Attached files

file filename
8-K - 8-K - RealD Inc.a14-22945_18k.htm

Exhibit 99.1

 

 

 

RealD Inc. Reports Second Quarter Fiscal Year 2015 Financial Results

 

·                                         Licensing revenue of $31.8 million increased 3% year-over-year

 

·                                         Adjusted EBITDA of $17.6 million increased 28% year-over-year

 

·                                         Free cash flow more than doubled to $23.4 million for the three months ended September 30, 2014

 

 

LOS ANGELES (November 3, 2014) - Global visual technology company RealD Inc. (NYSE: RLD) today announced financial results for its second quarter of fiscal 2015 ended September 30, 2014.

 

“We are pleased with our fiscal second quarter results, which reflect modest growth in licensing revenues coupled with strong increases in Adjusted EBITDA and free cash flow,” commented Michael V. Lewis, Chairman and Chief Executive Officer of RealD.  “Our performance reflects broader box office improvement, continued stabilization in global 3D percentages and previously enacted cost cutting measures.  We are pleased with our efforts to support 3D viewership and continue to work with our studio and exhibitor partners to optimize 3D performance across our platform.”

 

Mr. Lewis continued, “Over the past year, we have evaluated all aspects of our business and are in the process of taking additional steps designed to enhance shareholder value.  As part of this effort, we are actively evaluating alternatives, in consultation with our outside advisors, for restructuring our R&D efforts: Consumer, Laser, Screen and RealD TrueImageTM. We expect the outcome of this process to result in a further streamlining of our organization and efficiencies in our cost structure.”

 

RealD management and its Board of Directors believe the value of its business will benefit from the strength of its cinema platform and upcoming film slate, the value inherent in its IP portfolio, and the changes being made to further reduce operating expenses and capital expenditures.  The Company strongly believes that the aforementioned actions will enhance value for all RealD shareholders.  Accordingly, the RealD Board, in consultation with outside financial and legal advisors, has carefully reviewed the unsolicited indication of interest from Starboard Value LP and unanimously determined not to pursue it.

 

1



 

Second Quarter Fiscal 2015 Financial Highlights

 

                   Total revenue was $47.4 million, comprised of license revenue of $31.8 million and product and other revenue of $15.6 million. For the second quarter of fiscal 2014, total revenue was $43.9 million, comprised of license revenue of $31.0 million and product and other revenue of $12.9 million.

                   China license revenue represented 11% of total worldwide license revenue, up from 9% for the second fiscal quarter of 2014.

                   GAAP net loss attributable to common stockholders was $1.6 million, or $0.03 per share, compared to GAAP net loss attributable to common stockholders of $4.7 million, or $0.09 per diluted share, for the second quarter of fiscal 2014.

                   Adjusted EBITDA was $17.6 million, compared to $13.7 million for the second 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).

 

Six-Months Fiscal 2015 Financial Highlights

 

                   Total revenue was $102.8 million, comprised of license revenue of $67.8 million and product and other revenue of $35.0 million. For the six months ended September 30, 2013, total revenue was $103.1 million, comprised of license revenue of $68.3 million and product and other revenue of $34.8 million.

                   China license revenue represented 13% of total worldwide license revenue, up from 8% for the six months ended September 30, 2013.

                   GAAP net income attributable to common stockholders was $3.9 million, or $0.08 per share, compared to GAAP net loss attributable to common stockholders of $6.2 million, or $0.13 per diluted share, for the six months ended September 30, 2013.

                   Adjusted EBITDA was $40.5 million, compared to $29.7 million for the six months ended September 30, 2013.

                   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 six months ended September 30, 2014, cash inflow from operating activities was $32.9 million and total capital expenditures were $10.9 million, resulting in positive free cash flow of $22.0 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 September 30, 2014, cash and cash equivalents were $49.9 million and total debt was $33.6 million.

 

2



 

Key Metrics

 

                   Estimated box office generated on RealD-enabled screens(1) in the second quarter of fiscal 2015 was $618 million ($274 million domestic, $344 million international).  In the second quarter of fiscal 2014, estimated box office generated on RealD-enabled screens was $582 million ($253 million domestic, $329 million international).

