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

RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced financial results for its first quarter of fiscal 2013 ended June 22, 2012.

First Quarter Financial Highlights

Revenue
  • Revenue was $68.2 million, an increase of 14% from $59.6 million in the first quarter of fiscal 2012.
  • Net license revenue was $41.2 million, an increase of 15% from $35.7 million in the first quarter of fiscal 2012.
  • Product and other revenue was $27.0 million, an increase of 13% from $23.8 million in the first quarter of fiscal 2012.

GAAP Net Income Results
  • GAAP net income attributable to common stockholders was $3.0 million, or $0.05 per diluted share, compared to $9.6 million, or $0.17 per diluted share, for the first quarter of fiscal 2012.
  • The year-over-year decrease in GAAP net income was largely attributable to a $5.9 million decline in “Product and Other” gross profits that resulted from a significantly reduced mix of recycled 3D eyewear shipped to RealD-equipped theaters during the first quarter of fiscal 2013.
  • A higher effective tax rate of 61% in the first quarter of fiscal 2013 also contributed to the year-over-year decline in GAAP net income and net income per diluted share.

Non-GAAP Results
  • Adjusted EBITDA was $23.2 million, a decrease of 11% compared to $26.1 million in the first quarter of fiscal 2012. The decrease was largely attributable to a decrease in “Product and Other” gross profits from 3D eyewear.
  • Adjusted EBITDA decreased to 34% of net revenue from 44% of net revenue in the first 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.

Balance Sheet, Cash Flows and Stock Repurchases
  • As of June 22, 2012, the Company’s balance sheet included total cash and cash equivalents of $45.5 million, an increase of $20.6 million from March 23, 2012. Total debt as of June 22, 2012 remained unchanged at $25.0 million.
  • Cash flows from operating activities were $27.8 million and total capital expenditures were $7.8 million, resulting in free cash flow of $20.0 million.
  • The Company defines free cash flow, a Non-GAAP measure, as cash flows from operating activities less total capital expenditures in a given period. Total capital expenditures include purchases of cinema systems and related components as well as purchases of property and equipment.
  • The Company repurchased 133,987 common shares during the quarter for $1.6 million, resulting in an average cost of $11.84 per share repurchased.

“The first quarter marked a solid increase in license revenue year-over-year, highlighting the continued strength of our premium cinema format on a global basis,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD. “However, our bottom-line comparison versus the prior-year quarter was impacted by a $5.9 million decline in our product gross profits that resulted from a significantly reduced mix of recycled eyewear shipped to RealD-equipped theaters during the quarter. Nonetheless, during the quarter our business generated $20 million in free cash flow, consistent with our expectation that RealD will generate strong cash flows during fiscal 2013 as our spending on capital expenditures moderates.”

Key Metrics and International Revenue Statistics

  • International markets generated 56% of license revenue compared to 58% of license revenue in the first quarter of fiscal 2012.
  • As of June 22, 2012, the Company had deployed approximately 20,700 RealD-enabled screens, an increase of 18% from approximately 17,500 screens as of June 24, 2011, and an increase of 500 screens, or 2%, from approximately 20,200 screens as of March 23, 2012.
  • As of June 22, 2012, the Company had approximately 12,000 domestic screens at approximately 2,700 domestic theater locations and approximately 8,700 international screens at approximately 2,500 international theater locations.

3D Theatrical Release Schedule for Fiscal 2013 (As of July 30, 2012 – Domestic)

Fiscal Q1 2013
 

Film
 

Domestic Release Date
(ended 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 8/8/2012
ParaNorman 8/17/2012
Resident Evil: Retribution 9/14/2012
Finding Nemo (re-release) 9/14/2012
Dredd 9/21/2012
 

Fiscal Q3 2013

Film

Domestic Release Date
(ending 12/21/12) Hotel Transylvania 9/28/2012
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
Monsters, Inc. (re-release) 12/19/2012
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
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 first quarter ended June 22, 2012 beginning at 4:30 pm ET (1:30 pm PT), today, July 30, 2012. To access the call via telephone, interested parties should dial (877) 941-4774 (U.S.) or (480) 629-9760 (International) ten minutes prior to the start time and use conference ID 4550803.

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 4550803.

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
June 22, June 24,
2012 2011
 
Revenue:
License $ 41,189 $ 35,711
Product and other   26,989     23,849  
Total revenue 68,178 59,560
Cost of revenue:
License 10,013 6,416
Product and other   26,820     17,825  
Total cost of revenue 36,833 24,241
Gross profit 31,345 35,319
Operating expenses:
Research and development 4,898 4,645
Selling and marketing 6,895 7,229
General and administrative   11,262     8,430  
Total operating expenses   23,055     20,304  
Operating income 8,290 15,015
Interest expense, net (313 ) (211 )
Other loss   (353 )   (150 )
Income before income taxes 7,624 14,654
Income tax expense   4,677     5,252  
Net income 2,947 9,402
Net loss attributable to
noncontrolling interest   32     193  
Net income attributable to RealD Inc.
common stockholders $ 2,979   $ 9,595  
 
