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8-K - 8-K - RealD Inc.a11-28941_18k.htm

Exhibit 99.1

 

 

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

 

LOS ANGELES (November 2, 2011) - RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its second quarter of fiscal 2012 ended September 23, 2011.

 

Second Quarter Financial Highlights

 

Revenue

 

·                  Revenue was $88.0 million, an increase of 35% from $65.3 million in the second quarter of fiscal 2011.

·                  Net license revenue was $52.0 million, an increase of 119% from $23.8 million in the second quarter of fiscal 2011.

·                  Excluding the impact of $11.6 million in exhibitor stock option expense in the prior year quarter (a contra revenue item), licensing revenue increased 47% year-over-year.  Since all exhibitor stock options vested in fiscal 2011, RealD does not expect to incur exhibitor stock option expense during the current fiscal year or in future years.

·                  Product and other revenue was $36.0 million, a decrease of 13% from $41.6 million in the second quarter of fiscal 2011.  The decrease is partially attributable to an increasing number of international consumers returning to the cinema with RealD eyewear purchased at a previous RealD showing.

·                  License revenue increased to 59% of gross revenue during the quarter from 46% of gross revenue in the second quarter of fiscal 2011, whereas product revenue decreased to 41% of gross revenue during the quarter from 54% of gross revenue in the second quarter of fiscal 2011.

 

GAAP Results — Profitability Measures and Balance Sheet

 

·                  GAAP net income attributable to common stockholders was $18.9 million, or $0.33 per diluted share.  In the second quarter of fiscal 2011, the Company recorded a GAAP net loss attributable to common stockholders of $5.1 million, or $0.12 per share.

·                  Gross margin increased to 48% from 21% in the second quarter of fiscal 2011.

·                  The Company’s balance sheet at September 23, 2011 included total cash and cash equivalents of $32.5 million and total debt of $25.0 million.  The Company had $25 million available on its line of credit as of September 23, 2011.

 

Non-GAAP Results — Profitability Measures

 

·                  Adjusted EBITDA was $44.4 million, an increase of 169% from $16.5 million in the second quarter of fiscal 2011.

·                  Adjusted EBITDA increased to 50% of net revenue from 25% of net revenue in the second 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.

 



 

“A strong 3D film slate and our growing base of 3D cinema systems worldwide enabled RealD to deliver significant year-over-year growth in license revenue, a key driver of our growth in net income and Adjusted EBITDA during the quarter,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD.

 

Key Metrics and International Revenue Statistics

 

·                  International markets generated 56% of gross license revenue in the quarter compared to 52% of gross license revenue in the second quarter of fiscal 2011.

·                  As of September 23, 2011, the Company had deployed approximately 18,700 RealD-enabled screens, an increase of 101% from approximately 9,300 screens as of September 24, 2010, and an increase of 1,200 screens, or 7%, from approximately 17,500 screens as of June 24, 2011.

·                  As of September 23, 2011, the Company had approximately 11,100 domestic screens at approximately 2,500 domestic theater locations and approximately 7,600 international screens at approximately 2,400 international theater locations.

 

Recent Business Highlights

 

·                  RealD entered into agreements with two Chinese cinema circuits: SHIMAO Cinema and Beijing SAGA Luxury Cinema.  Each exhibitor committed to equip a minimum of 100 auditoriums with RealD technology.

·                  RealD today is announcing revised expectations for its license agreement with Samsung Electronics LCD Business.  In May 2011, RealD and Samsung announced that panels featuring RealD 3D display technology were expected to be made available to consumer electronics manufacturers by early 2012.   RealD has recently learned that Samsung’s initiative to manufacture panels under the RealD license agreement is not being pursued at this time.  As a result, RealD is now pursuing other potential partners for its 3D display technology among consumer electronics panel manufacturers.

 



 

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

(As of November 2, 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 (re-release)

 

9/16/2011

 

 

Dolphin Tale 3D

 

9/23/2011

 

Fiscal Q3 2012

 

Film

 

Domestic Release Date

 

 

Three Musketeers

 

10/21/2011

 

 

Puss in Boots

 

10/28/2011

 

 

A Very Harold & Kumar 3D Christmas

 

11/4/2011

 

 

Immortals

 

11/11/2011

 

 

Happy Feet 2

 

11/18/2011

 

 

Arthur Christmas

 

11/23/2011

 

 

Hugo

 

11/23/2011

 

 

The Adventures of Tintin

 

12/21/2011

 

Fiscal Q4 2012

 

Film

 

Domestic Release Date

 

 

The Darkest Hour

 

12/25/2011

 

 

Beauty and the Beast 3D (re-release)

 

1/13/2012

 

 

Underworld 4: Awakening

 

1/20/2012

 

 

Journey 2: The Mysterious Island

 

2/10/2012

 

 

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

 

2/10/2012

 

 

Ghost Rider: Spirit of Vengeance

 

2/17/2012

 

 

Dr. Seuss’ The Lorax

 

3/2/2012

 

 

Hansel & Gretel: Witch Hunters

 

3/2/2012

 

 

John Carter

 

3/9/2012

 

Sources: Rentrak and imdb.com.

 



 

Conference Call Information

 

Members of RealD management will host a conference call to discuss the Company’s financial results for the second quarter ended September 23, 2011 beginning at 4:30 pm ET (1:30 pm PT), today, November 2, 2011.  To access the call via telephone, interested parties should dial (877) 941-1427 (U.S.) or (480) 629-9664 (International) ten minutes prior to the start time and use conference ID 4476324.

