RealD Inc. Reports Third Quarter Fiscal 2011 Financial Results

LOS ANGELES--()--RealD Inc. (NYSE: RLD), a leading global licensor of 3D technologies, today announced the Company's financial results for the three and nine months ended December 24, 2010.

Third Quarter Fiscal 2011 Results

For the third quarter of fiscal 2011, RealD reported net revenue of $57.8 million, compared to $30.2 million for the third quarter of fiscal 2010, an increase of 91 percent.

GAAP net loss attributable to common stockholders for the third quarter of fiscal 2011 was $16.6 million, or $0.34 per diluted share, compared to a GAAP net loss attributable to common stockholders of $15.1 million, or $0.61 per diluted share, for the third quarter of fiscal 2010. Excluding the impact of motion picture exhibitor option expense of $22.0 million and $11.8 million respectively, non-GAAP net income attributable to common stockholders for the third quarter of fiscal 2011 was $5.4 million, compared to a non-GAAP net loss attributable to common stockholders of $3.3 million for the third quarter of fiscal 2010. Non-GAAP net income (loss) attributable to common stockholders is defined below and reconciled to net loss attributable to common stockholders, the most comparable measure under GAAP, in the section entitled “Use of non-GAAP financial measures.”

Adjusted EBITDA for the third quarter of fiscal 2011 was $16.9 million, compared to $5.4 million for the third quarter of fiscal 2010, an increase of 213 percent. Adjusted EBITDA, which is a non-GAAP financial measure, is defined below and reconciled to net income (loss), the most comparable measure under GAAP, in the section entitled “Use of non-GAAP financial measures.”

As of December 24, 2010, the Company had deployed approximately 11,300 RealD-enabled screens, comprised of 6,900 domestic (United States and Canada) RealD-enabled screens and 4,400 international RealD-enabled screens, and representing an increase of 163% from 4,300 screens at December 25, 2009 and an increase of 22% from approximately 9,300 screens at September 24, 2010.

At December 24, 2010, the Company had total cash and cash equivalents of $35.5 million.

Management Comments

“We are pleased that the third quarter marked a continuation of the strong performance we delivered in the first half of fiscal 2011,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD. “Driven by an increasing 3D film slate and growing consumer demand for an immersive 3D visual experience, the 3D box office continued to expand in the third quarter of fiscal 2011. Our ability to garner over an estimated 80% of the domestic 3D box office and, we believe, an increasing share of the international 3D box office, serves as a testament to the superior technology and value proposition that RealD delivers to exhibitors. We look forward to enabling the continued growth of 3D cinema through the ongoing worldwide deployment of our premium RealD 3D cinema systems which deliver a distinctive and immersive 3D visual experience to consumers.”

First Nine Months Fiscal 2011 Results

For the nine months ended December 24, 2010, RealD reported net revenue of $187.6 million, compared to $94.4 million for the nine months ended December 25, 2009, an increase of 99 percent.

GAAP net loss attributable to common stockholders for the nine months ended December 24, 2010 was $16.8 million, or $0.43 per diluted share, compared to a GAAP net loss attributable to common stockholders of $30.4 million, or $1.24 per diluted share, for the nine months ended December 25, 2009. Excluding the impact of motion picture exhibitor option expense of $34.0 million and $18.0 million respectively, non-GAAP net income attributable to common stockholders for the nine months ended December 24, 2010 was $17.3 million, compared to a non-GAAP net loss attributable to common stockholders of $12.4 million for the nine months ended December 25, 2009.

Adjusted EBITDA for the nine months ended December 24, 2010 was $44.4 million, compared to $11.5 million for the nine months ended December 25, 2009, an increase of 285 percent.

Second Half Fiscal 2011 & First Half Fiscal 2012 3D Theatrical Release Schedule

(As of February 3, 2011)

         

Fiscal Q3 2011

 

Film

 

Release Date

My Soul To Take 10/8/2010
Jackass 3D 10/15/2010
Saw VII 10/29/2010
Megamind 11/5/2010
Tangled (Rapunzel) 11/24/2010
The Chronicles of Narnia: Voyage of the Dawn Treader 3D 12/10/2010
Tron: Legacy 3D 12/17/2010
Yogi Bear 12/17/2010
Gulliver's Travels 12/22/2010
 

Fiscal Q4 2011

Film

Release Date

The Green Hornet 3D 1/14/2011
James Cameron Presents Sanctum 3D 2/4/2011
Gnomeo & Juliet 2/11/2011
Justin Bieber’s Never Say Never 3D 2/11/2011
Drive Angry 2/25/2011
Mars Needs Moms 3D 3/11/2011
 

