The Street’s impressed: RealD’s share price is up about 20% in after-market trading. Investors already knew that things were tough for the 3D technology company in the quarter that ended in September. It said early this month that it will lay off about 20% of its staff. Also, last quarter about 57% of the domestic 3D box office came from animated movies which usually have lower-than-average ticket prices. But bad as the business was, it wasn’t as bad as investors expected. The company says it lost $4.66M, 10.2% worse than the period last year, on revenues of $43.9M, -20.1%. The top line was a little better than the $43.0M that analysts expected. But the net loss of 9 cents a share beat the consensus forecast of a 19 cent loss. The number of RealD screens was up 13% from last year to about 24,200, including 13,300 in domestic theaters. And the number of 3D films in the quarter, at 11, was up from last year’s nine. Even so, box office sales at RealD venues fell 17.9% to $582M. The company’s revenues included $31.0M from license fees (-11.4%) and $13M from products (-35.3%). The recent layoffs could result in a charge of as much as $4.9M, the company says, while it may take an additional $0.9M hit from losses on leases for facilities it no longer needs. RealD says it expects to save about $15M a year. It’s also upbeat about recent …
RealD ended up with a net loss, but the stock price is +5.2% after hours after the 3D technology company surprised the Street with help from its overseas expansion efforts. In the quarter that ended in March, RealD had a net loss of $4.4M, down from a $5.5M profit in the period last year, on revenues of $45.4M, -9.2%. The revenue figure topped forecasts of about $43M. And the net loss at 9 cents a share was better than the 19 cent loss analysts anticipated. The soft box office early this year contributed to the downturn. Domestic ticketbuyers spent $268M at RealD-enabled screens, -20.5%, though overseas sales were +37.3% to $346M. The company had 22,700 screens globally at the end of March, up 500 from the end of 2012. CEO Michael Lewis says that international expansion will continue to be a big part of RealD’s story this year. Its largest 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,” he says.
RealD Lowers Financial Guidance After Fiscal Q2 Earnings Miss Expectations, Announces Expansion Of Business In China
PREVIOUS: It wasn’t a horrible miss, but it comes off of expectations that were already pretty low for the 3D technology company. RealD reported a net loss of $4.2M, down from an $18.9M profit a year ago, on revenues of nearly $55M, -37.5%. Revenues beat the consensus forecast for $50.5M. But the loss of 8 cents a share contrasts with the Street’s expectation for a 7 cent loss. Investors may be even more concerned about the company’s lowered guidance for the remainder of fiscal 2013: It says that it has “moderated expectations for growth” that reflect “slower-than-anticipated growth in headcount” as well as a shift in timing for “certain initiatives.” CEO Michael Lewis says that the quarter that ended in September presented “a very challenging comparison versus last year’s second quarter that included exceptional contributions from Harry Potter and Transformers.” He also told analysts that the Olympics hurt. But the company isn’t leaving investors empty handed. RealD reduced its outlook for operating expenses to as much as $100M from its previous forecast of as much as $110M. That “should help profitability somewhat,” B. Riley & Co analyst Eric Wold says. RealD also says that it repurchased about 2.4M shares in Q2.
The stock is down more than 18% in after hours trading following the report for the period that ended in June. RealD generated net income of $2.9M, -68.7% vs the same quarter last year, on revenues of $68.2M, +14.5%. But analysts expected revenues of $70.4M. And earnings at five cents a share fell way short of the consensus forecast of 15 cents. CEO Michael Lewis says that the profit drop was “impacted by a $5.9M decline in our product gross profits” due to “a significantly reduced mix of recycled eyewear shipped to RealD-equipped theaters during the quarter.” The company says that doesn’t affect its growth prospects. At the end of the quarter there were about 20,700 RealD-enabled screens, up 18% from a year ago. Lewis says that RealD “will generate strong cash flows during fiscal 2013 as our spending on capital expenditures moderates.” The company says that revenues will decline in the current quarter vs last year which included mega-hits Warner Bros’ Harry Potter And The Deathly Hallows Part 2 and Paramount’s Transformers: Dark Of The Moon.
