RealD Inc. Reports Fourth Quarter and Fiscal Year 2013 Financial Results

RealD Inc. Reports Fourth Quarter and Fiscal Year 2013 Financial Results

LOS ANGELES--(BUSINESS WIRE)-- RealD Inc. (NYS: RLD) , a leading global licensor of 3D technologies, today announced financial results for its fourth quarter and fiscal year ended March 31, 2013.

"RealD delivered strong free cash flow for our fourth quarter and fiscal year ended March 31, 2013, despite the slight year-over-year decline in license revenue," said Michael V. Lewis, Chairman and Chief Executive Officer of RealD. "We also continue to advance our international expansion initiatives, highlighted by the recent opening of our first office in Latin America. Additionally, RealD's largest exhibitor customer in Latin America, Cinepolis, entered into an expanded agreement to equip at least 400 additional auditoriums with RealD 3D technology across the Cinepolis circuit in Latin America, the United States and India within the next 12 months."


Fourth Quarter Fiscal 2013 Financial Highlights

  • Total revenue was $45.4 million, comprised of license revenue of $31.3 million and product and other revenue of $14.2 million, for the fourth quarter of fiscal 2013. For the fourth quarter of fiscal 2012, total revenue was $50.0 million, comprised of license revenue of $31.7 million and product and other revenue of $18.4 million.

  • GAAP net loss attributable to common stockholders was $4.3 million, or $0.09 per share, compared to GAAP net income attributable to common stockholders of $5.5 million, or $0.10 per diluted share, for the fourth quarter of fiscal 2012. The fourth quarter of fiscal 2012 included a tax benefit of $2.1 million.

  • Adjusted EBITDA was $13.9 million, compared to $17.8 million in the fourth 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).

Full Year Fiscal 2013 Financial Highlights

  • Total revenue was $215.6 million, comprised of license revenue of $137.8 million and product and other revenue of $77.8 million, for the year ended March 31, 2013. For the year ended March 23, 2012, total revenue was $246.6 million, comprised of license revenue of $147.8 million and product and other revenue of $98.8 million.

  • GAAP net loss attributable to common stockholders was $9.7 million, or $0.20 per share, compared to GAAP net income of $36.9 million, or $0.65 per diluted share, for the year ended March 23, 2012.

  • Adjusted EBITDA was $63.3 million, compared to $104.4 million for the year ended March 23, 2012.

Cash Flows, Stock Repurchases and Balance Sheet Highlights

  • For the year ended March 31, 2013, cash flows from operating activities were $79.7 million and total capital expenditures were $34.3 million, resulting in free cash flow of $45.4 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 fourth quarter of fiscal 2013, RealD repurchased approximately 1,106,000 shares of common stock for $12.7 million, representing an average cost of $11.47 per share.

  • Since the inception of the stock repurchase program in April 2012 through March 31, 2013, RealD has repurchased approximately 5,928,000 shares of common stock at an average cost of $10.20 per share. As of March 31, 2013, $14.6 million remained available under the $75 million stock repurchase authorization.

  • As of March 31, 2013, cash and cash equivalents were $31.0 million and total debt was $47.5 million. The increase of $12.5 million in total debt from December 31, 2012 primarily funded stock repurchases during the quarter.

Key Metrics

  • Estimated box office generated on RealD-enabled screens(1) for the fourth quarter of fiscal 2013 was $614 million ($268 million domestic, $346 million international). In the fourth quarter of fiscal 2012, estimated box office generated on RealD-enabled screens was $589 million ($337 million domestic, $252 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 fourth quarter of fiscal 2012.

  • Seven 3D films were released in the fourth quarter of fiscal 2013, compared to eight 3D films in the fourth quarter of fiscal 2012. These figures reflect the number of 3D films released domestically during the periods.

  • International markets generated 61% of license revenue and 29% of product and other revenue in the fourth quarter of fiscal 2013.

  • As of March 31, 2013, RealD had deployed approximately 22,700 RealD-enabled screens, an increase of 12% from approximately 20,200 screens as of March 23, 2012, and an increase of 500 screens (200 domestic, 300 international), or 2%, from approximately 22,200 screens as of December 31, 2012.

  • As of March 31, 2013, RealD had approximately 12,800 domestic screens at approximately 2,800 domestic theater locations and approximately 9,900 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.

Previously Announced Plan to Change Definition of Adjusted EBITDA, a Non-GAAP Measure, Beginning in FY 2014

As previously announced, 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 RealD's expanded credit facility. As a result, for future reporting periods, RealD no longer intends to add back sales and use tax and property tax to calculate Adjusted EBITDA for financial reporting purposes.

