentrak and imdb.com.

 

Conference Call Information

Members of RealD’s management will host a conference call to discuss RealD’s financial results for the first quarter of fiscal 2014, beginning at 4:30 pm ET (1:30 pm PT), today, August 7, 2013. To access the call via telephone, interested parties should dial (855) 769-4820 (U.S.) or (407) 374-0083 (International) ten minutes prior to the start time and use conference ID 20099342.

The conference call will also be broadcast live over the Internet, hosted at the Investor Relations section of RealD’s website at www.reald.com. An archived replay of the call will be available via webcast at www.reald.com or by dialing (855) 859-2056, or (404) 537-3406 for international callers. The conference ID for the telephone replay is 20099342.

Cautionary Note on Forward-Looking Statements

This press release includes forward-looking information and statements, including but not limited to: statements concerning anticipated future financial and operating performance; our expectations regarding demand and acceptance for our technologies; RealD’s ability to continue to derive substantial revenue from the licensing of RealD’s 3D technologies for use in the motion picture industry; 3D motion picture releases and conversions scheduled for fiscal 2014 ending March 31, 2014 and beyond, their commercial success and consumer preferences, that, in recent periods, have trended in favor of 2D over 3D in some motion pictures in domestic and international markets; our ability to increase our revenues and the number of RealD-enabled screens in domestic and international markets and our market share; our ability to supply our solutions to our customers on a timely basis; RealD's relationships with its exhibitor and studio partners and the business model for 3D eyewear in North America; the progress, timing and amount of expenses associated with RealD’s research and development activities, which may increase in future periods; market and industry trends, including growth in 3D content; our plans, strategies and expected opportunities; the deployment of and demand for our products and products incorporating our technologies; RealD’s projected operating results; and competitive pressures in domestic and international cinema markets impacting license and product revenues.

These statements are based on our management’s current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our management’s control that could cause actual results to differ materially from the results discussed in the forward-looking statements. RealD’s Annual Report on Form 10-K for the twelve months ended March 31, 2013 and other documents filed with the SEC include a more detailed discussion of the risks and uncertainties that may cause actual results to differ materially from the results discussed in the forward-looking statements.

RealD undertakes no obligation to update publicly the information contained in this press release, or any forward-looking statements, to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

Use of Non-GAAP Financial Measures

To supplement RealD’s financial statements presented on a GAAP basis, RealD provides Adjusted EBITDA and free cash flow as supplemental measures of its performance. RealD defines Adjusted EBITDA as net income (loss), plus net interest expense, income taxes, other income, and depreciation and amortization, as further adjusted to eliminate the impact of share based compensation expense and certain other items not considered by RealD management to be indicative of RealD’s core operating performance. RealD defines free cash flow as net cash provided by operating activities less total capital expenditures in a given period (e.g. purchases of cinema systems and property and equipment on a combined basis).

RealD presents Adjusted EBITDA in reporting its financial results to provide investors with additional tools to evaluate RealD’s operating results in a manner that focuses on what RealD’s management believes to be its ongoing business operations. RealD presents free cash flow to provide investors a metric for our capacity to generate cash from our operating and investing activities to sustain our operating activities. RealD’s management does not itself, nor does it suggest that investors should, consider any such Non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Adjusted EBITDA and free cash flow are used by management for planning purposes, including: the preparation of internal budgets, forecasts and strategic plans; in analyzing the effectiveness of business strategies; to evaluate potential acquisitions; in making compensation decisions; and in communications with its Board of Directors concerning financial performance. Because not all companies use identical calculations, RealD’s presentation of Adjusted EBITDA and free cash flow may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments. Adjusted EBITDA also differs from the amounts calculated under the similarly titled definition in our credit agreement, which is further adjusted to reflect certain other cash and non-cash charges and is used to determine compliance with financial covenants and RealD’s ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

About RealD Inc.

RealD is a leading global licensor of 3D and other visual technologies. RealD's extensive intellectual property portfolio is used in applications that enable a premium viewing experience in the theater, the home and elsewhere. RealD licenses its RealD Cinema Systems to motion picture exhibitors that show 3D motion pictures and alternative 3D content. RealD also provides its RealD Display, active and passive eyewear, and RealD Format technologies to consumer electronics manufacturers, content producers and distributors to enable the delivery and viewing of 3D and other premium content on a variety of visual displays and devices.

RealD was founded in 2003 and has offices in Beverly Hills, California; Boulder, Colorado; London, United Kingdom; Moscow, Russia; Shanghai, China; Hong Kong; Tokyo, Japan; and Rio de Janeiro, Brazil. For more information, please visit our website at www.reald.com.

© 2013 RealD Inc. All Rights Reserved.

      RealD Inc. Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)   Three months ended June 30,       June 22, 2013 2012   Revenue: License $ 37,306 $ 41,189 Product and other   21,913     26,989   Total revenue 59,219 68,178 Cost of revenue: License 10,818 10,013 Product and other   20,220     26,820   Total cost of revenue 31,038 36,833 Gross profit 28,181 31,345 Operating expenses: Research and development 5,544 4,898 Selling and marketing 7,338 6,895 General and administrative   14,422     11,262   Total operating expenses   27,304     23,055   Operating income 877 8,290 Interest expense, net (489 ) (313 ) Other loss, net   (209 )   (353 ) Income before income taxes 179 7,624 Income tax expense   1,715     4,677   Net income (loss) (1,536 ) 2,947

