RLD Reald

Global visual technology company RealD Inc. (NYSE: RLD) today announced financial results for its third quarter of fiscal 2016 ended December 31, 2015.

Third Quarter Fiscal 2016 Financial Highlights

• Total revenue was $50.4 million, comprised of license revenue of $29.7 million and product and other revenue of $20.7 million. For the third quarter of fiscal 2015, total revenue was $32.6 million, comprised of license revenue of $21.0 million and product and other revenue of $11.6 million.
• China license revenue represented 15% of total worldwide license revenue, down from 20% for the third fiscal quarter of 2015.
• GAAP net loss attributable to common stockholders was $4.3 million, or $0.08 per diluted share, compared to GAAP net loss attributable to common stockholders of $11.3 million, or $0.23 per diluted share, for the third quarter of fiscal 2015.
• Adjusted EBITDA was $19.6 million, compared to $8.1 million in the third quarter of fiscal 2015.
• 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-Months Fiscal 2016 Financial Highlights

• Total revenue was $142.4 million, comprised of license revenue of $92.0 million and product and other revenue of $50.4 million. For the nine months ended December 31, 2014, total revenue was $135.6 million, comprised of license revenue of $89.0 million and product and other revenue of 46.6 million.
• China license revenue represented 17% of total worldwide license revenue, up from 15% for the nine months ended December 31, 2014.
• GAAP net loss attributable to common stockholders was $4.9 million, or $0.10 per diluted share, compared to GAAP net loss attributable to common stockholders of $6.1 million, or $0.12 per diluted share, for the nine months ended December 31, 2014.
• Adjusted EBITDA was $51.4 million, compared to $49.6 million for nine months ended December 31, 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 nine months ended December 31, 2015, cash inflow from operating activities was $27.9 million and total capital expenditures were $11.0 million, resulting in positive free cash flow of $16.9 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 December 31, 2015, cash and cash equivalents were $81.5 million and total debt was $35.4 million.
• Net cash inflow from operating activities of $27.9 million during the nine months ended December 31, 2015 included an upfront license fee of $7.5 million per RealD's agreement with a computer technology company to develop and commercialize its intelligent backlight technology.

Key Metrics

• Estimated box office generated on RealD-enabled screens(1) in the third quarter of fiscal 2016 was $753 million ($386 million domestic, $367 million international). In the third quarter of fiscal 2015, estimated box office generated on RealD-enabled screens was $338 million ($157 million domestic, $181 million international).
• Total RealD license revenue as a percent of total estimated box office generated on RealD-enabled screens excluding China, was 3.9% in the quarter, compared to 6.2% in the third quarter of fiscal 2015.
• Nine 3D films were released in the third quarter of fiscal 2016, compared to five 3D films in the third quarter of fiscal 2015. These figures reflect the number of 3D films released domestically during the periods.
• International markets generated 60% of license revenue and 30% of product and other revenue in the third quarter of fiscal 2016.
• In the third quarter of fiscal 2016, worldwide 3D percentages were 39% (38% domestic, 40% international). In the third quarter of fiscal 2015, worldwide 3D percentages were 38% (32% domestic, 42% international).
• In the first nine months of fiscal 2016, worldwide 3D percentages were 38% (35% domestic, 40% international). In the first nine months of fiscal 2015, worldwide 3D percentages were 40% (34% domestic, 44% international).
• As of December 31, 2015, RealD had deployed approximately 27,800 RealD-enabled screens, an increase of 5% from approximately 26,500 screens as of December 31, 2014, and an increase of 1,100 screens (200 domestic, 900 international), or 4%, from approximately 26,700 screens as of March 31, 2015.
• As of December 31, 2015, RealD had approximately 13,800 domestic screens at approximately 3,000 domestic theater locations and approximately 14,000 international screens at approximately 3,350 international theater locations.

(1) RealD’s estimates of box office on RealD-enabled screens rely on box office tracking data. Estimated international box office encompasses the 19 foreign countries where tracking data is available. The 19 foreign countries do not include China and represent approximately 80% of RealD’s international license revenue.