3D Theatrical Release Schedule for Fiscal 2014

(As of June 6, 2013 - Domestic)

Fiscal Q1 2014

Film

Domestic Release Date

(ending 6/30/13)

Jurassic Park (re-release)

4/5/2013

Iron Man 3

5/3/2013

The Great Gatsby

5/10/2013

Star Trek Into Darkness

5/16/2013

Epic

5/24/2013

Man of Steel

6/14/2013

World War Z

6/21/2013

Monsters University

6/21/2013

Fiscal Q2 2014

Film

Domestic Release Date

(ending 9/30/13)

Despicable Me 2

7/3/2013

Pacific Rim

7/12/2013

Turbo

7/17/2013

R.I.P.D.

7/19/2013

The Wolverine

7/26/2013

The Smurfs 2

7/31/2013

Percy Jackson: Sea of Monsters

8/7/2013

Planes

8/9/2013

One Direction: This Is Us

8/30/2013

Battle of the Year: The Dream Team

9/13/2013

Cloudy With a Chance of Meatballs 2

9/27/2013

Fiscal Q3 2014

Film

Domestic Release Date

(ending 12/31/13)

Sin City: A Dame to Die For

10/4/2013

Gravity

10/4/2013

Metallica: Through the Never

10/4/2013

The Seventh Son

10/18/2013

Free Birds

11/1/2013

Thor: The Dark World

11/8/2013

Frozen

11/27/2013

Postman Pat: The Movie - You Know You're the One

11/27/2013

The Hobbit: The Desolation of Smaug

12/13/2013

Walking With Dinosaurs

12/20/2013

47 Ronin

12/25/2013

Fiscal Q4 2014

Film

Domestic Release Date

(ending 3/31/14)

The Nut Job

1/17/2014

I, Frankenstein

1/24/2014

The Lego Movie

2/7/2014

Pompeii

2/28/2014

Mr. Peabody and Sherman

3/7/2014

300: Rise of an Empire

3/7/2014

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 fourth quarter of fiscal 2013, beginning at 4:30 pm ET (1:30 pm PT), today, June 6, 2013. 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 73037700.

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 73037700.

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 and acceptance for our technologies; 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 ability to generate revenue from the licensing of RealD's 3D technologies for use in 3D-enabled display devices; 3D motion picture releases and conversions scheduled for fiscal 2014 ending March 31, 2014 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 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, which may increase in future periods; market and industry trends, including growth in 3D content; our plans, strategies and expected opportunities; the deployment of and demand for our products and products incorporating our technologies; RealD's projected operating results; and competitive pressures in domestic and international cinema markets impacting license and product revenues.

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 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 23, 2012, RealD's Quarterly Report on Form 10-Q for the third fiscal quarter ended December 31, 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 and free cash flow as supplemental measures of its performance. RealD 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 RealD's core operating performance. 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. 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 RealD's 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, content producers and distributors to enable the delivery and viewing of 3D content on a variety of visual displays and devices.

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.

© 2013 RealD Inc. All Rights Reserved.

RealD Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three months ended

Year ended

March 31,

March 23,

March 31,

March 23,

2013

2012

2013

2012

Revenue:

License

$

31,253

$

31,655

$

137,752

$

147,801

Product and other

14,196

18,392

77,800

98,827

Total revenue

45,449

50,047

215,552

246,628

Cost of revenue:

License

12,424

9,480

47,243

39,801

Product and other

12,751

13,672

78,117

78,137

Total cost of revenue

25,175

23,152

125,360

117,938

Gross profit

20,274

26,895

90,192

128,690

Operating expenses:

Research and development

4,588

3,764

19,454

16,500

Selling and marketing

6,394

7,423

25,266

27,682

General and administrative

12,033

12,454

47,830

42,189

Total operating expenses

23,015

23,641

92,550

86,371

Operating income (loss)

(2,741

)

3,254

(2,358

)

42,319

Interest expense

(456

)

(261

)

(1,483

)

(971

)

Other income (loss)

(425

)

625

(982

)

782

Income (loss) before income taxes

(3,622

)

3,618

(4,823

)

42,130

Income tax expense (benefit)

822

(2,065

)

5,064

5,105

Net income (loss)

(4,444

)

5,683

(9,887

)

37,025

Net (income) loss attributable to noncontrolling interest

108

(147

)

197

(156

)

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

$

(4,336

)

$

5,536

$

(9,690

)

$

36,869

Earnings (loss) per common share:

Basic

$

(0.09

)

$

0.10

$

(0.20

)

$

0.68

Diluted

$

(0.09

)

$

0.10

$

(0.20

)

$

0.65

Shares used in computing earnings per common share:

Basic

49,792

54,587

52,345

54,352

Diluted

49,792

56,468

52,345

56,852

RealD Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)

March 31,

March 23,

2013

2012

Assets

Current assets:

Cash and cash equivalents

$

31,020

$

24,894

Accounts receivable, net

45,472

59,212