RealD Inc. Reports First Quarter Fiscal Year 2015 Financial Results

  RealD Inc. Reports First Quarter Fiscal Year 2015 Financial Results

              - Growth in Adjusted EBITDA of 43% year-over-year

                - Generated net income in excess of $5 million

      - China delivered year-over-year growth in license revenue of 83%

Business Wire

LOS ANGELES -- August 5, 2014

RealD Inc. (NYSE: RLD), a leading global licensor of 3D and other visual
technologies, today announced financial results for its first quarter of
fiscal 2015 ended June 30, 2014.

“The year is off to a strong start with RealD delivering meaningful
improvements in our key profitability metrics,” commented Michael V. Lewis,
Chairman and Chief Executive Officer of RealD. “Adjusted EBITDA increased 43%
year-over-year and we generated net income in excess of $5 million. The
improvement in profitability reflects our ongoing focus on effectively
managing our cost base, in-line with our cost reduction plan implemented last
year. In addition, our more targeted theatre installation in key growth
markets contributed to our strong results during the quarter. Looking ahead,
we will continue to capitalize on expansion opportunities in our growth
markets including China and Russia, maintain our prudent and disciplined
approach to R&D investment and focus on increasing shareholder value.”

First Quarter Fiscal 2015 Financial Highlights

  *Total revenue was $55.4 million, comprised of license revenue of $36.0
    million and product and other revenue of $19.4 million. For the first
    quarter of fiscal 2014, total revenue was $59.2 million, comprised of
    license revenue of $37.3 million and product and other revenue of $21.9
    million.
  *China license revenue represented 14% of total worldwide license revenue,
    up from 8% in the first fiscal quarter of 2014.
  *GAAP net income attributable to common stockholders was $5.5 million, or
    $0.10 per share, compared to GAAP net loss attributable to common
    stockholders of $1.5 million, or $0.03 per diluted share, for the first
    quarter of fiscal 2014.
  *Adjusted EBITDA was $22.9 million, compared to $16.0 million in the first
    quarter of fiscal 2014.
  *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 quarter ended June 30, 2014, cash flows from operating activities
    were $4.1 million and total capital expenditures were $5.4 million,
    resulting in negative free cash flow of $1.3 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, 2014, cash and cash equivalents were $27.8 million and
    total debt was $35.4 million.

Key Metrics

  *Estimated box office generated on RealD-enabled screens^(1) for the first
    quarter of fiscal 2015 was $787 million ($387 million domestic, $400
    million international). In the first quarter of fiscal 2014, estimated box
    office generated on RealD-enabled screens was $838 million ($431 million
    domestic, $407 million international).
  *Ten 3D films were released in the first quarter of fiscal 2015, compared
    to eight 3D films in the first quarter of fiscal 2014. These figures
    reflect the number of 3D films released domestically during the periods.
  *International markets generated 63% of license revenue and 34% of product
    and other revenue in the first quarter of fiscal 2015.
  *As of June 30, 2014, RealD had deployed approximately 25,600 RealD-enabled
    screens, an increase of 9% from approximately 23,500 screens as of June
    30, 2013, and an increase of 400 screens (50 domestic, 350 international),
    or 2%, from approximately 25,200 screens as of March 31, 2014.
  *As of June 30, 2014, RealD had approximately 13,450 domestic screens at
    approximately 3,000 domestic theater locations and approximately 12,150
    international screens at approximately 3,000 international theater
    locations.

      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
(1)  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 20 foreign countries where box office tracking
      is available. RealD estimates these countries represent approximately
      85% of RealD’s international license revenues.


3D Theatrical Release Schedule for Fiscal 2015
(As of August 5, 2014 – Domestic)

Fiscal Q2 2015     Film                                Domestic Release Date
(ending 9/30/14)    Dawn of the Planet of the Apes       7/11/2014
                    Planes: Fire & Rescue                7/18/2014
                    Hercules                             7/25/2014
                    Guardians of The Galaxy              8/1/2014
                    Step Up: All In                      8/8/2014
                    James Cameron's Deepsea Challenge    8/8/2014
                    3D
                    Teenage Mutant Ninja Turtles         8/8/2014
                    Sin City: A Dame to Kill For         8/22/2014
                    The Boxtrolls                        9/26/2014
                                                         
Fiscal Q3 2015      Film                                 Domestic Release Date
(ending 12/31/14)   Book of Life                         10/17/2014
                    Big Hero 6                           11/7/2014
                    The Penguins of Madagascar           11/26/2014
                    Exodus: Gods and Kings               12/12/2014
                    The Hobbit: The Battle of the Five   12/17/2014
                    Armies
                                                         
Fiscal Q4 2015      Film                                 Domestic Release Date
(ending 3/31/15)    Norm of the North                    1/16/2015
                    Jupiter Ascending                    2/6/2015
                    Seventh Son                          2/6/2015
                    The SpongeBob Movie: Sponge Out of   2/6/2015
                    Water
                    Home                                 3/27/2015

Fiscal Q1 2016      Film                                 Domestic Release Date
(ending 6/30/15)    Avengers: Age of Ultron              5/1/2015
                    Mad Max: Fury Road                   5/15/2015
                    Tomorrowland                         5/22/2015
                    B.O.O.: Bureau of Otherworldly       6/5/2015
                    Operations
                    San Andreas                          6/5/2015
                    Jurassic World                       6/12/2015
                    Inside Out                           6/19/2015
                  The Fantastic Four                  6/19/2015

Sources: Rentrak and imdb.com.

