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8-K - 8-K - RealD Inc.a15-16826_18k.htm

Exhibit 99.1

 

 

 

RealD Inc. Reports First Quarter Fiscal Year 2016 Financial Results

 

LOS ANGELES (August 5, 2015) - Global visual technology company RealD Inc. (NYSE: RLD) today announced financial results for its first quarter of fiscal 2016 ended June 30, 2015.

 

“The first quarter marked a return to profitability for RealD, led by improved global 3D performance,” commented Michael V. Lewis, Chairman and Chief Executive Officer of RealD.  “3D percentages worldwide remain healthy and the fiscal 2016 3D film slate is among the most compelling in recent years.  As a result, the RealD box office grew to approximately $840 million.  Drivers of this growth included a strong global 3D film slate, improved consumer demand and continued growth in China.  With our global cinema platform established, we are well positioned to deliver strong RealD box office and improved operating leverage.”

 

 

First Quarter Fiscal 2016 Financial Highlights

 

                   Total revenue was $53.6 million, comprised of license revenue of $37.1 million and product and other revenue of $16.5 million. For the first quarter of fiscal 2015, total revenue was $55.2 million, comprised of license revenue of $35.8 million and product and other revenue of $19.4 million.

 

                   China license revenue represented 18% of total worldwide license revenue, up from 14% for the first fiscal quarter of 2015.

 

                   GAAP net income attributable to common stockholders was $7.3 million, or $0.14 per diluted share, compared to GAAP net income attributable to common stockholders of $5.9 million, or $0.11 per diluted share, for the first quarter of fiscal 2015.

 

                   Adjusted EBITDA was $24.6 million, compared to $23.4 million in the first quarter of fiscal 2015.

 

                   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 three months ended June 30, 2015, cash outflow from operating activities was $4.3 million and total capital expenditures were $4.2 million, resulting in negative free cash flow of $8.5 million.

 

                   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, 2015, cash and cash equivalents were $63.0 million and total debt was $40.7 million.

 

1



 

Key Metrics

 

                   Estimated box office generated on RealD-enabled screens(1) in the first quarter of fiscal 2016 was $842 million ($458 million domestic, $384 million international).   In the first quarter of fiscal 2015, estimated box office generated on RealD-enabled screens was $787 million ($387 million domestic, $400 million international).

 

                   Six 3D films were released in the first quarter of fiscal 2016, compared to ten 3D films in the first quarter of fiscal 2015.  These figures reflect the number of 3D films released domestically during the periods.

 

                   International markets generated 60% of license revenue and 19% of product and other revenue in the first quarter of fiscal 2016.

 

                   As of June 30, 2015, RealD had deployed approximately 27,000 RealD-enabled screens, an increase of 5% from approximately 25,600 screens as of June 30, 2014, and an increase of 300 screens (50 domestic, 250 international), or 1%, from approximately 26,700 screens as of March 31, 2015.

 

                   As of June 30, 2015, RealD had approximately 13,650 domestic screens at approximately 3,000 domestic theater locations and approximately 13,350 international screens at approximately 3,200 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 19 foreign countries where box office tracking is available.  RealD estimates these countries represent approximately 85% of RealD’s international license revenues.  The 19 foreign countries do not include China.

 

2



 

The following table shows the major domestically produced 3D motion pictures released or scheduled for release on domestic and/or international 3D-enabled screens for the last three quarters of fiscal year 2016 ending March 31, 2016 and the first fiscal quarter of fiscal year 2017 ending March 31, 2017.