Earnings per common share:
Basic $ 0.05 $ 0.18
Diluted $ 0.05 $ 0.17
 
Shares used in computing earnings per common share:
Basic 54,676 53,955
Diluted 56,643 57,781
 
RealD Inc.
Consolidated Balance Sheets
(In thousands)
 
June 22, March 23,
2012 2012
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 45,525 $ 24,894
Accounts receivable, net 58,734 59,212
Inventories 22,012 40,577
Deferred costs – eyewear 1,280 932
Prepaid expenses and other current assets   2,846     2,630  
Total current assets 130,397 128,245
Property and equipment, net 14,543 12,713
Cinema systems, net 137,648 141,024
Digital projectors, net-held for sale 1,035 1,078
Goodwill 10,657 10,657
Other intangibles, net 1,704 1,746
Deferred income taxes 3,049 3,049
Other assets   5,505     3,663  
Total assets $ 304,538   $ 302,175  
 
Liabilities and equity
Current liabilities:
Accounts payable $ 17,507 $ 22,617
Accrued expenses and other liabilities 25,010 28,870
Deferred revenue 9,258 7,201
Income taxes payable 4,254 1,121
Deferred income taxes   3,094     3,149  
Total current liabilities 59,123 62,958
Credit facility agreement 25,000 25,000
Deferred revenue, net of current portion 13,428 13,920
Other long-term liabilities, customer deposits and virtual print fee liability 2,871 2,691
 
Commitments and contingencies
 
Equity (deficit)
Common stock 315,043 309,894
Accumulated deficit (109,732 ) (112,711 )
Treasury stock, at cost   (1,586 )    
Total RealD Inc. stockholders’ equity 203,725 197,183
Noncontrolling interest   391     423  
Total equity   204,116     197,606  
 
Total liabilities and equity $ 304,538   $ 302,175  
 
RealD Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three months ended
June 22, June 24,
2012 2011
Cash flows from operating activities
Net income $ 2,947 $ 9,402
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,850 6,098
Deferred income tax (55 ) (178 )
Non-cash interest expense 104 133
Non-cash stock compensation 4,282 2,899
Impairment of long-lived assets 1,574 118
Changes in operating assets and liabilities:
Accounts receivable (1,996 ) 361
Inventories 18,565 (6,398 )
Prepaid expenses and other current assets 173 774
Deferred costs - eyewear (348 ) (2,186 )
Other assets (1,064 ) (1,965 )
Accounts payable (5,114 ) (6,165 )
Accrued expenses and other liabilities (3,964 ) (9,285 )
Other long-term liabilities, customer deposits and virtual print fee liability 180 1,195
Income taxes receivable/payable 3,133 4,202
Deferred revenue   1,565     2,921  
Net cash provided by operating activities 27,832 1,926
 
Cash flows from investing activities
Purchases of property and equipment (2,745 ) (684 )
Purchases of cinema systems and related components (5,044 ) (24,180 )
Proceeds from sale of digital projectors   2,474      
Net cash used in investing activities (5,315 ) (24,864 )
 
Cash flows from financing activities
Repayments of long-term debt (594 )
Proceeds from credit agreement - revolving credit facility 30,000
Repayments on credit agreement - revolving credit facility (25,000 ) (5,000 )
Proceeds from credit agreement - term loan facility 25,000
Payments of debt issuance costs (1,167 )
Proceeds from exercise of stock options 565 395
Proceeds from employee stock purchase plan 302
Proceeds from exercise of warrants 90
Proceeds from exercise of motion picture exhibitor options 3
Purchases of treasury stock   (1,586 )    
Net cash (used) provided by financing activities   (1,886 )   24,894  
Net increase in cash and cash equivalents 20,631 1,956
Cash and cash equivalents, beginning of year   24,894     16,936  
Cash and cash equivalents, end of year $ 45,525   $ 18,892  
 
RealD Inc.
Schedule of Non-GAAP Reconciliations
(In thousands)
(Unaudited)
 
Reconciliation of Net Income to Adjusted EBITDA
     
Three months ended
June 22, June 24,
(in thousands) 2012 2011
 
Net income $ 2,947 $ 9,402
Add (deduct):
Interest expense, net 313 211
Income tax expense 4,677 5,252
Depreciation and amortization 7,850 6,098
Other loss (1) 353 150
Share-based compensation expense (2) 4,282 2,899
Impairment of assets and intangibles (3) 1,574 118
Sales and use tax (4) 853 1,490
Property tax (5)   320   436
Adjusted EBITDA $ 23,169 $ 26,056

(1) Includes gains and losses from foreign currency exchange and foreign currency forward contracts.(2) Represents share-based compensation expense of nonstatutory and incentive stock options and restricted stock units to employees, officers and directors.(3) Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and identifiable intangibles.(4) Represents taxes incurred by us for cinema license and product revenue.(5) Represents property taxes on RealD Cinema Systems and digital projectors.

Copyright Business Wire 2010

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