RealD Inc. Reports Financial Results for Fourth Quarter and Fiscal Year 2012

  RealD Inc. Reports Financial Results for Fourth Quarter and Fiscal Year 2012

Business Wire

LOS ANGELES -- May 31, 2012

RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today
announced financial results for its fourth quarter and fiscal year ended March
23, 2012.

Fourth Quarter Financial Highlights

Revenue

  *Revenue was $50.0 million, a decrease of 14% from $58.5 million in the
    fourth quarter of fiscal 2011.
  *Net license revenue was $31.7 million, a decrease of 4% from $33.1 million
    in the fourth quarter of fiscal 2011.
  *Net license revenue for the prior-year quarter is net of $2.4 million in
    motion picture exhibitor stock option expense (a contra revenue item).
  *Product and other revenue was $18.4 million, a decrease of 28% from $25.4
    million in the fourth quarter of fiscal 2011. These results reflect an
    $8.1 million decrease in international product revenue that is partially
    attributable to a growing number of international consumers reusing RealD
    eyewear purchased at a previous RealD showing.

GAAP Results – Profitability Measures and Balance Sheet

  *GAAP net income attributable to common stockholders was $5.5 million, or
    $0.10 per diluted share, compared to $4.5 million, or $0.08 per diluted
    share, for the fourth quarter of fiscal 2011. Results for the fourth
    quarter of fiscal 2012 include an income tax benefit of $2.1 million,
    equivalent to approximately $0.04 per diluted share.
  *Gross margin increased to 54% from 51% in the fourth quarter of fiscal
    2011.
  *The Company’s balance sheet at March 23, 2012 included total cash and cash
    equivalents of $24.9 million and total debt of $25.0 million.
  *Subsequent to the end of the fourth quarter of fiscal 2012, RealD entered
    into a new $125 million credit facility. As of May 31, 2012, unused
    borrowing capacity on the new credit facility was approximately $100
    million.

Non-GAAP^Results – Profitability Measures

  *Adjusted EBITDA was $17.8 million, essentially flat compared to $17.8
    million in the fourth quarter of fiscal 2011.
  *Adjusted EBITDA increased to 36% of net revenue from 30% of net revenue in
    the fourth 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).

“We delivered solid profitability in the fourth quarter, as healthy growth in
domestic license revenue helped to offset the tough comparison we anticipated
overseas versus our very strong international results in the fourth quarter of
fiscal 2011,” said Michael V. Lewis, Chairman and Chief Executive Officer of
RealD. “Importantly, RealD’s summer film slate is off to an excellent start in
both domestic and international markets. The record-setting opening of The
Avengers further demonstrates the strong consumer demand for premium
presentations in RealD 3D as well as the compelling economics of 3D filmmaking
for our studio and exhibitor partners.”

Key Metrics and International Revenue Statistics

  *International markets generated 49% of license revenue compared to 64% of
    gross license revenue in the fourth quarter of fiscal 2011. The lower
    percentage from international license revenue reflects the difficult
    international comparison versus the prior-year quarter when Tangled,
    Chronicles of Narnia, Tron Legacy, Megamind and Gulliver’s Travels had
    strong results overseas. In addition, certain films released in the
    domestic market during the fourth quarter of fiscal 2012 were scheduled to
    release in key international countries after the end of the quarter.
  *As of March 23, 2012, the Company had deployed approximately 20,200
    RealD-enabled screens, an increase of 35% from approximately 15,000
    screens as of March 25, 2011, and an increase of 500 screens, or 3%, from
    approximately 19,700 screens as of December 23, 2011.
  *As of March 23, 2012, the Company had approximately 11,700 domestic
    screens at approximately 2,600 domestic theater locations and
    approximately 8,500 international screens at approximately 2,500
    international theater locations.

$50 Million Stock Repurchase Authorization

  *Subsequent to the end of the fourth quarter of fiscal 2012, the Company
    announced that its Board of Directors had authorized the repurchase of up
    to $50 million in RealD’s common stock.
  *The authorization demonstrates management’s confidence in RealD’s future
    and its commitment to maximizing shareholder value.

Fiscal 2012 Financial Results

Revenue

  *Revenue was $246.6 million, essentially flat compared to $246.1 million
    for fiscal 2011.
  *Net license revenue was $147.8 million, an increase of 46% from $101.5
    million for fiscal 2011.
  *Net license revenue for fiscal 2011 is net of $36.4 million in motion
    picture exhibitor stock option expense (a contra revenue item).
  *Product and other revenue was $98.8 million, a decrease of 32% from $144.6
    million for fiscal 2011.

