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8-K - 8-K - RealD Inc.a11-23141_18k.htm

Exhibit 99.1

 

 

RealD Inc. Reports Financial Results for First Quarter of Fiscal 2012

 

LOS ANGELES (July 28, 2011) - RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its first quarter of fiscal 2012 ended June 24, 2011.

 

First Quarter Ended June 24, 2011

 

GAAP Results — Revenue

 

·                  Net license revenue was a record $35.7 million, an increase of 39% from $25.7 million in the first quarter of fiscal 2011.

·                  Net license revenue for the prior-year quarter is net of $0.5 million in motion picture exhibitor stock option expense (a contra revenue item).  All exhibitor stock options vested in fiscal 2011 and, as a result, there was no additional exhibitor stock option expense in the just-completed first quarter of fiscal 2012 nor do we expect there will be in future periods.

·                  Net license revenue comprised 60% of net revenue versus 40% of net revenue in the first quarter of fiscal 2011.

·                  Product and other revenue was $23.8 million, a decrease from $38.8 million in the first quarter of fiscal 2011.  The decline is partially attributable to an increasing number of international consumers returning to the cinema with RealD eyewear purchased at a previous RealD 3D showing.

·                  Product and other revenue comprised 40% of net revenue versus 60% of net revenue in the first quarter of fiscal 2011.

·                  Net revenue, which includes net license revenue and product and other revenue as referenced above, was $59.6 million compared to $64.5 million in the first quarter of fiscal 2011.

 

GAAP Results — Profitability Measures and Balance Sheet

 

·                  GAAP net income attributable to common stockholders was a record $9.6 million, or $0.17 per diluted share, representing an increase of 226% from $2.9 million, or $0.09 per diluted share, in the first quarter of fiscal 2011.

·                  The Company’s profitability benefited from a $10.9 million improvement in product and other gross profit to $6.0 million from a negative $4.8 million in the first quarter of fiscal 2011.

·                  Gross margin increased significantly to 59% from 28% in the first quarter of fiscal 2011 and reflects the higher mix of net license revenue and improved product and other gross profit referenced above.

·                  The Company’s balance sheet at June 24, 2011 included total cash and cash equivalents of $18.9 million and total debt of $26.7 million.  The Company had $25 million available on its line of credit at June 24, 2011.

 

Non-GAAP Results

 

·                  Adjusted EBITDA was a record $26.1 million, an increase of 137% from $11.0 million in the first quarter of fiscal 2011.

·                  Adjusted EBITDA increased to 44% of net revenue from 17% of net revenue in the first quarter of fiscal 2011.

·                  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.

 



 

“Continued growth in 3D box office receipts, led by the outperformance of international markets, contributed to RealD’s strong financial results for the quarter,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD.  “We achieved record results in GAAP net income attributable to common stockholders and Adjusted EBITDA, which increased 226% and 137% year-over-year, respectively, underscoring the operating leverage inherent in our business model.”

 

Key Metrics and International Revenue Statistics

 

·                  International markets generated 58% of net license revenue in the first quarter of fiscal 2012 compared to 35% of net license revenue in the first quarter of fiscal 2011.

·                  As of June 24, 2011, the Company had deployed approximately 17,500 RealD-enabled screens, an increase of 133% from approximately 7,500 screens at June 25, 2010, and an increase of 2,500 screens, or 17%, from approximately 15,000 screens at March 25, 2011.

·                  Domestic screens (U.S. and Canada) were approximately 10,300 and international screens were approximately 7,200 at June 24, 2011.

·                  Total locations with RealD-enabled screens at June 24, 2011 were approximately 4,800, including approximately 2,500 domestic locations and approximately 2,300 international locations.

 

Recent Business Highlights

 

·                  In July 2011, RealD and Cinemark Holdings, Inc. (NYSE: CNK) announced the expansion of their 3D cinema relationship with a commitment for up to 1,500 additional RealD 3D-enabled screens to be installed across the Cinemark circuit in North America and Latin America.

