Attached files

file filename
8-K - 8-K - RealD Inc.a12-3950_28k.htm

Exhibit 99.1

 

 

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

 

LOS ANGELES (February 1, 2012) - RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its third quarter of fiscal 2012 ended December 23, 2011.

 

Third Quarter Financial Highlights

 

Revenue

 

·                  Revenue was $49.0 million, a decrease of 15% from $57.8 million in the third quarter of fiscal 2011.

·                  Net license revenue was $28.5 million, an increase of 51% from $18.8 million in the third quarter of fiscal 2011.

·                  Net license revenue for the prior-year quarter is net of $22.0 million in motion picture exhibitor stock option expense (a contra revenue item).  All exhibitor stock options vested in fiscal 2011 and RealD does not expect to incur exhibitor stock option expense during the current fiscal year or in future years.

·                  Product and other revenue was $20.6 million, a decrease of 47% from $38.9 million in the third 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.

 

GAAP Results — Profitability Measures and Balance Sheet

 

·                  GAAP net income attributable to common stockholders was $2.8 million, or $0.05 per diluted share, compared to a GAAP net loss attributable to common stockholders of $16.6 million, or $0.34 per share, for the third quarter of fiscal 2011.

·                  Gross margin increased to 49% from 11% in the third quarter of fiscal 2011.

·                  The Company’s balance sheet at December 23, 2011 included total cash and cash equivalents of $29.2 million and total debt of $25.0 million.  The Company had $25.0 million available on its line of credit as of December 23, 2011.

 

Non-GAAP Results — Profitability Measures

 

·                  Adjusted EBITDA was $16.2 million, a decrease of 4% from $16.9 million in the third quarter of fiscal 2011.

·                  Adjusted EBITDA increased to 33% of net revenue from 29% of net revenue in the third 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 (loss).

 

“Prudent management of operating expenses enabled RealD to maintain profitability during the third fiscal quarter despite a relatively muted 3D film slate,” said Michael V. Lewis, Chairman and Chief Executive

 

1



 

Officer of RealD. “Looking forward, we are excited about the promising slate of 3D films in our fiscal 2013 that begins on March 24, 2012, as well as continued expansion within international markets.”

 

Key Metrics and International Revenue Statistics

 

·                  International markets generated 60% of gross license revenue in the quarter compared to 58% of gross license revenue in the third quarter of fiscal 2011.

·                  As of December 23, 2011, the Company had deployed approximately 19,700 RealD-enabled screens, an increase of 74% from approximately 11,300 screens as of December 24, 2010, and an increase of 1,000 screens, or 5%, from approximately 18,700 screens as of September 23, 2011.

·                  As of December 23, 2011, the Company had approximately 11,500 domestic screens at approximately 2,500 domestic theater locations and approximately 8,200 international screens at approximately 2,400 international theater locations.

 

First Nine Months Fiscal 2012 Results

 

Revenue

 

·                  Revenue was $196.6 million, an increase of 5% from $187.6 million for the nine months ended December 24, 2010.

·                  Net license revenue was $116.1 million, an increase of 70% from $68.4 million for the nine months ended December 24, 2010.

·                  Net license revenue for the nine months ended December 24, 2010 is net of $34.0 million in motion picture exhibitor stock option expense (a contra revenue item).

·                  Product and other revenue was $80.4 million, a decrease of 33% from $119.2 million for the nine months ended December 24, 2010.

 

GAAP Results — Profitability Measures

 

·                  GAAP net income attributable to common stockholders was $31.3 million, or $0.55 per diluted share, compared to a GAAP net loss attributable to common stockholders of $16.8 million, or $0.43 per share, for the nine months ended December 24, 2010.

·                  Gross margin increased to 52% from 20% for the nine months ended December 24, 2010.

 

Non-GAAP Results — Profitability Measures

 

·                  Adjusted EBITDA was $86.6 million, an increase of 95% from $44.4 million for the nine months ended December 24, 2010.