GAAP Results – Profitability Measures

  *GAAP net income attributable to common stockholders was $36.9 million, or
    $0.65 per diluted share, compared to a GAAP net loss attributable to
    common stockholders of $12.3 million, or $0.29 per share, for fiscal 2011.
  *Gross margin increased to 52% from 28% for fiscal 2011.

Non-GAAP^Results – Profitability Measures

  *Adjusted EBITDA was $104.4 million, an increase of 68% from $62.2 million
    for fiscal 2011.
  *Adjusted EBITDA increased to 42% of net revenue from 25% of net revenue
    for fiscal 2011.


3D Theatrical Release Schedule for Fiscal 2013
(As of May 31, 2012 – Domestic)

Fiscal Q1 2013     Film                                Domestic Release Date
(ending 6/22/12)    Wrath of the Titans                  3/30/2012
                    Titanic (re-release)                 4/4/2012
                    The Pirates! Band of Misfits         4/27/2012
                    The Avengers                         5/4/2012
                    Men in Black III                     5/25/2012
                    Piranha 3DD                          6/1/2012
                    Madagascar 3: Europe’s Most Wanted   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                    7/3/2012
                    Katy Perry: Part of Me 3D            7/5/2012
                    Ice Age: Continental Drift           7/13/2012
                    Step Up Revolution                   7/27/2012
                    Nitro Circus: The Movie              8/10/2012
                    ParaNorman                           8/17/2012
                    Resident Evil: Retribution           9/14/2012
                    Finding Nemo (re-release)            9/14/2012
                    Dredd                                9/21/2012
                    Hotel Transylvania                   9/21/2012
                                                         
Fiscal Q3 2013      Film                                 Domestic Release Date
(ending 12/21/12)   Frankenweenie                        10/5/2012
                    Silent Hill: Revelation 3D           10/26/2012
                    Wreck-It Ralph                       11/2/2012
                    Rise of the Guardians                11/21/2012
                    Life of Pi                           11/21/2012
                    The Hobbit: An Unexpected Journey    12/14/2012
                    Cirque du Soleil: Worlds Away        12/21/2012
                                                         
Fiscal Q4 2013      Film                                 Domestic Release Date
(ending 3/22/13)    The Great Gatsby                     12/25/2012
                    The Texas Chainsaw Massacre 3D       1/4/2013
                    Hansel and Gretel: Witch Hunters     1/11/2013
                    Monsters, Inc. (re-release)          1/18/2013
                    Battle of the Year: The Dream Team   1/25/2013
                    47 Ronin                             2/8/2013
                    Escape from Planet Earth             2/14/2013
                    Oz: The Great and Powerful           3/8/2013
                    The Croods                           3/22/2013
                    Jack the Giant Killer                3/22/2013

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 fourth quarter and fiscal year ended March
23, 2012 beginning at 4:30 p.m. ET (1:30 p.m. PT), today, May 31, 2012. 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 4538808.

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 4538808.

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 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 2013 ending March 22, 2013, 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 Annual Report on Form 10-K for
the twelve months ended March 23, 2012 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; and in
communications with its Board of Directors concerning financial performance.
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. 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. Adjusted
EBITDA also differs from the amounts calculated under the similarly titled
definition in our credit agreement, which is further adjusted to reflect
certain other cash and non-cash charges and is used to determine compliance
with financial covenants and our ability to engage in certain activities, such
as incurring additional debt and making certain restricted 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 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.


RealD Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

                      Three months ended        Year ended
                         March 23,   March 25,    March 23,    March 25,
                      2012      2011       2012       2011    
                                                                   
Revenue:
License                  $ 31,655     $ 33,133       $ 147,801     $ 101,523
Product and other         18,392    25,381     98,827     144,613 
Total revenue              50,047       58,514         246,628       246,136
Cost of revenue:
License                    9,480        6,334          39,801        17,994
Product and other         13,672    22,303     78,137     160,402 
Total cost of              23,152       28,637         117,938       178,396
revenue
Gross profit               26,895       29,877         128,690       67,740
Operating
expenses:
Research and               3,764        4,831          16,500        15,582
development
Selling and                7,423        8,888          27,682        24,139
marketing
General and               12,454    10,640     42,189     35,835  
administrative
Total operating           23,641    24,359     86,371     75,556  
expenses
Operating income           3,254        5,518          42,319        (7,816  )
(loss)
Interest expense           (261   )     (46    )       (971    )     (919    )
Other income              625       (194   )    782        6,182   
(loss)
Income (loss)
before income              3,618        5,278          42,130        (2,553  )
taxes
Income tax expense        (2,065 )   973        5,105      4,272   
(benefit)
Net income (loss)          5,683        4,305          37,025        (6,825  )
Net (income) loss
attributable to            (147   )     162            (156    )     (530    )
noncontrolling
interest
Accretion of              -         -          -          (4,934  )
preferred stock
Net income (loss)
attributable to          $ 5,536    $ 4,467     $ 36,869    $ (12,289 )
RealD Inc. common
stockholders
                                                                   
