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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.
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. RealDs estimates of box office on RealD-enabled screens rely on box office tracking data. International box office reflects RealDs 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 RealDs international license revenues. The 19 foreign countries do not include China.
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.
Conference Call Information
Members of RealDs management will host a conference call to discuss RealDs 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 RealDs 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 managements 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 managements control that could cause actual results to differ materially from the results discussed in the forward-looking statements. RealDs 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.
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 managements 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. RealDs extensive intellectual property portfolio is used in applications that enable a premium viewing experience in the theater, the home and elsewhere. RealDs 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
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 |
|
RealD Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
|
June 30, |
|
March 31, |
| ||
|
|
(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 |
|
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 |
|
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) |