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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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