The following table shows the major domestically produced 3D motion pictures released or scheduled for release on domestic and/or international 3D-enabled screens for the last quarter of fiscal year 2016 ending March 31, 2016 and the entire fiscal year 2017 ending March 31, 2017.

(As of February 1, 2016 – Domestic)

                 

Fiscal Q4 2016

     

Film

     

Domestic Release Date

(ending 3/31/16) Kung Fu Panda 3 1/29/2016 The Finest Hours 1/29/2016 Gods of Egypt 2/26/2016 Zootopia 3/4/2016 Batman v Superman: Dawn of Justice 3/25/2016  

Fiscal Q1 2017

Film

Domestic Release Date

(ending 6/30/16) The Jungle Book 4/15/2016 Ratchet & Clank 4/29/2016 Captain America: Civil War 5/6/2016 The Angry Birds Movie 5/20/2016 X-Men: Apocalypse 5/27/2016 Alice Through the Looking Glass 5/27/2016 Teenage Mutant Ninja Turtles: Out of the Shadows 6/3/2016 Warcraft 6/10/2016 Finding Dory 6/17/2016 Independence Day Resurgence 6/24/2016  

Fiscal Q2 2017

Film

Domestic Release Date

(ending 9/30/16) Tarzan 7/1/2016 The BFG 7/1/2016 The Secret Life of Pets 7/8/2016 Ghostbusters 7/15/2016 Ice Age Collision Course 7/22/2016 Star Trek Beyond 7/22/2016 Suicide Squad 8/5/2016 Pete's Dragon 8/12/2016 Spectral 8/12/2016 Kubo and the Two Strings 8/19/2016 Storks 9/23/2016  

Fiscal Q3 2017

Film

Domestic Release Date

(ending 12/31/16) Doctor Strange 11/4/2016 Trolls 11/4/2016 Billy Lynn's Long Halftime Walk 11/11/2016 Fantastic Beasts & Where to Find Them 11/18/2016 Moana 11/23/2016 The Great Wall 11/23/2016 Rogue One 12/16/2016  

Fiscal Q4 2017

Film

Domestic Release Date

(ending 3/31/17) Geostorm 1/13/2017 Monster Trucks 1/13/2017 Resident Evil: The Final Chapter 1/27/2017 LEGO Batman Movie 2/10/2017 Boss Baby 3/10/2017 Kong: Skull Island 3/10/2017 Beauty and the Beast 3/17/2017

Knights of the Roundtable: King Arthur

3/24/2017

Get Smurfy 3/31/2017         Ghost In the Shell       3/31/2017

Sources: Rentrak and imdb.com.

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; statements regarding the extent and timing of future licensing, products and services; and 3D motion picture releases and conversions scheduled for fiscal year 2016 ending March 31, 2016 and fiscal year 2017 ending March 31, 2017.

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 fiscal year ended March 31, 2015 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 our financial statements presented on a GAAP basis, we provide Adjusted EBITDA and free cash flow as supplemental measures of our performance. We define 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 comprising the non-U.S. GAAP categories “restructuring charges, severance costs and reserves” and “non- recurring expenses” as defined in our Credit Agreement. We define free cash flow as total cash provided (used) by operating activities less cash used in purchases of property and equipment and cash used in purchases of cinema systems and related components.

We present Adjusted EBITDA in reporting our financial results to provide investors with additional tools to evaluate our operating results in a manner that focuses on what our management believes to be our ongoing business operations. We present 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. Management does not itself, nor does it suggest that investors should, consider any such non-U.S. 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, our 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.

About RealD Inc.

RealD is a leading global licensor of 3D and other visual technologies. RealD is the world’s most widely used 3D technology and our extensive intellectual property portfolio is used in applications and products that enable a premium viewing experience in the theater, the home and elsewhere.