                   Nine 3D films were released in the second quarter of fiscal 2015, compared to 11 3D films in the second quarter of fiscal 2014.  These figures reflect the number of 3D films released domestically during the periods.

                   International markets generated 67% of license revenue and 33% of product and other revenue in the second quarter of fiscal 2015.

                   As of September 30, 2014, RealD had deployed approximately 26,000 RealD-enabled screens, an increase of 7% from approximately 24,200 screens as of September 30, 2013, and an increase of 800 screens (100 domestic, 700 international), or 3%, from approximately 25,200 screens as of March 31, 2014.

                   As of September 30, 2014, RealD had approximately 13,500 domestic screens at approximately 3,000 domestic theater locations and approximately 12,500 international screens at approximately 3,060 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 19 foreign countries where box office tracking is available. RealD estimates these countries represent approximately 85% of RealD’s international license revenues. The 19 foreign countries do not include China.

 

3



 

3D Theatrical Release Schedule for the Last Two Quarters of Fiscal 2015 and First Two Quarters of Fiscal 2016

(As of November 3, 2014 – Domestic)

 

 

 

 

 

 

 

 

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 Armies

12/17/2014

 

 

 

Fiscal Q4 2015

Film

Domestic Release Date

(ending 3/31/15)

Jupiter Ascending

2/6/2015

 

Seventh Son

2/6/2015

 

The SpongeBob Movie: Sponge Out of Water

2/6/2015

 

Insurgent

3/20/2015

 

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

 

Monster Trucks

5/29/2015

 

B.O.O.: Bureau of Otherworldly Operations

6/5/2015

 

San Andreas

6/5/2015

 

Jurassic World

6/12/2015

 

Inside Out

6/19/2015

 

 

 

Fiscal Q2 2016

Film

Domestic Release Date

(ending 9/30/15)

Minions

7/10/2015

 

Ant-Man

7/17/2015

 

Pan

7/17/2015

 

Pixels

7/24/2015

 

The Fantastic Four

8/7/2015

 

Everest

9/18/2015

 

Hotel Transylvania 2

9/25/2015

 

 

 

 

 

 

 

 Sources: Rentrak and imdb.com.

 

4



 

Conference Call Information

 

Members of RealD’s management will host a conference call to discuss RealD’s financial results for the second quarter of fiscal 2015, beginning at 4:30 pm ET (1:30 pm PT), today, November 3, 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 15798923.

 

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 15798923.

 

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; our ability to continue to derive substantial revenue from the licensing of our 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; our relationships with our exhibitor and studio partners and the business model for 3D eyewear in North America; the process of evaluating alternatives regarding our research and development activities, including any anticipated changes in organization structure or the realization of further reductions in cost structure as a result; 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.

 

5



 

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 comprising the non-U.S. GAAP category “restructuring charges, severance costs and reserves” as defined in RealD’s Credit Agreement.  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 and can be used in applications that enable a premium viewing experience in the theater, the home and elsewhere.  RealD’s core business is the licensing of RealD Cinema Systems and the product sale of RealD eyewear to motion picture exhibitors to enable a premium viewing experience for 3D motion pictures and alternative 3D content in the theater.

 

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.

 

Investor Contact:

Andrew Greenebaum / Laura Bainbridge

310-829-5400

investors@reald.com

 

Media Contact:

Will Hammond

424-702-4758

whammond@reald.com

 

6



 

RealD Inc.