 

(As of August 5, 2015 – Domestic)

 

 

 

 

Fiscal Q2 2016

Film

Domestic Release Date

(ending 9/30/15)

Terminator Genisys

7/1/2015

 

Minions

7/10/2015

 

Ant-Man

7/17/2015

 

Pixels

7/24/2015

 

Underdogs

8/14/2015

 

Everest

9/25/2015

 

Hotel Transylvania 2

9/25/2015

 

 

 

Fiscal Q3 2016

Film

Domestic Release Date

(ending 12/31/15)

The Martian

10/2/2015

 

The Walk

10/9/2015

 

Pan

10/9/2015

 

Goosebumps

10/16/2015

 

Paranormal Activity: The Ghost Dimension

10/23/2015

 

Peanuts

11/6/2015

 

Hunger Games: Mockingjay, Part 2

11/20/2015

 

The Good Dinosaur

11/25/2015

 

In the Heart of the Sea

12/11/2015

 

Star Wars: The Force Awakens

12/18/2015

 

Point Break

12/25/2015

 

 

 

Fiscal Q4 2016

Film

Domestic Release Date

(ending 3/31/16)

The Nut Job 2

1/22/2016

 

Kung Fu Panda 3

1/29/2016

 

The Finest Hours

1/29/2016

 

Zootopia

3/4/2016

 

Monster Trucks

3/18/2016

 

Batman v Superman: Dawn of Justice

3/25/2016

 

 

 

Fiscal Q1 2017

Film

Domestic Release Date

(ending 6/30/16)

The Jungle Book

4/15/2016

 

Captain America: Civil War

5/6/2016

 

Angry Birds

5/20/2015

 

Alice Through the Looking Glass

5/27/2016

 

Warcraft

6/10/2015

 

Finding Dory

6/17/2016

 

 

 

 

Sources: Rentrak and imdb.com.

 

3



 

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 2016, beginning at 4:30 pm ET (1:30 pm PT), today, August 5, 2015. 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 81842860.

 

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 (U.S.) or (404) 537-3406 for international callers. The conference ID for the telephone replay is 81842860.

 

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; statements regarding the extent and timing of future licensing, products and services, revenue levels and mix, expenses, margins, net income (loss) per diluted share, income taxes, tax benefits, acquisition costs and related amortization, and other measures of results of operations; our expectations regarding demand and acceptance for our technologies and our ability to successfully commercialize our technologies within a particular time frame, if at all; 3D motion picture releases and conversions scheduled for fiscal year 2016 ending March 31, 2016 and beyond, their commercial success and consumer preferences, that, in recent periods, have trended in favor of 2D over 3D; our ability to increase the number of RealD-enabled screens in domestic and international markets and market share; our ability to supply our products to our customers on a timely basis; our relationships with exhibitor and studio partners and the business model for 3D eyewear in North America; any discussion regarding strategic alternatives; the progress, timing and amount of expenses associated with our research and development activities; market and industry growth opportunities and trends in the markets in which we operate, including in 3D content; our plans, strategies and expected opportunities, including the development and evaluation of any potential strategic alternatives; the deployment of and demand for our products and products incorporating our technologies; competitive pressures in domestic and international cinema markets impacting licensing and product revenues; and our ability to execute and achieve anticipated savings or other benefits from our cost reduction efforts.

 

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, 2015 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.

 

4



 

Use of Non-GAAP Financial Measures

 

To supplement our financial statements presented on a GAAP basis, we provide Adjusted EBITDA and free cash flow as supplemental measures of our performance.  We define Adjusted EBITDA as net income (loss) plus expenses for interest, income taxes, depreciation, amortization, impairment and stock-based compensation plus net foreign exchange loss (gain) plus expenses comprising the non-U.S. GAAP categories “restructuring charges, severance costs and reserves” and “non- recurring expenses” as defined in our Credit Agreement.  We define free cash flow as total cash provided (used) by operating activities less cash used in purchases of property and equipment and cash used in purchases of cinema systems and related components.

 

We present Adjusted EBITDA in reporting our financial results to provide investors with additional tools to evaluate our operating results in a manner that focuses on what our management believes to be our ongoing business operations. We present 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. Management does not itself, nor does it suggest that investors should, consider any such non-U.S. 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, our 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.

 

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’s core business is the licensing of RealD Cinema Systems and the product sale of RealD eyewear to motion picture exhibitors to enable a premium viewing experience for 3D motion pictures and alternative 3D content in the theater.

 

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.

 

© 2015 RealD Inc.  All Rights Reserved.