RealD was founded in 2003 and has offices in Beverly Hills; Boulder; London; Moscow; Shanghai; Hong Kong; and Tokyo. For more information, please visit our website at www.reald.com.

© 2016 RealD Inc. All Rights Reserved.

 

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

     

Three months endedDecember 31

Nine months endedDecember 31

2015   2014 2015   2014 Revenue: License $ 29,743 $ 20,958 $ 92,031 $ 88,961 Product and other 20,630   11,613   50,363   46,597   Total revenue 50,373 32,571 142,394 135,558 Cost of revenue: License 10,656 11,487 30,917 33,612 Product and other 12,754   6,121   35,649   31,410   Total cost of revenue 23,410 17,608 66,566 65,022 Gross profit 26,963 14,963 75,828 70,536 Operating expenses: Research and development 4,107 4,582 10,578 14,692 Selling and marketing 4,503 4,382 14,605 15,493 General and administrative 17,059   12,654   45,414   35,804   Total operating expenses 25,669   21,618   70,597   65,989   Operating income (loss) 1,294 (6,655 ) 5,231 4,547 Interest expense, net (425 ) (393 ) (1,195 ) (1,278 ) Other loss, net (659 ) (3,088 ) (2,240 ) (4,264 ) Income (loss) before income taxes 210 (10,136 ) 1,796 (995 ) Income tax expense 4,492   1,154   6,670   5,117   Net loss (4,282 ) (11,290 ) (4,874 ) (6,112 ) Net income attributable to noncontrolling interest —   —   —   —   Net loss attributable to RealD Inc. common stockholders $ (4,282 ) $ (11,290 ) $ (4,874 ) $ (6,112 )   Loss per common share: Basic $ (0.08 ) $ (0.23 ) $ (0.10 ) $ (0.12 ) Diluted $ (0.08 ) $ (0.23 ) $ (0.10 ) $ (0.12 ) Shares used in computing loss per common share: Basic 51,474 49,771 51,183 49,935 Diluted 51,474 49,771 51,183 49,935    

RealD Inc.Condensed Consolidated Balance Sheets(In thousands)

           

December 31, 2015

March 31, 2015

(Unaudited)

Assets Current assets: Cash and cash equivalents $ 81,471 $ 60,333 Accounts receivable, net 48,902 26,748 Inventories 8,199 8,305 Deferred costs – eyewear 316 80 Prepaid expenses and other current assets 4,465   4,770   Total current assets 143,353 100,236 Property and equipment, net 16,363 20,599 Cinema systems, net 69,629 82,243 Goodwill 10,657 10,657 Other intangibles, net 3,839 4,817 Deferred income taxes 1,662 2,461 Other assets 8,452   8,631   Total assets $ 253,955   $ 229,644  

Liabilities and equity

Current liabilities: Accounts payable $ 13,717 $ 9,652 Accrued expenses and other liabilities 29,183 26,640 Deferred revenue 6,662 5,009 Income taxes payable 1,090 1,619 Deferred income taxes 1,784 2,583 Current portion of Credit Agreement 10,635   7,460   Total current liabilities 63,071 52,963 Credit Agreement, net of current portion 24,723 22,380 Deferred revenue, net of current portion 11,025 3,931 Other long-term liabilities 3,373   4,027   Total liabilities 102,192 83,301 Commitments and contingencies Equity (deficit) Common stock 383,923 371,689 Accumulated deficit (233,450 ) (226,803 ) Accumulated other comprehensive income 1,793   1,960   Total RealD Inc. stockholders’ equity 152,266 146,846 Noncontrolling interest (503 ) (503 ) Total equity 151,763   146,343   Total liabilities and equity $ 253,955   $ 229,644      

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

     

Nine months endedDecember 31

2015   2014 Cash flows from operating activities Net loss $ (4,874 ) $ (6,112 ) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 27,721 29,925 Deferred income tax — 1 Non-cash interest expense 276 203 Non-cash stock compensation 10,427 11,515 Non-cash bad debt expense (122 ) 646 Loss on disposal of property and equipment — 154 Impairment of long-lived assets and related purchase commitments 2,213 2,736 Changes in operating assets and liabilities:

