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TheStreet Open House

RealD Inc. Reports Financial Results For Third Quarter Of Fiscal 2013

RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its third quarter of fiscal 2013 ended December 31, 2012.

“2D films generated an outsized share of global box office receipts during our third fiscal quarter, which limited our financial results for the quarter,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD. “Importantly, our continuing focus on growth initiatives in international markets recently led to two major exhibitor contracts in Russia, one of the highest grossing countries for 3D box office receipts. We announced today that Russian exhibitors Karo Film and Kinomax will equip up to a combined 300 RealD systems across their circuits, providing the industry’s brightest 3D presentation to their moviegoing customers.

“Our repurchase of 2.3 million shares of common stock during the quarter and the recent expansion of our stock repurchase program underscore our confidence in RealD’s future growth opportunities,” Lewis added.

Third Quarter Fiscal 2013 Financial Highlights

Financial results for the third quarter of fiscal 2013 benefited from RealD’s previously announced change in quarterly reporting periods, which added 10 extra days to the quarter ended December 31, 2012 when compared to the third quarter of fiscal 2012 ended December 23, 2011.

  • Total revenue was $46.9 million, comprised of license revenue of $30.3 million and product and other revenue of $16.6 million. For the third quarter of fiscal 2012, total revenue was $49.0 million, comprised of license revenue of $28.5 million and product and other revenue of $20.6 million.
  • GAAP net loss attributable to common stockholders was $4.2 million, or $0.08 per share, compared to GAAP net income attributable to common stockholders of $2.8 million, or $0.05 per diluted share, for the third quarter of fiscal 2012. The third quarter of fiscal 2012 included a tax benefit of $2.2 million.
  • Adjusted EBITDA was $12.5 million, compared to $16.2 million in the third quarter of fiscal 2012.
  • 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).

Nine-Month Fiscal 2013 Financial Highlights

  • Total revenue was $170.1 million, comprised of license revenue of $106.5 million and product and other revenue of $63.6 million. For the nine months ended December 23, 2011, total revenue was $196.6 million, comprised of license revenue of $116.1 million and product and other revenue of $80.4 million.
  • GAAP net loss attributable to common stockholders was $5.4 million, or $0.10 per share, compared to GAAP net income of $31.3 million, or $0.55 per diluted share, for the nine months ended December 23, 2011.
  • Adjusted EBITDA was $49.4 million, compared to $86.6 million for the nine months ended December 23, 2011.

Cash Flows, Stock Repurchases and Balance Sheet Highlights

  • For the nine months ended December 31, 2012, cash flows from operating activities were $63.0 million and total capital expenditures were $24.4 million, resulting in free cash flow of $38.5 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.
  • During the quarter, the Company repurchased approximately 2,262,000 shares of common stock for $21.5 million, representing an average cost of $9.52 per share.
  • Since the inception of the stock repurchase program in April 2012 through December 31, 2012, the Company has repurchased approximately 4,822,000 shares of common stock. As of December 31, 2012, $27.2 million remained available under the $75 million stock repurchase authorization.
  • Cash and cash equivalents were $27.7 million and total debt was $35.0 million as of December 31, 2012. The increase of $22.5 million in total debt from September 21, 2012 primarily funded stock repurchases during the quarter.

Key Metrics

  • Estimated box office generated on RealD-enabled screens (1) for the third quarter of fiscal 2013 was $643 million ($299 million domestic, $344 million international). In the third quarter of fiscal 2012, estimated box office generated on RealD-enabled screens was $532 million ($256 million domestic, $276 million international).
  • The percentage of RealD box office generated from animation and family genre films (which have lower average ticket prices) decreased compared to the third quarter of fiscal 2012, when animation and family films dominated the holiday film slate.
  • Nine 3D films were released in the third quarter of fiscal 2013 compared to eight 3D films in the third quarter of fiscal 2012.
  • International markets generated 59% of license revenue and 34% of product and other revenue in the third quarter of fiscal 2013.
  • As of December 31, 2012, the Company had deployed approximately 22,200 RealD-enabled screens, an increase of 13% from approximately 19,700 screens as of December 23, 2011, and an increase of 700 screens (300 domestic, 400 international), or 3%, from approximately 21,500 screens as of September 21, 2012.
  • As of December 31, 2012, the Company had approximately 12,600 domestic screens at approximately 2,800 domestic theater locations and approximately 9,600 international screens at approximately 2,700 international theater locations.
          (1)     Estimated domestic box office on RealD-enabled screens represents the estimated 3D box office generated on RealD-enabled domestic screens. Estimated international box office on RealD-enabled international screens is the estimated 3D box office generated on RealD-enabled international screens. RealD’s estimates of box office on RealD-enabled screens rely on box office tracking data. International box office reflects RealD’s estimates of international box office generated on RealD-enabled screens in 20 foreign countries where box office tracking is available. RealD estimates these countries represent approximately 85% of RealD’s international license revenues.
 

Planned Changes to Definition of Adjusted EBITDA, a Non-GAAP Measure

Beginning in the first quarter of fiscal 2014 that ends on June 30, 2013, RealD intends to modify its definition of Adjusted EBITDA for financial reporting purposes to align with the Adjusted EBITDA definition under the expanded credit facility entered into on April 19, 2012. The Adjusted EBITDA definition under RealD’s credit facility does not add back sales and use tax and property tax as part of the calculation. Beginning in fiscal 2014, RealD will no longer add back sales and use tax and property tax to calculate Adjusted EBITDA for financial reporting purposes.

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