Fiscal Q1 2012

Film

Release Date

Rio 4/15/2011
Thor 5/6/2011
Friday the 13th 3D 5/13/2011
Priest 3D 5/13/2011
Pirates of the Caribbean: On Stranger Tides 5/20/2011
Kung Fu Panda: The Kaboom Of Doom 5/26/2011
Green Lantern 6/17/2011
Cars 2 6/24/2011
 

Fiscal Q2 2012

Film

Release Date

Transformers: Dark Of the Moon 3D 7/1/2011
Harry Potter: Deathly Hallows Part II 7/15/2011
Smurfs 3D 8/3/2011
The Darkest Hour 3D 8/5/2011
Friday Night 3D 8/19/2011
Spy Kids 4: Armageddon 3D 8/19/2011
Conan 3D 8/19/2011
Final Destination 5 3D 8/26/2011
Untitled 3D Shark Thriller 9/2/2011
Piranha 3DD 9/16/2011
Dolphin Tale 3D 9/16/2011
    Journey 2: The Mysterious Island   9/23/2011

Source: Rentrak

Conference call information

Members of RealD management will host a conference call to discuss its third quarter fiscal 2011 financial results beginning at 4:30 pm ET (1:30 pm PT), today, February 3, 2011. The conference will be broadcast live over the Internet, hosted at the Investor Relations section of the company's website at www.reald.com, and will be archived online upon completion of the call.

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 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 2010 and 2011; our ability to supply our solutions to our customers on a timely basis; the progress, timing and amount of expenses associated with RealD's research and development activities; market and industry trends, including growth in 3D content; and RealD's projected operating results. 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 quarterly report on Form 10-Q for the three and nine months ended December 24, 2010 includes a more detailed discussion of the risks and uncertainties that may cause that could 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 non-GAAP net income attributable to common stockholders and Adjusted EBITDA as supplemental measures of its performance. The company defines non-GAAP net income attributable to common stockholders as net income attributable to common stockholders excluding the impact of motion picture exhibitor option expense. The company defines Adjusted EBITDA as net income (loss), plus net interest expense, income 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 indicative of the company’s core operating performance.

RealD presents non-GAAP net income attributable to common stockholders and 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; in communications with its Board of Directors concerning financial performance; and as part of the company’s credit agreement in which Adjusted EBITDA is used to measure compliance with certain covenants.

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, RealD Format and gaming technologies to consumer electronics manufacturers and content producers and distributors to enable the delivery and viewing of 3D content. RealD's cutting-edge 3D 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.

© 2011 RealD Inc. All Rights Reserved.

RealD Inc.
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 
  Three months ended   Nine months ended
December 24,   December 25, December 24,   December 25,
    2010 2009 2010 2009
 
Revenue:
License $ 18,838 $ 4,269 $ 68,390 $ 25,993
Product and other   38,942     25,926     119,232     68,449  
Total revenue 57,780 30,195 187,622 94,442
Cost of revenue:
License 5,301 2,587 11,660 7,099
Product and other   46,341     29,040     138,099     77,586  
Total cost of revenue 51,642 31,627 149,759 84,685
Gross margin 6,138 (1,432 ) 37,863 9,757
Operating expenses:
Research and development 4,347 2,322 10,751 7,327
Selling and marketing 5,813 3,342 15,251 11,123
General and administrative   10,596     3,920     25,195     9,870  
Total operating expenses   20,756     9,584     51,197     28,320  
Operating loss (14,618 ) (11,016 ) (13,334 ) (18,563 )
Interest expense (71 ) (575 ) (873 ) (1,149 )
Other income (loss)   (431 )   (210 )   6,376     (670 )
Loss before income taxes (15,120 ) (11,801 ) (7,831 ) (20,382 )
Income tax expense   1,648     478     3,299     1,431  
Net loss (16,768 ) (12,279 ) (11,130 ) (21,813 )

Net (income) loss attributable to noncontrolling interest

181 261 (692 ) 726
Accretion of preferred stock   -     (3,093 )   (4,934 )   (9,278 )

Net loss attributable to RealD Inc. common stockholders

$ (16,587 ) $ (15,111 ) $ (16,756 ) $ (30,365 )
 
Loss per common share:
Basic and diluted $ (0.34 ) $ (0.61 ) $ (0.43 ) $ (1.24 )
 
Shares used in computing earnings per common share:
Basic and diluted 48,760 24,607 38,689 24,454
                 
 
RealD Inc.
Consolidated Balance Sheets
(In thousands)
 