 

 

Accounts receivable (22,032 ) 13,916 Inventories 106 2,269 Prepaid expenses and other current assets (818 ) 117 Deferred costs - eyewear (236 ) (42 ) Other assets (97 ) (3,286 ) Accounts payable 4,065 (7,137 ) Accrued expenses and other liabilities 2,540 2,347 Other long-term liabilities (654 ) (783 ) Income taxes receivable/payable 594 (1,152 ) Deferred revenue 8,747   (5,224 ) Net cash provided by operating activities 27,856 40,093   Cash flows from investing activities Purchases of property and equipment (871 ) (4,032 ) Purchases of cinema systems and related components (10,102 ) (12,626 ) Proceeds from sale of property and equipment —   79   Net cash used in investing activities (10,973 ) (16,579 )   Cash flows from financing activities Proceeds from Credit Agreement 12,700 37,300 Repayments on Credit Agreement (7,182 ) (41,845 ) Payments of debt issuance costs — (895 ) Proceeds from exercise of stock options 1,245 2,782 Proceeds from employee stock purchase plan 562 291 Repurchase of statutory withholdings of stock issued for restricted stock units (1,773 ) (990 ) Net cash provided by (used in) financing activities 5,552   (3,357 ) Effect of currency exchange rate changes on cash and cash equivalent (1,297 ) 2,793 Net increase in cash and cash equivalents 21,138 22,950 Cash and cash equivalents, beginning of period 60,333   28,800   Cash and cash equivalents, end of period $ 81,471   $ 51,750      

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

       

Reconciliation of Adjusted EBITDA to Net Income (Loss)

 

Three months endedDecember 31

Nine months endedDecember 31

(in thousands)

2015   2014 2015   2014 Net loss $ (4,282 ) $ (11,290 ) $ (4,874 ) $ (6,112 ) Add (deduct): Interest expense, net 425 393 1,195 1,278 Income tax expense 4,492 1,154 6,670 5,117 Depreciation and amortization 8,934 9,920 27,721 29,925 Other loss (1) 659 3,088 2,240 4,264 Share-based compensation expense (2) 3,086 3,282 10,427 11,515 Impairment of assets and intangibles (3) 1,402 1,268 2,213 2,736 Cost reduction plan (4) 617 307 803 910 Non-recurring expenses (5) 4,312   —   5,000   —   Adjusted EBITDA (6) $ 19,645   $ 8,122   $ 51,395   $ 49,633    

(1) Consists of gains and losses from foreign currency exchange and foreign currency forward contracts.

(2) Represents share-based compensation expense of nonstatutory and incentive stock options, restricted stock units and performance stock units, and employee stock purchase plan to employees, non-employees, officers and directors.

(3) Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and related purchase commitments and identifiable intangibles.

(4) Expenses under our Credit Agreement for the non-U.S. GAAP category “restructuring charges, severance costs and reserves.”

(5) Expenses under our Credit Agreement for the non-U.S. GAAP category "non-recurring costs and expenses", which is limited to $5.0 million per fiscal year.

(6) Adjusted EBITDA is not a recognized measurement under U.S. GAAP. For a definition of Adjusted EBITDA and reconciliation to net income (loss), the comparable U.S. GAAP item, see “Use of Non-U.S. GAAP Financial Measures.”

         

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

 

Nine months endedDecember 31

(in thousands)

2015   2014 Net cash provided by operating activities $ 27,856 $ 40,093 Purchases of property and equipment (871 ) (4,032 ) Purchases of cinema systems and related components (10,102 ) (12,626 ) Total free cash flow $ 16,883   $ 23,435    

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RealD Inc.Investor:Andrew Greenebaum / Laura Bainbridge310-829-5400investors@reald.comorMedia:Will Hammond424-702-4758whammond@reald.com