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 2015, beginning at 4:30 pm
ET (1:30 pm PT), today, August 5, 2014. 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
67201345.

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, or (404) 537-3406 for international callers. The
conference ID for the telephone replay is 67201345.

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; our expectations regarding demand for and
acceptance of our technologies and our ability to successfully commercialize
our technologies within a particular timeframe, if at all; RealD’s ability to
continue to derive substantial revenue from the licensing of RealD’s 3D
technologies for use in the motion picture industry; 3D motion picture
releases and conversions scheduled for fiscal 2015 ending March 31, 2015 and
beyond, their commercial success and consumer preferences, that, in recent
periods, have trended in favor of 2D over 3D in some motion pictures in
domestic and international markets; our ability to increase our revenues and
the number of RealD-enabled screens in domestic and international markets and
our 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 growth opportunities and trends in the market
in which we operate, including growth in 3D content; our plans, strategies and
expected opportunities; the deployment of and demand for our products and
products incorporating our technologies; competitive pressures in domestic and
international cinema markets impacting license 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, 2014
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 and free cash flow as supplemental measures of its
performance. RealD defines 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
under RealD’s Credit Agreement for the non-U.S. GAAP category “restructuring
charges, severance costs and reserves”. RealD defines free cash flow as net
cash provided by operating activities less total capital expenditures in a
given period (e.g., purchases of cinema systems and property and equipment on
a combined basis).

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 presents 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. 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 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, RealD’s 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. Our definition of Adjusted
EBITDA for financial reporting purposes aligns with the Adjusted EBITDA
definition under our Credit Agreement.

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 licenses its RealD Cinema Systems to motion picture exhibitors that show
3D motion pictures and alternative 3D content. RealD also provides certain of
its technologies and active and passive eyewear to consumer electronics
manufacturers and content distributors and will continue to leverage its
extensive intellectual property portfolio to develop additional revenue
opportunities.

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.

© 2014 RealD Inc. All Rights Reserved.

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

                                                      Three months ended
                                                       June 30,    June 30,
                                                        2014       2013   
                                                                    
Revenue:
License                                                $ 35,973     $ 37,306
Product and other                                       19,406     21,913 
Total revenue                                            55,379       59,219
Cost of revenue:
License                                                  10,897       10,818
Product and other                                       14,499     20,220 
Total cost of revenue                                    25,396       31,038
Gross profit                                             29,983       28,181
Operating expenses:
Research and development                                 3,790        5,544
Selling and marketing                                    5,791        7,338
General and administrative                              12,344     14,422 
Total operating expenses                                21,925     27,304 
Operating income                                         8,058        877
Interest expense, net                                    (430   )     (489   )
Other income (loss)                                     160        (209   )
Income before income taxes                               7,788        179
Income tax expense                                      2,287      1,715  
Net income (loss)                                        5,501        (1,536 )
Net (income) loss attributable to noncontrolling        -          2      
interest
Net income (loss) attributable to RealD Inc. common    $ 5,501     $ (1,534 )
stockholders
                                                                    
Earnings (loss) per common share:
Basic                                                  $ 0.11       $ (0.03  )
Diluted                                                $ 0.10       $ (0.03  )
                                                                    
Shares used in computing earnings (loss) per common
share:
Basic                                                    49,671       49,588
Diluted                                                  52,770       49,588


RealD Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

                                                  June 30,      March 31,
                                                    2014         2014     
                                                                  
Assets
Current assets:
Cash and cash equivalents                          $ 27,841       $ 28,800
Accounts receivable, net                             59,818         48,422
Inventories                                          7,807          9,109
Deferred costs – eyewear                             713            149
Prepaid expenses and other current assets           4,834        5,197    
Total current assets                                 101,013        91,677
Property and equipment, net                          23,758         22,491
Cinema systems, net                                  100,355        106,735
Digital projectors, net-held for sale                –              57
Goodwill                                             10,657         10,657
Other intangibles, net                               5,837          6,154
Deferred income taxes                                4,571          4,571
Other assets                                        7,230        4,840    
Total assets                                       $ 253,421     $ 247,182  
                                                                  
