RealDThe new 3D

About RealD

The company licenses 3D technologies to various clients

Largest 3D theater companyMakes the projectors and glasses

Founded in 2003

Market Cap: $1 Billion

NYSE

IPO

Went Public July 16th 2010

Issued stock to pay off some debt

Raised more money then expectedShares priced at $16/share

Opened at $19.55/share

Quarterly release due today Nov. 2nd

3D Industry

“3D theatrical releases have been the single largest driver for theaters who have installed digital screens over the past year, with 80% growth rate” (Galas)

“3D is the future of movies” (Time Magazine)

Attendance in 3D movies is up and 2D movies is down

More theaters switching to 3D

Avatar earned over $2.7 billionAvatar 2 and 3 are in the making

Jackass 3D earned $50 million opening weekend

http://www.filmofilia.com/wp-content/uploads/2010/03/international-3d.jpg

Market Saturation

RealD has 1,972 theaters in U.S.

Roughly 3,000 theaters in U.S.

Only a few screens at each theater

Only 219 theaters in AsiaA lot of room for growth

Product Segments

CinemaProjectors

Exclusive agreement with Sony

Glasses

ProfessionalNASA

Helped pilot the Mars Rover

Design/Architecture

Government/Defense

Movie making tools

ResidentialComing 2012

Predicted Growth of 3D TVs

3D-Display-Info.com

Competitors

IMAX (IMAX)3D equipment is more expensive

3D screens are generally larger and do not fit into more theater screens

Dolby (DLB)Company focuses on sound technology not 3D

Does not have the history or experience that RealD does

As Reported Annual Income Statement Report Date 03/26/2010 03/27/2009 03/31/2008Scale Thousands Thousands Thousands

Total revenue 149,846 39,675 23,378

Total cost of revenue 140,603 27,107 13,500

Gross margin 9,243 12,568 9,878

Total operating expenses 43,470 27,864 26,483

Operating income (loss) (34,227) (15,296) (16,605)

Interest expense 1,730 949 1,257

Other income (loss) (1,112) 100 (7)Income (loss) before income taxes - domestic (41,405) (15,795) (17,869)Income (loss) before income taxes - foreign 4,336 (350) -Loss from continuing operations before income taxes (37,069) (16,145) (17,869)

Current state income taxes 78 50 20

Current foreign income taxes 2,538 143 -

Total current income taxes 2,616 193 20

Deferred federal income taxes - 26 -

Deferred foreign income taxes 64 - -

Income tax expense 2,680 219 20Income (loss) from continuing operations (39,749) (16,364) (17,889)

Loss from operations, net of tax - - (508)Loss on sale of discontinued operations, net of tax - - (11,288)

Discontinued operations, net of tax - - (11,796)

Net income (loss) (39,749) (16,364) (29,685)

As Reported Quarterly Income Statement Report Date 06/25/2010 06/26/2009

1st Quarter 1st Quarter

Currency USD USD

Scale Thousands Thousands

Total revenue 64,520 25,564

Total cost of revenue 46,618 22,701

Gross margin 17,902 2,863

Total operating expenses 13,314 9,033

Operating income (loss) 4,588 (6,170)

Interest expense 519 282

Other income (loss) 6,610 (10)Loss from continuing operations before income taxes 10,679 (6,462)

Income tax expense 827 527

Net income (loss) 9,852 (6,989)

Valuation

June 30th, 2010 June 30th, 2009

EBIT $4,588 -$6,170

Growth Rate 174%

Stock Price $22.09

Stock Price*Growth Rate $38.44

WACC 20%Growth Rate Discounted 8 Months $33.67

Conclusion

We own no stocks like this

A lot of room for growth in RealDHome Televisions

Asian Theaters

U.S. Theaters

Stock is undervalued

Suggestion= 225 shares @ MarketRoughly $4,700