 
  December 24,   March 26,
    2010 2010
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 35,472 $ 13,134
Accounts receivable, net 59,258 51,184
Inventories 43,076 6,539
Deferred costs – eyewear 1,571 1,842
Deferred income taxes 4,349 4,349
Prepaid expenses and other current assets   4,913     1,128  
Total current assets 148,639 78,176
Property and equipment, net 5,520 2,558
Cinema systems, net 95,254 40,623
Digital projectors, net-held for sale 10,809 25,521
Goodwill 10,657 10,657
Other intangibles, net 1,963 2,024
Other assets   184     2,587  
Total assets $ 273,026   $ 162,146  

Liabilities, redeemable convertible preferred stock and equity (deficit)

Current liabilities:
Accounts payable $ 57,055 $ 37,625
Accrued expenses and other liabilities 38,813 24,608
Deferred revenue 16,590 19,430
Credit facility agreement 20,066
Income taxes payable 1,420 1,254
Current portion of long-term debt   2,430     9,299  
Total current liabilities 116,308 112,282
Deferred revenue, net of current portion 15,098 14,144
Virtual print fee liability and customer deposits 4,533 8,331
Long-term debt, net of current portion 486 2,031
Deferred tax liability 4,413 4,413
Commitments and contingencies
Series C mandatorily redeemable convertible preferred stock, 62,831
Equity (deficit)
Series A redeemable convertible preferred stock 1,978
Series B redeemable convertible preferred stock 2,970
Series D redeemable convertible preferred stock 19,952
Common stock 284,297 68,371
Accumulated deficit   (154,047 )   (137,291 )
Total RealD Inc. stockholders’ equity (deficit) 130,250 (44,020 )
Noncontrolling interest   1,938     2,134  
Total equity (deficit)   132,188       (41,886 )

Total liabilities, mandatorily redeemable convertible preferred stock and equity (deficit)

$ 273,026   $ 162,146  
                 
 
RealD Inc.
Schedule of Non-GAAP Reconciliations
(In thousands)
(Unaudited)
 

Reconciliation of Net Loss to Adjusted EBITDA

 
  Three months ended   Nine months ended
December 24,   December 25, December 24,   December 25,
(in thousands)   2010   2009 2010   2009
 
Net loss $ (16,768 )   $ (12,279 ) $ (11,130 )   $ (21,813 )
Add (deduct):
Interest expense 71 575 873 1,149
Income tax expense 1,648 478 3,299 1,431
Depreciation and amortization 4,384 2,010 10,428 5,387
Other (income) loss (1) 431 210 (6,376 ) 670
Share-based compensation expense (2) 2,980 763 5,988 2,230
Exhibitor option expense (3) 21,960 11,794 34,008 17,966
Impairment of assets and intangibles (4) 519 115 814 408
Sales and use tax (5) 1,291 1,470 5,443 3,323
Property tax (6) 392 174 839 494
Management fee (7)   -       87     175       263  
Adjusted EBITDA   $ 16,908     $ 5,397     $ 44,361     $ 11,508  
 
 

(1) Includes amortization of debt issue costs, unrealized foreign currency exchange gains and losses and gain of $6.7 million from the sale of digital projectors in the nine month period ended December 24, 2010.

 

(2) Represents share-based compensation expense of nonstatutory and incentive stock options and restricted stock units to employees, officers, directors and consultants.

 

(3) Represents stock options granted to some of our motion picture exhibitor licensees. The amounts are recorded as contra revenue in the condensed consolidated financial statements.

 

(4) Represents impairment of long-lived assets, such as fixed assets, theatrical equipment and identifiable intangibles.

 

(5) Represents taxes incurred by us for cinema license and product revenue.

 

(6) Represents property taxes on RealD Cinema Systems and digital projectors.

 

(7) Represents payment of management fees to our Series C mandatorily redeemable convertible preferred stockholder (included in general and administrative expense, which was terminated upon the completion of our initial public offering).

 

 

Reconciliation of Net Loss Attributable to Common Stockholders to
Non-GAAP Net Income (Loss) Attributable to Common Stockholders
(In thousands)
(Unaudited)

 

 

Three months ended

Nine months ended
December 24, December 25, December 24, December 25,
(in thousands):   2010 2009 2010 2009
Net loss attributable to common stockholders:

$

(16,587

)

$

(15,111

)

$ (16,756 ) $ (30,365 )
Adjustment:
Exhibitor option expense  

21,960

   

11,794

    34,008     17,966  

Non-GAAP net income (loss) attributable to common stockholders:

 

$

5,373

   

$

(3,317

)

  $ 17,252     $ (12,399 )

Contacts

Addo Communications
Andrew Greenebaum / Laura Foster
310-829-5400
andrewg@addocommunications.com / lauraf@addocommunications.com

Contacts

Addo Communications
Andrew Greenebaum / Laura Foster
310-829-5400
andrewg@addocommunications.com / lauraf@addocommunications.com