Shares are up slightly in after market trading as the 3D technology company served up results that it sees as a win for the quarter that ended in March. It reported net income of $5.5M, up 32% vs the same period last year, on revenues of $50.0M, down 14.5%. The revenue decline is partly due to an $8.1M drop in international product revenue which the company says reflects how overseas movie goers are re-using their RealD 3D glasses. Still, revenues beat analysts’ predictions of $46.2M. And profits, at 10 cents a share, were well ahead of forecasts for a 7 cent loss. It was helped, though, by a $2.1M income tax benefit — which equals about 4 cents a share. The company says it made 49% of its licensing revenue from overseas vs 64% last year, which benefited from titles including Tangled, Chronicles of Narnia, Tron Legacy, Megamind, and Gulliver’s Travels. In addition to the financial results, RealD says that it plans to repurchase $50M of its stock. Also the company announced a deal with China’s HNA Vigor Film Investment to install its 3D technology at 500 screens. Looking forward, CEO Michael Lews says that “the record-setting opening of The Avengers further demonstrates the strong consumer demand for premium presentations in RealD 3D as well as the compelling economics of 3D film making for our studio and exhibitor partners.”
Shares popped about 9% in after hours trading following the 3D technology company’s end of year earnings report that, while not pretty, at least delivered more than the Street expected. In the last three months of 2011 RealD generated $2.8M in net income, up from a $16.8M loss in the period last year, on revenues of $49M, down 15.2%. Analysts anticipated revenues of $42.3M. Earnings, at five cents a share, were well above the five cent loss that company followers forecast. Some of the revenue decline is due to a drop in sales of 3D glasses overseas as people returned to theaters “with RealD eyewear purchased at a previous RealD showing,” the company says. But cost cutting was the order of the day as CEO Michael Lewis says the company dealt with “a relatively muted 3D film slate” that included DreamWorks Animation’s Puss In Boots And Paramount’s Hugo. The company says there were 19,700 RealD-enabled screens at year end, up 74% from a year ago. The total includes 11,500 domestic screens. Lewis says that he’s “excited about the promising slate of 3D films in our fiscal 2013 that begins on March 24, 2012, as well as continued expansion within international markets.”
The after-hours trades gave up the 9.5% gain in RealD shares on Wednesday before the market closed. And the strange thing is that earnings for fiscal 2Q were way ahead of forecasts: The 3D movie technology company had net income of $19.2M, up from a $4.2M loss in the period last year, on revenues of $88M, up 34.7%. The earnings, at 33 cents a share, compare to the Street’s forecast of 22 cents. But investors also expected revenues to come in at $94.4M. Fiscal 3Q could be worse: RealD says that only eight 3D films will be out in the quarter vs nine last year, including six that had domestic box office sales of more than $100M. Samsung’s decision not to make LCD screens for RealD’s 3D TV technology could be a big blow to its home entertainment ambitions. CEO Michael Lewis says that RealD now is ”pursuing other potential partners.” Samsung ”had a recent management change, reviewed all their projects and decided not to go forward with the RealD technology at the moment,” Lewis said. “We’re still bullish on the technology… despite the headwinds we encountered recently.”
RealD isn’t taking sides in the fight between Sony and exhibitors over who should pay for 3D glasses. “We are confident that the industry will reach a resolution” that benefits everyone, Lewis says. Meanwhile he defended RealD’s technology, saying that it offered “twice the brightness of our competitors.” He says that some studios including DreamWorks Animation and Relativity are …
Now that Big Media’s 2Q earnings season is over, the big question on Wall Street is: Did it give us any insight into the future? CEOs’ cheery talk about strong ad sales in TV’s upfront market, the expected bump next year from political ads, and the revenues coming in from online streaming services may be irrelevant if the economy sinks into a deep, new recession. CEOs say they see no evidence of trouble yet. The industry’s leading cheerleader, CBS chief Les Moonves, channeled his inner Buzz Lightyear last week saying that he has “every reason to believe that we will deliver strong results throughout the rest of the year, into 2012 and beyond.” Investors still sliced 6.3% off of CBS’ market value. The Dow Jones U.S. Media Index is down about 16% in the last month as traders anticipate cuts in ad spending, ticket buying, subscriptions — the works. If the pessimists are right, then the race is on: Which company will be the first to change its message from “people will buy media because they have cash” to “people will buy media because it helps them to forget their problems”?