 

Investor Contact:

Andrew Greenebaum / Laura Bainbridge

310-829-5400

investors@reald.com

 

Media Contact:

Will Hammond

424-702-4758

whammond@reald.com

 

5



 

RealD Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

 

 

 

Three months ended June 30

 

 

 

2015

 

2014

 

Revenue:

 

 

 

 

 

License

 

$

37,134

 

$

35,813

 

Product and other

 

16,435

 

19,406

 

Total revenue

 

53,569

 

55,219

 

Cost of revenue:

 

 

 

 

 

License

 

10,154

 

10,848

 

Product and other

 

12,475

 

14,350

 

Total cost of revenue

 

22,629

 

25,198

 

Gross profit

 

30,940

 

30,021

 

Operating expenses:

 

 

 

 

 

Research and development

 

2,818

 

3,718

 

Selling and marketing

 

5,377

 

5,781

 

General and administrative

 

12,920

 

11,994

 

Total operating expenses

 

21,115

 

21,493

 

Operating income

 

9,825

 

8,528

 

Interest expense, net

 

(354)

 

(472)

 

Other income

 

347

 

160

 

Income before income taxes

 

9,818

 

8,216

 

Income tax expense

 

2,494

 

2,287

 

Net income

 

7,324

 

5,929

 

Net income attributable to noncontrolling interest

 

 

 

Net income attributable to RealD Inc. common stockholders

 

$

7,324

 

$

5,929

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic

 

$

0.14

 

$

0.12

 

Diluted

 

$

0.14

 

$

0.11

 

Shares used in computing earnings per common share:

 

 

 

 

 

Basic

 

50,794

 

49,671

 

Diluted

 

52,581

 

52,770

 

 

6



 

RealD Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

June 30,
2015

 

March 31,
2015

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

63,042

 

$

60,333

 

Accounts receivable, net

 

53,017

 

26,748

 

Inventories

 

6,660

 

8,305

 

Deferred costs – eyewear

 

798

 

80

 

Prepaid expenses and other current assets

 

4,707

 

4,770

 

Total current assets

 

128,224

 

100,236

 

Property and equipment, net

 

19,785

 

20,599

 

Cinema systems, net

 

78,246

 

82,243

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

4,494

 

4,817

 

Deferred income taxes

 

2,819

 

2,461

 

Other assets

 

8,334

 

8,631

 

Total assets

 

$

252,559

 

$

229,644

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

9,911

 

$

9,652

 

Accrued expenses and other liabilities

 

24,146

 

26,640

 

Deferred revenue

 

5,919

 

5,009

 

Income taxes payable

 

1,856

 

1,619

 

Deferred income taxes

 

2,942

 

2,583

 

Current portion of Credit Agreement

 

10,635

 

7,460

 

Total current liabilities

 

55,409

 

52,963

 

Credit Agreement, net of current portion

 

30,040

 

22,380

 

Deferred revenue, net of current portion

 

4,055

 

3,931

 

Other long-term liabilities

 

3,974

 

4,027

 

Total liabilities

 

93,478

 

83,301

 

Commitments and contingencies

 

 

 

 

 

Equity (deficit)

 

 

 

 

 

Common stock

 

377,217

 

371,689

 

Accumulated deficit

 

(219,617)

 

(226,803)

 

Accumulated other comprehensive income

 

1,984

 

1,960

 

Total RealD Inc. stockholders’ equity

 

159,584

 

146,846

 

Noncontrolling interest

 

(503)

 

(503)

 

Total equity

 

159,081

 

146,343

 

Total liabilities and equity

 

$

252,559

 

$

229,644

 

 

7



 

RealD Inc.