·                  Adjusted EBITDA increased to 44% of net revenue from 24% of net revenue for the nine months ended December 24, 2010.

 

2



 

3D Theatrical Release Schedule for Second Half Fiscal 2012 and First Half Fiscal 2013

(As of February 1, 2012 — Domestic)

 

Fiscal Q3 2012

 

Film

 

Domestic Release Date

(ended 12/23/11)

 

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

(ending 3/23/12)

 

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

 

 

John Carter

 

3/9/2012

 

 

 

 

 

Fiscal Q1 2013

 

Film

 

Domestic Release Date

(ending 6/22/12)

 

Wrath of the Titans

 

3/30/2012

 

 

The Pirates! Band of Misfits

 

3/30/2012

 

 

Titanic (re-release)

 

4/6/2012

 

 

The Avengers

 

5/4/2012

 

 

Men in Black III

 

5/25/2012

 

 

Madagascar 3

 

6/8/2012

 

 

Prometheus

 

6/8/2012

 

 

Brave

 

6/22/2012

 

 

Abraham Lincoln: Vampire Hunter

 

6/22/2012

 

 

 

 

 

Fiscal Q2 2013

 

Film

 

Domestic Release Date

(ending 9/21/12)

 

Amazing Spiderman 4

 

7/3/2012

 

 

Ice Age: Continental Drift

 

7/13/2012

 

 

Step Up 4Ever 3D

 

7/27/2012

 

 

ParaNorman

 

8/17/2012

 

 

Resident Evil 5: Retribution

 

9/14/2012

 

 

Finding Nemo (re-release)

 

9/14/2012

 

 

Dredd

 

9/21/2012

 

 

Hotel Transylvania

 

9/21/2012

 

Sources: Rentrak and imdb.com.

 

3



 

Conference Call Information

 

Members of RealD management will host a conference call to discuss the Company’s financial results for the third quarter ended December 23, 2011 beginning at 4:30 pm ET (1:30 pm PT), today, February 1, 2012.  To access the call via telephone, interested parties should dial (877) 941-4774 (U.S.) or (480) 629-9760 (International) ten minutes prior to the start time and use conference ID 4507345.

 

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 4507345.

 

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 December 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

 

4



 

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.

 

© 2012 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

 

5



 

RealD Inc.

Consolidated Statements of Operations

 (In thousands, except per share amounts)

(Unaudited)

 

 

 

Three months ended

 

Nine months ended

 

 

 

December 23,

 

December 24,

 

December 23,

 

December 24,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

License

 

$

28,454

 

$

18,838

 

$

116,146

 

$

68,390

 

Product and other

 

20,572

 

38,942

 

$

80,435

 

$

119,232

 

Total revenue

 

49,026

 

57,780

 

196,581

 

187,622

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

License (1)

 

9,202

 

5,301

 

30,321

 

11,660

 

Product and other

 

15,870

 

46,341

 

64,465

 

138,099

 

Total cost of revenue

 

25,072

 

51,642

 

94,786

 

149,759

 

Gross profit

 

23,954

 

6,138

 

101,795

 

37,863

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

4,336

 

4,347

 

12,736

 

10,751

 

Selling and marketing

 

6,564

 

5,813

 

20,259

 

15,251

 

General and administrative

 

11,513

 

10,596

 

29,735

 

25,195

 

Total operating expenses

 

22,413

 

20,756

 

62,730

 

51,197

 

Operating income (loss)

 

1,541

 

(14,618

)

39,065

 

(13,334

)

Interest expense

 

(227

)

(71

)

(710

)

(873

)

Other income (loss)

 

(792

)

(431

)

157

 

6,376

 

Income (loss) before income taxes

 

522

 

(15,120

)

38,512

 

(7,831

)

Income tax expense (benefit)

 

(2,241

)

1,648

 

7,170

 

3,299

 

Net income (loss)

 

2,763

 

(16,768

)

31,342

 

(11,130

)

Net (income) loss attributable to noncontrolling interest

 

70

 

181

 

