[February 01, 2016]

RealD Inc. Reports Third Quarter Fiscal Year 2016 Financial Results

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)

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.

(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."

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