Earnings (loss)
per common share:
Basic                    $ 0.10       $ 0.09         $ 0.68        $ (0.29   )
Diluted                  $ 0.10       $ 0.08         $ 0.65        $ (0.29   )
                                                                   
Shares used in
computing earnings
per common share:
Basic                      54,587       51,426         54,352        41,933
Diluted                    56,468       57,025         56,852        41,933



RealD Inc.
Consolidated Balance Sheets
(In thousands)

                                             March 23,       March 25,
                                             2012          2011     
                                                                  
Assets
Current assets:
Cash and cash equivalents                      $ 24,894           $ 16,936
Accounts receivable, net                         59,212             50,676
Inventories                                      40,577             54,971
Deferred costs – eyewear                         932                49
Deferred income taxes                            –                  1,029
Income taxes receivable                          –                  139
Prepaid expenses and other current assets       2,630         1,734    
Total current assets                             128,245            125,534
Property and equipment, net                      12,713             7,889
Cinema systems, net                              141,024            122,226
Digital projectors, net-held for sale            1,078              10,475
Goodwill                                         10,657             10,657
Other intangibles, net                           1,746              1,918
Deferred income taxes                            3,049              –
Other assets                                    3,663         1,448    
Total assets                                   $ 302,175      $ 280,147  
                                                                  
Liabilities and equity
Current liabilities:
Accounts payable                               $ 22,617           $ 58,713
Accrued expenses and other liabilities           28,870             40,118
Deferred revenue                                 7,201              14,176
Income taxes payable                             1,121              –
Deferred income taxes                            3,149              –
Current portion of long-term debt               –             2,291    
Total current liabilities                        62,958             115,298
Credit facility agreement                        25,000             –
Deferred revenue, net of current portion         13,920             14,106
Other long-term liabilities, customer            2,691              4,533
deposits and virtual print fee liability
Long-term debt, net of current portion           –                  19
Deferred tax liability                           –                  1,091
                                                                  
Commitments and contingencies
                                                                  
Equity (deficit)
Common stock                                     309,894            292,904
Accumulated deficit                             (112,711 )     (149,580 )
Total RealD Inc. stockholders’ equity            197,183            143,324
Noncontrolling interest                         423           1,776    
Total equity                                    197,606       145,100  
                                                                  
Total liabilities and equity                   $ 302,175      $ 280,147  



RealD Inc.
Schedule of Non-GAAP Reconciliations
(In thousands)
(Unaudited)

Reconciliation of Net Income (Loss) to Adjusted EBITDA
                                                   
                          Three months ended       Year ended
                           March 23,   March 25,     March 23,    March 25,
(in thousands)             2012       2011      2012       2011   
                                                                    
Net income (loss)          $ 5,683    $  4,305    $ 37,025    $ (6,825 )
Add (deduct):
Interest expense             261           46           971           919
Income tax expense           (2,065 )      973          5,105         4,272
Depreciation and             7,708         5,309        28,266        15,737
amortization
Other (income) loss (1)      (625   )      194          (782    )     (6,182 )
Share-based compensation     4,026         2,962        15,744        8,950
expense (2)
Exhibitor option expense     -             2,439        -             36,447
(3)
Impairment of assets and     1,245         314          10,269        1,128
intangibles (4)
Sales and use tax (5)        1,287         1,041        6,363         6,484
Property tax (6)             301           251          1,434         1,090
Management fee (7)          -          -         -          175    
Adjusted EBITDA           $ 17,821   $  17,834   $ 104,395   $ 62,195 


(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 SeriesC mandatorily
redeemable convertible preferred stockholder (included in general and
administrative expense, which was terminated upon the completion of our
initial public offering).

Contact:

RealD Inc.
Investor Contact:
Erik Randerson, CFA, 424-702-4317
eranderson@reald.com
or
Media Contact:
Rick Heineman, 310-339-9347
rheineman@reald.com
 
Press spacebar to pause and continue. Press esc to stop.