(9

)

(692

)

Accretion of preferred stock

 

 

 

 

(4,934

)

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

 

$

2,833

 

$

(16,587

)

$

31,333

 

$

(16,756

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

$

(0.34

)

$

0.58

 

$

(0.43

)

Diluted

 

$

0.05

 

$

(0.34

)

$

0.55

 

$

(0.43

)

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Basic

 

54,524

 

48,760

 

54,274

 

38,689

 

Diluted

 

56,385

 

48,760

 

56,985

 

38,689

 

 


(1) The nine months ended December 23, 2011 include $6.8 million in impairment charged to cost of revenue for certain of the cinema systems.

 

6



 

RealD Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

December 23,

 

March 25,

 

 

 

2011

 

2011

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

29,180

 

$

16,936

 

Accounts receivable, net

 

44,015

 

50,676

 

Inventories

 

46,020

 

54,971

 

Deferred costs — eyewear

 

573

 

49

 

Deferred income taxes

 

 

1,029

 

Income taxes receivable

 

 

139

 

Prepaid expenses and other current assets

 

2,040

 

1,734

 

Total current assets

 

121,828

 

125,534

 

Property and equipment, net

 

10,970

 

7,889

 

Cinema systems, net

 

142,954

 

122,226

 

Digital projectors, net-held for sale

 

4,360

 

10,475

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

1,788

 

1,918

 

Deferred income taxes

 

817

 

 

Other assets

 

4,906

 

1,448

 

Total assets

 

$

298,280

 

$

280,147

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

26,584

 

$

58,713

 

Accrued expenses and other liabilities

 

27,457

 

40,118

 

Deferred revenue

 

7,820

 

14,176

 

Income taxes payable

 

3,885

 

 

Deferred income taxes

 

700

 

 

Current portion of long-term debt

 

 

2,291

 

Total current liabilities

 

66,446

 

115,298

 

Credit facility agreement

 

25,000

 

 

Deferred revenue, net of current portion

 

14,193

 

14,106

 

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

 

3,679

 

4,533

 

Long-term debt, net of current portion

 

 

19

 

Deferred income taxes

 

 

1,091

 

Commitments and contingencies

 

 

 

 

 

Equity

 

 

 

 

 

Common stock, $0.0001 par value, 200,000 shares authorized; 54,468 and 53,570 shares issued and outstanding at December 23, 2011 and March 25, 2011, respectively

 

305,424

 

292,904

 

Accumulated deficit

 

(118,247

)

(149,580

)

Total RealD Inc. stockholders’ equity

 

187,177

 

143,324

 

Noncontrolling interest

 

1,785

 

1,776

 

Total equity

 

188,962

 

145,100

 

Total liabilities and equity

 

$

298,280

 

$

280,147

 

 

7



 

RealD Inc.

Schedule of Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

 

Three months ended

 

Nine months ended

 

 

 

December 23,

 

December 24,

 

December 23,

 

December 24,

 

(in thousands)

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,763

 

$

(16,768

)

$

31,342

 

$

(11,130

)

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense

 

227

 

71

 

710

 

873

 

Income tax expense (benefit)

 

(2,241

)

1,648

 

7,170

 

3,299

 

Depreciation and amortization

 

7,406

 

4,384

 

20,558

 

10,428

 

Other (income) loss (1)

 

792

 

431

 

(157

)

(6,376

)

Share-based compensation expense (2)

 

4,086

 

2,980

 

11,718

 

5,988

 

Exhibitor option expense (3)

 

 

21,960

 

 

34,008

 

Impairment of assets and intangibles (4)

 

1,196

 

519

 

9,024

 

814

 

Sales and use tax (5)

 

1,569

 

1,291

 

5,076

 

5,443

 

Property tax (6)

 

367

 

392

 

1,133

 

839

 

Management fee (7)

 

 

 

 

175

 

Adjusted EBITDA

 

$

16,165

 

$

16,908

 

$

86,574

 

$

44,361

 

 


(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).

 

8