 

Condensed Consolidated Statements of Operations (Unaudited)

 

(In thousands, except per share data)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

September 30,
2014

 

September 30,
2013

 

 

September 30,
2014

 

September 30,
2013

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

License

 

$

31,834

 

$

30,976

 

 

$

67,807

 

$

68,282

 

Product and other

 

15,578

 

12,953

 

 

34,984

 

34,866

 

Total revenue

 

47,412

 

43,929

 

 

102,791

 

103,148

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

License

 

11,613

 

11,691

 

 

22,510

 

22,509

 

Product and other

 

10,892

 

12,332

 

 

25,391

 

32,552

 

Total cost of revenue

 

22,505

 

24,023

 

 

47,901

 

55,061

 

Gross profit

 

24,907

 

19,906

 

 

54,890

 

48,087

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Research and development

 

6,425

 

4,685

 

 

10,215

 

10,229

 

Selling and marketing

 

5,414

 

6,115

 

 

11,205

 

13,453

 

General and administrative

 

11,168

 

11,950

 

 

23,512

 

26,372

 

Total operating expenses

 

23,007

 

22,750

 

 

44,932

 

50,054

 

Operating income (loss)

 

1,900

 

(2,844)

 

 

9,958

 

(1,967)

 

Interest expense, net

 

(455)

 

(751)

 

 

(885)

 

(1,240)

 

Other income (loss)

 

(1,336)

 

483

 

 

(1,176)

 

274

 

Income (loss) before income taxes

 

109

 

(3,112)

 

 

7,897

 

(2,933)

 

Income tax expense

 

1,676

 

1,552

 

 

3,963

 

3,267

 

Net income (loss)

 

(1,567)

 

(4,664)

 

 

3,934

 

(6,200)

 

Net loss attributable to noncontrolling interest

 

 

13

 

 

 

15

 

Net income (loss) attributable to RealD Inc. common stockholders

 

$

(1,567)

 

$

(4,651)

 

 

$

3,934

 

$

(6,185)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03)

 

$

(0.09)

 

 

$

0.08

 

$

(0.13)

 

Diluted

 

$

(0.03)

 

$

(0.09)

 

 

$

0.08

 

$

(0.13)

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing earnings (loss) per common share:

 

 

 

 

 

 

Basic

 

49,783

 

49,260

 

 

49,828

 

49,479

 

Diluted

 

49,783

 

49,260

 

 

51,962

 

49,479

 

 

7



 

RealD Inc.

 

Condensed Consolidated Balance Sheets

 

(In thousands)

 

 

 

 

September 30,
2014

 

March 31,
2014

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

49,903

 

$

28,800

 

Accounts receivable, net

 

40,600

 

48,422

 

Inventories

 

7,704

 

9,109

 

Deferred costs – eyewear

 

56

 

149

 

Prepaid expenses and other current assets

 

4,975

 

5,197

 

Total current assets

 

103,238

 

91,677

 

Property and equipment, net

 

22,974

 

22,491

 

Cinema systems, net

 

96,106

 

106,792

 

Goodwill

 

10,657

 

10,657

 

Other intangibles, net

 

5,518

 

6,154

 

Deferred income taxes

 

4,571

 

4,571

 

Other assets

 

7,925

 

4,840

 

Total assets

 

$

250,989

 

$

247,182

 

 

Liabilities and equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

8,414

 

$

12,470

 

Accrued expenses and other liabilities

 

22,332

 

21,896

 

Deferred revenue

 

6,673

 

8,143

 

Income taxes payable

 

903

 

1,790

 

Deferred income taxes

 

4,292

 

4,288

 

Current portion of Credit Agreement

 

7,460

 

12,500

 

Total current liabilities

 

50,074

 

61,087

 

Credit Agreement, net of current portion

 

26,110

 

23,750

 

Deferred revenue, net of current portion

 

4,937

 

6,465

 

Other long-term liabilities

 

4,297

 

5,046

 

Total liabilities

 

85,418

 

96,348

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity (deficit)

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

363,553

 

352,913

 

Accumulated deficit

 

(197,829)

 

(201,763)

 

Accumulated other comprehensive income

 

425

 

262

 

Total RealD Inc. stockholders’ equity

 

166,149

 

151,412

 

Noncontrolling interest

 

(578)

 

(578)

 

Total equity

 

165,571

 

150,834

 

 

 

 

 

 

 

Total liabilities and equity

 

$

250,989

 

$

247,182

 

 

8



 

RealD Inc.