Liabilities and equity
Current liabilities:
Accounts payable                                   $ 11,989       $ 12,470
Accrued expenses and other liabilities               20,505         21,896
Deferred revenue                                     7,046          8,143
Income taxes payable                                 1,351          1,790
Deferred income taxes                                4,287          4,288
Current portion of Credit Agreement                 7,460        12,500   
Total current liabilities                            52,638         61,087
Credit Agreement, net of current portion             27,975         23,750
Deferred revenue, net of current portion             5,649          6,465
Other long-term liabilities, customer deposits      4,844        5,046    
and virtual print fee liability
Total liabilities                                   91,106       96,348   
                                                                  
Commitments and contingencies
                                                                  
Equity (deficit)
                                                                  
Common stock                                         358,894        352,913
Accumulated deficit                                  (196,262 )     (201,763 )
Accumulated other comprehensive income              261          262      
Total RealD Inc. stockholders’ equity                162,893        151,412
Noncontrolling interest                             (578     )    (578     )
Total equity                                        162,315      150,834  
                                                                  
Total equity                                       $ 253,421     $ 247,182  


RealD Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

                                                    Three months ended
                                                     June 30,     June 30,
                                                      2014        2013    
Cash flows from operating activities
Net income (loss)                                    $ 5,501       $ (1,536  )
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization                          9,813         9,554
Deferred income tax                                    (1      )     (1      )
Non-cash interest expense                              38            20
Non-cash stock compensation                            3,971         4,645
Gain on sale of digital projectors                     –             (18     )
Loss on disposal of property and equipment             9             –
Impairment of long-lived assets and related            1,016         953
purchase commitments
Changes in operating assets and liabilities:
Accounts receivable                                    (11,396 )     (9,972  )
Inventories                                            1,302         (3,839  )
Prepaid expenses and other current assets              1,273         (2,018  )
Deferred costs - eyewear                               (564    )     97
Other assets                                           (2,390  )     172
Accounts payable                                       (468    )     (4,637  )
Accrued expenses and other liabilities                 (1,429  )     (399    )
Other long-term liabilities, customer deposits and     (202    )     744
virtual print fee liability
Income taxes receivable/payable                        (454    )     535
Deferred revenue                                      (1,913  )    (3,015  )
Net cash provided (used) by operating activities       4,106         (8,715  )
                                                                   
Cash flows from investing activities
Purchases of property and equipment                    (2,632  )     (1,636  )
Purchases of cinema systems and related components     (2,799  )     (8,428  )
Proceeds from sale of property and equipment           67            –
Proceeds from sale of digital projectors              –           70      
Net cash used in investing activities                  (5,364  )     (9,994  )
                                                                   
Cash flows from financing activities
Repayments of long-term debt                           –             –
Proceeds from credit facility                          37,300        5,000
Repayments on credit facility                          (38,115 )     –
Payments of debt issuance costs                        (895    )     –
Proceeds from exercise of stock options               2,010       951     
Net cash provided by financing activities             300         5,951   
Effect of currency exchange rate changes on cash       (1      )     137
and cash equivalent
Net increase in cash and cash equivalents              (958    )     (12,758 )
Cash and cash equivalents, beginning of period        28,800      31,020  
Cash and cash equivalents, end of period             $ 27,841     $ 18,399  


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

Reconciliation of Adjusted EBITDA to Net Income (Loss)

                                          Three months ended
                                           June 30,    June 30,
(in thousands)                              2014       2013   
                                                        
Net income (loss)                          $ 5,501      $ (1,536 )
Add (deduct):
Interest expense, net                        430          489
Income tax expense                           2,287        1,715
Depreciation and amortization                9,813        9,554
Other (income) loss (1)                      (160   )     209
Share-based compensation expense (2)         3,971        4,645
Impairment of assets and intangibles (3)     1,016        951
Cost reduction plan (4)                     71         -      
Adjusted EBITDA (5)                        $ 22,929    $ 16,027 


(1)  Includes gains and losses from foreign currency exchange and foreign
      currency forward contracts.
      Represents share-based compensation expense of nonstatutory and
(2)   incentive stock options and restricted stock units and employee stock
      purchase plan to employees, officers and directors.
      Represents impairment of long-lived assets, such as fixed assets,
(3)   theatrical equipment and related purchase commitments and identifiable
      intangibles.
      Expenses under RealD’s 2014 Credit Agreement with City National Bank for
(4)   the non-U.S. GAAP category “restructuring charges, severance costs and
      reserves”.
      As previously announced, RealD has modified its definition of Adjusted
(5)   EBITDA for financial reporting purposes to align with the Adjusted
      EBITDA definition under RealD’s credit facility.


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

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

                                                    Three months ended
                                                     June 30,    June 30,
                                                      2014       2013    
(in thousands)
Net cash provided by operating activities            $ 4,106      $ (8,715  )
Purchases of property and equipment                    (2,632 )     (1,636  )
Purchases of cinema systems and related components    (2,799 )    (8,428  )
Free cash flow                                       $ (1,325 )   $ (18,779 )

Contact:

RealD Inc.
Investor Contact:
Andrew Greenebaum / Laura Bainbridge
310-829-5400
investors@reald.com
or
Media Contact:
Will Hammond
424-702-4758
whammond@reald.com
 
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