 

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 4476324.

 

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 relationships with consumer electronics panel manufacturers and its 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; 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; 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 Quarterly Report on Form 10-Q for the three months ended September 23, 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

 

Six months ended

 

 

 

September 23,

 

September 24,

 

September 23,

 

September 24,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

License

 

$

51,981

 

$

23,762

 

$

87,692

 

$

49,552

 

Product and other

 

36,014

 

41,560

 

$

59,863

 

$

80,290

 

Total revenue

 

87,995

 

65,322

 

147,555

 

129,842

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

License (1)

 

14,703

 

3,364

 

21,119

 

6,359

 

Product and other

 

30,770

 

48,135

 

48,595

 

91,758

 

Total cost of revenue

 

45,473

 

51,499

 

69,714

 

98,117

 

Gross profit

 

42,522

 

13,823

 

77,841

 

31,725

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

3,755

 

3,425

 

8,400

 

6,404

 

Selling and marketing

 

6,466

 

5,333

 

13,695

 

9,438

 

General and administrative

 

9,792

 

8,369

 

18,222

 

14,599

 

Total operating expenses

 

20,013

 

17,127

 

40,317

 

30,441

 

Operating income (loss)

 

22,509

 

(3,304

)

37,524

 

1,284

 

Interest expense

 

(272

)

(283

)

(483

)

(802

)

Other income

 

1,099

 

197

 

949

 

6,807

 

Income (loss) before income taxes

 

23,336

 

(3,390

)

37,990

 

7,289

 

Income tax expense

 

4,159

 

824

 

9,411

 

1,651

 

Net income (loss)

 

19,177

 

(4,214

)

28,579

 

5,638

 

Net (income) loss attributable to noncontrolling interest

 

(272

)

187

 

(79

)

(873

)

Accretion of preferred stock

 

 

(1,096

)

 

(4,934

)

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

 

$

18,905

 

$

(5,123

)

$

28,500

 

$

(169

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.35

 

$

(0.12

)

$

0.53

 

$

(0.01

)

Diluted

 

$

0.33

 

$

(0.12

)

$

0.50

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

54,343

 

42,856

 

54,151

 

33,774

 

Diluted

 

56,788

 

42,856

 

57,287

 

33,774

 

 


(1)   The three and six month periods ended September 23, 2011 include $6.8 million in impairment charged to cost of revenue for certain of the cinema systems.

 



 

RealD Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

September 23,

 

March 25,

 

 

 

2011

 

2011

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

32,515

 

$

16,936

 

Accounts receivable, net

 

53,762

 

50,676

 

Inventories

 

55,696

 

54,971

 

Deferred costs — eyewear

 

211

 

49

 

Deferred income taxes

 

 

1,029

 

Income taxes receivable

 

 

139

 

Prepaid expenses and other current assets

 

1,584

 

1,734

 

Total current assets

 

143,768

 

125,534

 

Property and equipment, net

 

8,617

 

7,889

 

Cinema systems, net

 

143,123

 

122,226

 

Digital projectors, net-held for sale

 

4,516

 

10,475

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

1,830

 

1,918

 

Deferred income taxes

 

817

 

 

Other assets

 

3,270

 

1,448

 

Total assets

 

$

316,598

 

$

280,147

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

40,895

 

$

58,713

 

Accrued expenses and other liabilities

 

29,429

 

40,118

 

Deferred revenue

 

13,344

 

14,176

 

Credit facility agreement

 

25,000

 

 

Deferred income taxes

 

699

 

 

Income taxes payable

 

6,891

 

 

Current portion of long-term debt

 

 

2,291

 

Total current liabilities

 

116,258

 

115,298

 

Deferred revenue, net of current portion

 

15,074

 

14,106

 

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

 

3,202

 

4,533

 

Long-term debt, net of current portion

 

 

19

 

Deferred income taxes

 

 

1,091

 

Commitments and contingencies

 

 

 

 

 

Equity

 

 

 

 

 

Common stock

 

301,289

 

292,904

 

Accumulated deficit

 

(121,080

)

(149,580

)

Total RealD Inc. stockholders’ equity

 

180,209

 

143,324

 

Noncontrolling interest

 

1,855

 

1,776

 

Total equity

 

182,064

 

145,100

 

Total liabilities and equity

 

$

316,598

 

$

280,147

 

 



 

RealD Inc.

Schedule of Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

 

Three months ended

 

Six months ended

 

 

 

September 23,

 

September 24,

 

September 23,

 

September 24,

 

(in thousands)

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

19,177

 

$

(4,214

)

$

28,579

 

$

5,638

 

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense

 

272

 

283

 

483

 

802

 

Income tax expense

 

4,159

 

824

 

9,411

 

1,651

 

Depreciation and amortization

 

7,054

 

3,376

 

13,152

 

6,044

 

Other income (1)

 

(1,099

)

(197

)

(949

)

(6,807

)

Share-based compensation expense (2)

 

4,733

 

2,352

 

7,632

 

3,008

 

Exhibitor option expense (3)

 

 

11,556

 

 

12,048

 

Impairment of assets and intangibles (4)

 

7,710

 

164

 

7,828

 

295

 

Sales and use tax (5)

 

2,017

 

2,007

 

3,507

 

4,152

 

Property tax (6)

 

330

 

241

 

766

 

447

 

Management fee (7)

 

 

87

 

 

175

 

Adjusted EBITDA

 

$

44,353

 

$

16,479

 

$

70,409

 

$

27,453

 

 


(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).