Net loss attributable to noncontrolling interest

  2     32  

Net income (loss) attributable to RealD Inc. common stockholders

$ (1,534 ) $ 2,979     Earnings (loss) per common share: Basic $ (0.03 ) $ 0.05 Diluted $ (0.03 ) $ 0.05   Shares used in computing earnings (loss) per common share: Basic 49,588 54,676 Diluted 49,588 56,643               RealD Inc. Consolidated Balance Sheets (In thousands)   June 30, March 31, 2013 2013 (unaudited) Assets Current assets: Cash and cash equivalents $ 18,399 $ 31,020 Accounts receivable, net 55,444 45,472 Inventories 19,269 15,430 Deferred costs – eyewear 441 538 Prepaid expenses and other current assets   5,991     3,973   Total current assets 99,544 96,433 Property and equipment, net 25,123 25,002 Cinema systems, net 125,171 125,379 Digital projectors, net-held for sale 644 728 Goodwill 10,657 10,657 Other intangibles, net 7,107 7,417 Deferred income taxes 3,001 3,001 Other assets   4,859     5,031   Total assets $ 276,106   $ 273,648     Liabilities and equity Current liabilities: Accounts payable $ 18,113 $ 22,737 Accrued expenses and other liabilities 24,634 25,013 Deferred revenue 7,964 9,916 Income taxes payable 1,139 603 Deferred income taxes 2,859 2,860 Current portion of long-term debt   1,042     1,042   Total current liabilities 55,751 62,171 Credit facility agreement 51,458 46,458 Deferred revenue, net of current portion 9,329 10,392 Other long-term liabilities, customer deposits and virtual print fee liability   6,182     5,438   Total liabilities   122,720     124,459     Commitments and contingencies   Equity (deficit) Common stock 338,290 332,694 Accumulated deficit (184,380 ) (182,846 ) Accumulated other comprehensive income   252     115   Total RealD Inc. stockholders’ equity 154,162 149,963 Noncontrolling interest   (776 )   (774 ) Total equity   153,386     149,189     Total liabilities and equity $ 276,106   $ 273,648           RealD Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)   Three months ended June 30,       June 22, 2013 2012 Cash flows from operating activities Net income (loss) $ (1,536 ) $ 2,947

Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities:

Depreciation and amortization 9,554 7,850 Deferred income tax (1 ) (55 ) Non-cash interest expense 20 104 Non-cash stock compensation 4,645 4,282 Gain on sale of digital projectors (18 ) – Impairment of long-lived assets and related purchase commitments 953 1,574 Changes in operating assets and liabilities: Accounts receivable (9,972 ) (1,996 ) Inventories (3,839 ) 18,565 Prepaid expenses and other current assets (2,018 ) 173 Deferred costs - eyewear 97 (348 ) Other assets 172 (1,064 ) Accounts payable (4,637 ) (5,114 ) Accrued expenses and other liabilities (399 ) (3,964 ) Other long-term liabilities, customer deposits and virtual print fee liability 744 180 Income taxes receivable/payable 535 3,133 Deferred revenue   (3,015 )   1,565   Net cash (used) provided by operating activities (8,715 ) 27,832   Cash flows from investing activities Purchases of property and equipment (1,636 ) (2,745 ) Purchases of cinema systems and related components (8,428 ) (5,044 ) Proceeds from sale of digital projectors   70     2,474   Net cash used in investing activities (9,994 ) (5,315 )   Cash flows from financing activities Proceeds from credit facility 5,000 25,000 Repayments on credit facility – (25,000 ) Payments of debt issuance costs – (1,167 ) Proceeds from exercise of stock options 951 565 Proceeds from employee stock purchase plan – 302 Purchases of treasury stock   –     (1,586 ) Net cash (used) provided by financing activities   5,951     (1,886 ) Effect of currency exchange rate changes on cash and cash equivalent 137 – Net (decrease) increase in cash and cash equivalents (12,621 ) 20,631 Cash and cash equivalents, beginning of period   31,020     24,894   Cash and cash equivalents, end of period $ 18,399   $ 45,525           RealD Inc. Schedule of Non-GAAP Reconciliations (In thousands) (Unaudited)   Reconciliation of Net Income (Loss) to Adjusted EBITDA   Three months ended June 30,       June 22, (in thousands) 2013 2012   Net income (loss) $ (1,536 ) $ 2,947 Add (deduct): Interest expense, net 489 313 Income tax expense 1,715 4,677 Depreciation and amortization 9,554 7,850 Other loss, net (1) 209 353 Share-based compensation expense (2) 4,645 4,282 Impairment of assets and intangibles (3)   951     1,574 Adjusted EBITDA (4) $ 16,027   $ 21,996  

(1)

 

Includes gains and losses from foreign currency exchange and foreign currency forward contracts.

(2)

Represents share-based compensation expense of nonstatutory and incentive stock options and restricted stock units and employee stock purchase plan to employees, officers and directors.

(3)

Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and related purchase commitments and identifiable intangibles.

(4)

As previously announced, RealD has modified its definition of Adjusted EBITDA for financial reporting purposes to align with the Adjusted EBITDA definition under RealD’s credit facility. As a result, the prior year calculation of Adjusted EBITDA was revised to conform with RealD’s new definition of Adjusted EBITDA.

        RealD Inc. Schedule of Non-GAAP Reconciliations (In thousands) (Unaudited)  

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

  Three months ended June 30,       June 22, 2013 2012 (in thousands) Net cash provided by operating activities $ (8,715 ) $ 27,832 Purchases of property and equipment (1,636 ) (2,745 ) Purchases of cinema systems and related components   (8,428 )   (5,044 ) Free cash flow $ (18,779 ) $ 20,043