·                  In July 2011, RealD and AMC Entertainment announced an agreement to equip up to 1,000 additional screens with RealD 3D technology across the AMC circuit in the United States and Canada.

·                  RealD was granted 10 patents and filed 24 patent applications during the quarter ended June 24, 2011.  The Company’s intellectual property (IP) portfolio at June 24, 2011 included a total of 132 patents issued and 247 patents pending.

·                  In May 2011, RealD and Samsung Electronics LCD Business announced a license agreement to make available to consumer electronics manufacturers panels featuring a new jointly developed 3D display technology, which delivers full resolution 3D images to each eye utilizing RealD 3D cinema glasses.  Introduced in January 2011 at CES, initial panels for PC monitors are expected to be available by early 2012 and for TVs after the commercialization of PC monitors.

 

3D Theatrical Release Schedule for Fiscal 2012 Ending March 23, 2012

(As of July 28, 2011 — Domestic)

 

Fiscal Q1 2012

 

Film

 

Domestic Release Date

 

 

Rio

 

4/15/2011

 

 

Hoodwinked Too! Hood vs. Evil

 

4/29/2011

 

 

Thor

 

5/6/2011

 

 

Priest

 

5/13/2011

 

 

Pirates of the Caribbean: On Stranger Tides

 

5/20/2011

 

 

Kung Fu Panda 2

 

5/26/2011

 

 

Green Lantern

 

6/17/2011

 

 

Cars 2

 

6/24/2011

 



 

Fiscal Q2 2012

 

Film

 

Domestic Release Date

 

 

Transformers: Dark of the Moon

 

6/29/2011

 

 

Harry Potter and the Deathly Hallows Part 2

 

7/15/2011

 

 

Captain America: The First Avenger

 

7/22/2011

 

 

The Smurfs

 

7/29/2011

 

 

Glee Live!

 

8/12/2011

 

 

Final Destination 5

 

8/12/2011

 

 

Spy Kids 4: All the Time in the World

 

8/19/2011

 

 

Conan the Barbarian

 

8/19/2011

 

 

Fright Night

 

8/19/2011

 

 

Shark Night 3D

 

9/2/2011

 

 

Lion King 3D

 

9/16/2011

 

 

Dolphin Tale 3D

 

9/23/2011

 

 

 

 

 

Fiscal Q3 2012

 

Film

 

Domestic Release Date

 

 

Three Musketeers

 

10/21/2011

 

 

Puss in Boots

 

11/4/2011

 

 

A Very Harold & Kumar 3D Christmas

 

11/4/2011

 

 

Immortals

 

11/11/2011

 

 

Happy Feet 2

 

11/18/2011

 

 

Arthur Christmas

 

11/23/2011

 

 

Piranha 3DD

 

11/23/2011

 

 

Hugo Cabret

 

11/23/2011

 

 

The Darkest Hour

 

12/23/2011

 

 

The Adventures of Tintin: The Secret of the Unicorn

 

12/23/2011

 

 

 

 

 

Fiscal Q4 2012

 

Film

 

Domestic Release Date

 

 

Underworld 4: Awakening

 

1/20/2012

 

 

Journey 2: The Mysterious Island

 

1/27/2012

 

 

Star Wars: Episode 1: The Phantom Menace (re-release)

 

2/10/2012

 

 

Ghost Rider: Spirit of Vengeance

 

2/17/2012

 

 

Dr. Suess’ The Lorax

 

3/2/2012

 

 

Hansel & Gretel: Witch Hunters

 

3/2/2012

 

 

John Carter

 

3/9/2012

 

Source: Rentrak

 

Conference Call Information

 

Members of RealD management will host a conference call to discuss the Company’s financial results for the first quarter ended June 24, 2011 beginning at 4:30 pm ET (1:30 pm PT), today, July 28, 2011.  To access the call via telephone, interested parties should dial (877) 941-1428 (U.S.) or (480) 629-9665 (International) ten minutes prior to the start time and use conference ID 4457036.

