RealD Considering ‘Strategic Alternatives’ Including a Sale

The company, which specializes in 3D technology, reports an $11.3 million loss in fiscal Q3

The board of directors at RealD Inc. has engaged Moelis & Company to help it consider “strategic alternatives” that include a potential sale, the company said Monday as it announced third quarter earnings.

RealD,  a leading provider of 3D technology and glasses for movies, reported an $11.3 million loss in its fiscal third quarter compared to a loss of $271,000 in the same quarter a year ago. Revenue fell to $32.6 million from $55.4 million a year earlier, and adjusted earnings were $49.6 million, compared to $51 million for the nine months ended Dec. 31, 2013.

“Over the past 18 months, we have undertaken a series of actions that have further optimized our platform, driven significant reductions in our operating expenditures and enhanced our financial performance,” said Michael V. Lewis, chairman and chief executive at RealD.

RealD, which is based in Beverly Hills, in December announced plans for an $11.5 million reduction in operating expenses for fiscal year 2016 to $74 million to $76 million. Capital expenditures are expected to be $13 million to $15 million, a $4.5 million reduction from 2015’s guidance.

“While the operational and financial actions we have taken thus far are beginning to show results, we believe that a full review of strategic alternatives will allow us to determine the best path forward for RealD and our shareholders,” Lewis continued.

The timing may be right for  sale, but it won’t be an easy decision, as analysts are bullish.

RealD rejected an offer in November from activist investor Starboard Value, which was willing to pay $12 a share to take RealD private. That was when RealD stock was trading at $11.61. On Monday, shares closed at $11.03.

“The strong lineup of 3D films should drive an 18 percent increase in 3D box office for RealD during 2015,” B. Riley analyst Eric Wold said Monday. He also set a $16 price target for shares in the company, which has a $564 million market cap.

RealD received more good news last week, when Lionsgate Entertainment said it would release a 3D version of “The Hunger Games: Mockingjay – Part 2” on Nov. 20 using RealD’s system.

RealD is the leading 3D cinema platform worldwide, with more than 26,000 screens. Deep-pocked Asian interests would be possible suitors, as consumer demand and theater counts are growing steadily in many markets in that region.  In 2012, China’s largest entertainment concern, the Wanda Group, agreed to buy AMC Entertainment Holdings Inc. for $2.6 billion.