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

(In thousands)

 

 

 

Six months ended

 

 

 

September 30,
2014

 

September 30,
2013

 

Cash flows from operating activities

 

 

 

 

 

Net income (loss)

 

$

3,934

 

$

(6,200)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

20,223

 

19,764

 

Deferred income tax

 

4

 

(3)

 

Non-cash interest expense

 

126

 

140

 

Non-cash stock compensation

 

8,233

 

9,118

 

Gain on sale of digital projectors

 

 

(18)

 

Loss on disposal of property and equipment

 

(41)

 

 

Impairment of long-lived assets and related purchase commitments

 

1,468

 

2,783

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

7,822

 

2,621

 

Inventories

 

1,405

 

(3,626)

 

Prepaid expenses and other current assets

 

237

 

(1,834)

 

Deferred costs - eyewear

 

93

 

433

 

Other assets

 

(2,316)

 

127

 

Accounts payable

 

(4,042)

 

(11,420)

 

Accrued expenses and other liabilities

 

436

 

(1,512)

 

Other long-term liabilities

 

(749)

 

229

 

Income taxes receivable/payable

 

902

 

464

 

Deferred revenue

 

(2,998)

 

(3,118)

 

Net cash provided by operating activities

 

32,933

 

7,948

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of property and equipment

 

(3,448)

 

(3,343)

 

Purchases of cinema systems and related components

 

(7,456)

 

(13,044)

 

Proceeds from sale of property and equipment

 

79

 

70

 

Net cash used in investing activities

 

(10,825)

 

(16,317)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from Credit Agreement

 

37,300

 

37,500

 

Repayments on Credit Agreement

 

(39,980)

 

(20,000)

 

Payments of debt issuance costs

 

(895)

 

 

Proceeds from exercise of stock options

 

2,116

 

1,079

 

Proceeds from employee stock purchase plan

 

291

 

303

 

Purchases of treasury stock

 

 

(7,511)

 

Net cash provided (used) by financing activities

 

(1,168)

 

11,371

 

Effect of currency exchange rate changes on cash and cash equivalent

 

163

 

205

 

Net increase in cash and cash equivalents

 

21,103

 

3,207

 

Cash and cash equivalents, beginning of period

 

28,800

 

31,020

 

Cash and cash equivalents, end of period

 

$

49,903

 

$

34,227

 

 

9



 

RealD Inc.

 

Schedule of Non-GAAP Reconciliations

 

(In thousands)

 

(Unaudited)

 

Reconciliation of Adjusted EBITDA to Net Income (Loss)

 

 

 

Three months ended

 

Six months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

(in thousands)

 

2014

 

2013

 

2014

 

2013

 

Net income (loss)

 

$

(1,567)

 

$

(4,664)

 

$

3,934

 

$

(6,200)

 

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest expense, net

 

455

 

751

 

885

 

1,240

 

Income tax expense

 

1,676

 

1,552

 

3,963

 

3,267

 

Depreciation and amortization

 

10,410

 

10,210

 

20,223

 

19,764

 

Other (income) loss (1)

 

1,336

 

(483)

 

1,176

 

(274)

 

Share-based compensation expense (2)

 

4,262

 

4,473

 

8,233

 

9,118

 

Impairment of assets and intangibles (3)

 

452

 

1,832

 

1,468

 

2,783

 

Cost reduction plan (4)

 

532

 

 

603

 

 

Adjusted EBITDA (5)

 

$

17,556

 

$

13,671

 

$

40,485

 

$

29,698

 

 

 

 

 

 

 

 

 

 

 

 

(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 and employee stock purchase plan to 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 comprising the non-U.S. GAAP category “restructuring charges, severance costs and reserves” as defined in RealD’s Credit Agreement.

(5)         Aligns with the Adjusted EBITDA definition under RealD’s credit facility.

 

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

 

 

 

Six months ended

 

 

 

September 30,
2014

 

September 30,
2013

 

(in thousands)

 

 

 

 

 

Net cash provided by operating activities

 

$

32,933

 

$

7,948

 

Proceeds from sale of property and equipment

 

(3,448)

 

(3,343)

 

Purchases of cinema systems and related components

 

(7,456)

 

(13,044)

 

Free cash flow

 

$

22,029

 

$

(8,439)

 

 

10