 

The conference call will also be broadcast live over the Internet, hosted at the Investor Relations section of the Company’s website at www.reald.com.  An archived replay of the call will be available via webcast at www.reald.com or by dialing (877)-870-5176, or (858) 384-5517 for international callers. The conference ID for the telephone replay is 4457036.

 



 

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; RealD’s ability to continue to derive substantial revenue from the licensing of RealD’s 3D technologies for use in the motion picture industry, as well as RealD’s ability to generate substantial revenue from the licensing of RealD’s 3D technologies for use in the 3D consumer electronics market; 3D motion picture releases and conversions scheduled for fiscal 2012 ending March 23, 2012, their commercial success and consumer preferences; our ability to increase the number of RealD-enabled screens in domestic and international markets and market share; our ability to supply our solutions to our customers on a timely basis; the progress, timing and amount of expenses associated with RealD’s research and development activities; market and industry trends, including growth in 3D content; RealD’s projected operating results; and competitive pressures in domestic and international markets. 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.  The Company’s Annual Report on Form 10-K for the fiscal year ended March 25, 2011 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 as a supplemental measure of its performance.   The Company defines Adjusted EBITDA as net income (loss), plus net interest expense, income and other taxes, and depreciation and amortization, as further adjusted to eliminate the impact of share based compensation expense, exhibitor option expense and certain other items not considered by RealD management to be indicative of the company’s core operating performance.

 

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’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 is 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; in communications with its Board of Directors concerning financial performance; and as part of the Company’s credit agreement in which Adjusted EBITDA is used to measure compliance with certain covenants. Because not all companies use identical calculations, the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.  Furthermore, 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.

 

About RealD Inc.

 

RealD is a leading global licensor of 3D technologies. RealD’s extensive intellectual property portfolio is used in applications that enable a premium 3D 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 and content producers and distributors to enable

 



 

the delivery and viewing of 3D content.  RealD’s cutting-edge 3D technologies have been used for applications such as piloting the Mars Rover.

 

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

 

© 2011 RealD Inc.  All Rights Reserved.

 

Investor Contact:

Erik Randerson, CFA

424-702-4317

eranderson@reald.com

 

Media Contact:

Rick Heineman

310-339-9347

rheineman@reald.com

 



 

RealD Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three months ended

 

 

 

June 24,

 

June 25,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

License

 

$

35,711

 

$

25,728

 

Product and other

 

23,849

 

38,792

 

Total revenue

 

59,560

 

64,520

 

Cost of revenue:

 

 

 

 

 

License

 

6,416

 

2,995

 

Product and other

 

17,825

 

43,623

 

Total cost of revenue

 

24,241

 

46,618

 

Gross profit

 

35,319

 

17,902

 

Operating expenses:

 

 

 

 

 

Research and development

 

4,645

 

2,979

 

Selling and marketing

 

7,229

 

4,105

 

General and administrative

 

8,430

 

6,230

 

Total operating expenses

 

20,304

 

13,314

 

Operating income

 

15,015

 

4,588

 

Interest expense

 

(211

)

(519

)

Other income (loss)

 

(150

)

6,610

 

Income before income taxes

 

14,654

 

10,679

 

Income tax expense

 

5,252

 

827

 

Net income

 

9,402

 

9,852

 

Net (income) loss attributable to noncontrolling interest

 

193

 

(1,060

)

Accretion of preferred stock

 

 

(3,838

)

Undistributed earnings attributable to preferred stockholders

 

 

(2,008

)

Net income attributable to RealD Inc. common stockholders

 

$

9,595

 

$

2,946

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic

 

$

0.18

 

$

0.12

 

Diluted

 

$

0.17

 

$

0.09

 