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

(In thousands)

 

 

 

 

Three months ended June 30

 

 

 

2015

 

 

2014

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

7,324

 

 

$

5,929

 

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

 

 

 

 

 

 

Depreciation and amortization

 

9,561

 

 

9,813

 

Deferred income tax

 

1

 

 

(1

)

Non-cash interest expense

 

92

 

 

38

 

Non-cash stock compensation

 

4,413

 

 

3,971

 

Non-cash bad debt expense

 

(860

)

 

118

 

Loss on disposal of property and equipment

 

 

 

9

 

Impairment of long-lived assets and related purchase commitments

 

389

 

 

1,016

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

(25,409

)

 

(11,172

)

Inventories

 

1,645

 

 

1,212

 

Prepaid expenses and other current assets

 

65

 

 

1,320

 

Deferred costs - eyewear

 

(718

)

 

(564

)

Other assets

 

205

 

 

(2,283

)

Accounts payable

 

259

 

 

(468

)

Accrued expenses and other liabilities

 

(2,494

)

 

694

 

Other long-term liabilities

 

(53

)

 

(202

)

Income taxes receivable/payable

 

235

 

 

(454

)

Deferred revenue

 

1,034

 

 

(2,213

)

Net cash provided by (used in) operating activities

 

(4,311

)

 

6,763

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

(571

)

 

(2,895

)

Purchases of cinema systems and related components

 

(3,660

)

 

(5,187

)

Proceeds from sale of property and equipment

 

 

 

67

 

Net cash used in investing activities

 

(4,231

)

 

(8,015

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from Credit Agreement

 

12,700

 

 

37,300

 

Repayments on Credit Agreement

 

(1,865

)

 

(36,250

)

Payments of debt issuance costs

 

 

 

(895

)

Proceeds from exercise of stock options

 

741

 

 

2,010

 

Proceeds from employee stock purchase plan

 

374

 

 

 

Repurchase of statutory withholdings of stock issued for restricted stock units

 

(138

)

 

(269

)

Net cash provided by financing activities

 

11,812

 

 

1,896

 

Effect of currency exchange rate changes on cash and cash equivalent

 

(561

)

 

262

 

Net increase in cash and cash equivalents

 

2,709

 

 

906

 

Cash and cash equivalents, beginning of period

 

60,333

 

 

28,800

 

Cash and cash equivalents, end of period

 

$

63,042

 

 

$

29,706

 

 

8



 

RealD Inc.

 

Schedule of Non-GAAP Reconciliations (Unaudited)

 

(In thousands)

 

Reconciliation of Adjusted EBITDA to Net Income

 

 

 

 

Three months ended June 30

(in thousands)

 

2015

 

2014

Net income

 

$

7,324

 

$

5,929

Add (deduct):

 

 

 

 

Interest expense, net

 

354

 

472

Income tax expense

 

2,494

 

2,287

Depreciation and amortization

 

9,561

 

9,813

Other income (1)

 

(347)

 

(160)

Share-based compensation expense (2)

 

4,413

 

3,971

Impairment of assets and intangibles (3)

 

389

 

1,016

Cost reduction plan (4)

 

165

 

71

Non-recurring expenses (5)

 

218

 

Adjusted EBITDA (6)

 

$

24,571

 

$

23,399

 

(1)

Consists of gains and losses from foreign currency exchange and foreign currency forward contracts.

(2)

Represents share-based compensation expense of nonstatutory and incentive stock options, restricted stock units and performance stock units, and employee stock purchase plan to employees, non-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)

Expenses under our Credit Agreement for the non-U.S. GAAP category “restructuring charges, severance costs and reserves.”

(5)

Expenses under our Credit Agreement for the non-U.S. GAAP category “non-recurring costs and expenses”.

(6)

Adjusted EBITDA is not a recognized measurement under U.S. GAAP. For a definition of Adjusted EBITDA and reconciliation to net income (loss), the comparable U.S. GAAP item, see “Use of Non-U.S. GAAP Financial Measures”.

 

 

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

 

 

 

 

Three months ended June 30

(in thousands)

 

2015

 

2014

Net cash provided by (used in) operating activities

 

$

(4,311)

 

$

6,763

Purchases of property and equipment

 

(571)

 

(2,895)

Purchases of cinema systems and related components

 

(3,660)

 

(5,187)

Total free cash flow

 

$

(8,542)

 

$

(1,319)

 

9