Here are other themes from the latest earnings reports:
Jobs: Media companies still aren’t hiring. No one said that so baldly, but it’s there between the lines: CEOs talked more about financial engineering – cutting costs and returning cash to shareholders – than about spending to become more competitive. Time Warner recorded $24M in layoff-related expenses, quadruple the amount from the same quarter last year, while Viacom spent $14M, up from zero last year. Yet virtually every media company is repurchasing shares or increasing its dividend. The message? CEOs can’t persuade investors that the companies know how to make a decent profit from their cash, and shareholders want it back.
Pay TV: This was “the weakest (quarter) in the industry’s history,” says Bernstein Research’s Craig Moffett. Analysts were startled to see the largest cable, satellite, and telco companies collectively lose about 195,000 video customers. The cord cutters don’t fit the stereotype of well-to-do technophiles. Moffett says that “all the evidence” shows that a growing number of people – especially young adults — simply can’t afford pay TV. Dish Network seemed to confirm that thesis by saying that it will shift its marketing focus to upscale consumers instead of bargain hunters. With the U.S. market stalled, it’s easy to see why cable programmers want investors to look at their expansion efforts in growing markets overseas such as India, Russia, China, and Brazil. “It is the current momentum and potential of our international assets that present a meaningful, unique opportunity for us,” Discovery Communications CEO David Zaslav told analysts.
UPDATE: RealD Shares -14.5% In After-Hours Trading Even As CEO Michael Lewis Talks Up Prospects For 3D
UPDATE, 3:05 PM: The Street doesn’t seem to be buying CEO Michael Lewis’ claim that all’s well with RealD and 3D. RealD shares have lost 47.3% of their value from May 19, when co-founder Joshua Greer resigned as president, to the end of trading on Thursday. The stock will have its lowest closing ever tomorrow if it doesn’t improve from today’s after-hours trading price of around $15.75. Although Lewis says that “the economy’s under duress” causing consumers to second-guess the high 3D ticket prices, RealD will be fine if exhibitors and studios decide to charge less. “Our fees are locked for the term of the contract,” he says. He avoided answering a question about whether 3D tickets will typically account for between 40% and 60% of domestic box office — in June he said he didn’t see a trend when Disney’s Pirates of the Caribbean: On Stranger Tides and DreamWorks Animation’s Kung Fu Panda 2 opened close to that range. Lewis did say, though, that the numbers could improve as theaters have additional 3D screens and releases don’t open “on top of each other.”
PREVIOUS, 1:18 PM: The leading provider of 3D projection technology reported net profits in the June quarter of $9.4M, down 4.6% vs the same period last year, on revenues of $59.6M, down 7.7%. Earnings at 17 cents a share far exceeded the 4 cents that Wall Street analysts expected. But they also thought that RealD would end its fiscal 1Q with $78.9M in revenues.
UPDATE, 3:30 PM: Things were fine for RealD, until executives started talking. The company’s stock price initially jumped in after-hours trading following a surprisingly strong earnings report. That would be a welcome change for the company whose stock value has dropped more than 29% since mid-May. But investor sentiment quickly changed about mid-way through CEO Michael Lewis’ briefing where he scoffed at the notion that consumers are fed up with paying higher ticket prices for 3D. The stock price fell to 7.4% below Thursday’s $24.07 closing price. “I don’t think that two films a trend makes,” Lewis said referring specifically to the disappointing 3D sales for Disney’s Pirates Of The Caribbean: On Stranger Tides and DreamWorks Animation’s Kung Fu Panda 2. “I don’t see a trend. It’s a trend until the trend changes to something else.” He added that results for 3D films this year “will be all over the place, but the end result will be a good one.” RealD is especially optimistic about the performance of its screens outside the U.S. The international venues account for 49% of RealD’s locations, but 55% of its gross revenues. Lewis didn’t directly answer a question about whether weakening 3D sales in the U.S. might be an early warning of what will happen overseas.