 

 

 

 

 

 

Shares used in computing earnings per common share:

 

 

 

 

 

Basic

 

53,955

 

24,691

 

Diluted

 

57,781

 

31,073

 

 



 

RealD Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

June 24,

 

March 25,

 

 

 

2011

 

2011

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

18,892

 

$

16,936

 

Accounts receivable, net

 

50,315

 

50,676

 

Inventories

 

61,369

 

54,971

 

Deferred costs — eyewear

 

2,235

 

49

 

Deferred income taxes

 

 

1,029

 

Income taxes receivable

 

 

139

 

Prepaid expenses and other current assets

 

960

 

1,734

 

Total current assets

 

133,771

 

125,534

 

Property and equipment, net

 

7,978

 

7,889

 

Cinema systems, net

 

141,159

 

122,226

 

Digital projectors, net-held for sale

 

10,142

 

10,475

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

1,874

 

1,918

 

Deferred income taxes

 

817

 

 

Other assets

 

3,413

 

1,448

 

Total assets

 

$

309,811

 

$

280,147

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

52,545

 

$

58,713

 

Accrued expenses and other liabilities

 

30,966

 

40,118

 

Deferred revenue

 

15,740

 

14,176

 

Credit facility agreement

 

25,000

 

 

Deferred income taxes

 

701

 

 

 

Income taxes payable

 

4,063

 

 

Current portion of long-term debt

 

1,716

 

2,291

 

Total current liabilities

 

130,731

 

115,298

 

Deferred revenue, net of current portion

 

15,463

 

14,106

 

Other long-term liabilities, customer deposits and virtual print fee liability

 

5,728

 

4,533

 

Long-term debt, net of current portion

 

 

19

 

Deferred income taxes

 

 

1,091

 

Commitments and contingencies

 

 

 

 

 

Equity

 

 

 

 

 

Common stock

 

296,291

 

292,904

 

Accumulated deficit

 

(139,985

)

(149,580

)

Total RealD Inc. stockholders’ equity

 

156,306

 

143,324

 

Noncontrolling interest

 

1,583

 

1,776

 

Total equity

 

157,889

 

145,100

 

Total liabilities and equity

 

$

309,811

 

$

280,147

 

 



 

RealD Inc.

Schedule of Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

Reconciliation of Net Income to Adjusted EBITDA

 

 

 

Three months ended

 

 

 

June 24,

 

June 25,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net income

 

$

9,402

 

$

9,852

 

Add (deduct):

 

 

 

 

 

Interest expense

 

211

 

519

 

Income tax expense

 

5,252

 

827

 

Depreciation and amortization

 

6,098

 

2,668

 

Other (income) loss (1)

 

150

 

(6,610

)

Share-based compensation expense (2)

 

2,899

 

656

 

Exhibitor option expense (3)

 

 

492

 

Impairment of assets and intangibles (4)

 

118

 

131

 

Sales and use tax (5)

 

1,490

 

2,145

 

Property tax (6)

 

436

 

206

 

Management fee (7)

 

 

88

 

Adjusted EBITDA

 

$

26,056

 

$

10,974

 

 


(1)   Includes amortization of debt issue costs, unrealized foreign currency exchange gains and losses and gains from the sale of digital projectors.

(2)   Represents share-based compensation expense of nonstatutory and incentive stock options and restricted stock units to employees, officers and directors.

(3)   Represents stock options granted to some of our motion picture exhibitor licensees. The amounts are recorded as motion picture exhibitor option expense/contra revenue in the consolidated financial statements.

(4)   Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and identifiable intangibles.

(5)   Represents taxes incurred by us for cinema license and product revenue.

(6)   Represents property taxes on RealD Cinema Systems and digital projectors.

(7)   Represents payment of management fees to our Series C mandatorily redeemable convertible preferred stockholder (included in general and administrative expense, which was terminated upon the completion of our initial public offering).