Reports Profitable Year With Fiscal 2011 Revenues up 66% to $125 Million
Zumba(R) Fitness 2 Surpasses 1 Million Units Worldwide
Zumba(R) Fitness Franchise Surpasses 6 Million Units Worldwide
EDISON, NJ--(Marketwire - Jan 17, 2012) - Majesco Entertainment Company (
For the fourth quarter ended October 31, 2011, Majesco's net revenues were $25.1 million, up 8 percent versus $23.4 million in the same period a year ago. During the fourth quarter of 2011, the Company reported an operating loss of $3.0 million, compared to an operating loss of $1.3 million in the fourth quarter of 2010. Net loss for the quarter was $3.9 million versus a net loss of $1.5 million in 2010. Net loss for the quarter included a loss on impairment of software development costs and license fees of $2.7 million, related to games for which, in management's estimation, future cash flows will not be sufficient to recover previously capitalized costs. On a non-GAAP basis, net loss for the quarter was $2.7 million compared to a non-GAAP net loss of $1.5 million last year. Please refer to the Reconciliation of GAAP to Non-GAAP Financial Measures table included later in this release for additional information and details on non-GAAP items.
The Company's basic and diluted net loss per share for the quarter ended October 31, 2011 was $0.10, compared to a basic and diluted net loss per share of $0.04 in the same period last year. Non-GAAP diluted net loss per share for the quarter ended October 31, 2011 was $0.07 compared to a net loss per share of $0.04 last year. Please refer to the Reconciliation of GAAP to Non-GAAP Financial Measures table included later in this release for additional information and details on non-GAAP items.
For the twelve months ended October 31, 2011, the Company's net revenues increased 66 percent to $125.3 million versus the year ago period. The Company reported operating income of $11.4 million compared to an operating loss of $2.1 million in the same 2010 period. Non-GAAP operating income for the twelve month period was $12.8 million compared to non-GAAP operating loss of $0.3 million for the comparable 2010 period. In the twelve months ended October 31, 2011, net income was $6.8 million compared to a net loss of $1.0 million for the twelve months ended October 31, 2010. For the same period, non-GAAP net income was $11.1 million this year compared to a non-GAAP net loss of $1.3 million in 2010.
The Company's basic and diluted earnings per share for the twelve months ended October 31, 2011 were $0.18 and $0.17, respectively, while basic and diluted net loss per share was $0.03 for the corresponding period in 2010. The Company's non-GAAP diluted earnings per share for the twelve months ended October 31, 2011 were $0.28 compared to a diluted non-GAAP net loss per share of $0.04 in the corresponding 2010 period.
Jesse Sutton, Chief Executive Officer of Majesco, said, "In 2011, we experienced the successful launch of a brand new franchise for Majesco; Zumba Fitness has quickly become the fastest selling title in the company's history and the world's #1 fitness title of 2011. We grew revenues over 65% in 2011, expanded gross margins by over 1200 basis points, and delivered significant profits to the bottom line. Zumba Fitness has taken the fitness category by storm, selling over 4 million units worldwide in its first 12 months, and topping the charts as the #1 fitness title of the year in the US and UK. Finally, we are also excited about our digital initiatives -- we learned a great deal in 2011, made a strategic acquisition of Quick Hit, and plan to apply this knowledge to a robust 2012 slate of social and mobile titles."
Fiscal 2011 Highlights
Other Highlights
Announced Product Line-up
First Quarter Fiscal 2012 Ending January 31, 2012
To date, the Company has announced the following titles that were, or are expected to be, released during its fiscal first quarter 2012, which includes the recent holiday sales period:
Fiscal 2012
To date, the Company has announced the following titles that are expected to be released during the rest of fiscal 2012:
Fiscal 2012 Outlook
The Company expects fiscal 2012 full year net revenue in a range of $125 to $140 million, and non-GAAP earnings per share of $0.25 to $0.35. This outlook is based on an estimated fully diluted share count of approximately 41.5 million, and assumes non-cash compensation of approximately $0.05 to $0.07 per share for fiscal 2012. The Company has not provided a reconciliation of forward-looking GAAP and Non-GAAP financial measures due to the potential effects that changes in its stock price may have on the fair value of outstanding warrants.
Conference Call
At 4:30 p.m. (EST) today, management will host an earnings conference call. To access the call in the U.S., please dial 1-800-860-2442. Please dial in approximately 10 minutes prior to the start of the conference call. The conference call will also be broadcast live over the Internet and available for replay for 90 days from the "Investor Info" section of the Company's website at http://www.majescoentertainment.com. In addition, a replay of the call will be available via telephone for seven days beginning approximately two hours after the call. To listen to the telephone replay in the U.S., please dial 1-877-344-7529 and for international callers, dial 1-412-317-0088. Enter access code 10008616.
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and twelve months ended October 31, 2011 and 2010, the Company has presented both GAAP and non-GAAP financial results. GAAP financial measures, including operating income, net income, and basic and diluted earnings per share, have been adjusted to report certain non-GAAP financial measures.
These non-GAAP financial measures exclude the following items from the Company's consolidated statements of operations:
These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and the Company's prospects for the future. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
For more information on these non-GAAP financial measures, please see the tables in this release captioned "Reconciliation of GAAP and Non-GAAP Financial Measures."
About Majesco Entertainment Company
Majesco Entertainment Company is a provider of video games for the mass market. Building on more than 20 years of operating history, the company is focused on developing and publishing a wide range of casual and family oriented video games on all leading console and handheld platforms as well as online, social networks and mobile devices. Product highlights include Zumba® Fitness, Cooking Mama™, Alvin and the Chipmunks, and Hulk Hogan's Main Event. The company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. Majesco is headquartered in Edison, NJ with offices in San Francisco, CA, Bristol, UK, and a social games development studio in Foxboro, MA. More info can be found online at www.majescoentertainment.com or on Twitter at www.twitter.com/majesco.
Safe Harbor
Some statements set forth in this release, including the estimates under the headings "Fiscal 2012 Outlook" contain forward-looking statements that are subject to change. Statements including words such as "anticipate," "believe," "estimate" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Some of the factors which could cause our results to differ materially from our expectations include the following: consumer demand for our products, the consumer demand for videogame consoles and related hardware; our ability to predict consumer preferences among competing hardware platforms; consumer spending trends; the seasonal and cyclical nature of the interactive game segment; timely development and release of our products; competition in the interactive entertainment industry; developments in the law regarding protection of our products; our ability to secure licenses to valuable entertainment properties on favorable terms; our ability to manage expenses; our ability to attract and retain key personnel; adoption of new accounting regulations and standards; adverse changes in the securities markets; our ability to comply with continued listing requirements of the Nasdaq stock exchange; the availability of and costs associated with sources of liquidity; and other factors described in our filings with the SEC. The Company does not undertake, and specifically disclaims any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | |||||||||||||||||||||||
UNAUDITED SUPPLEMENTARY PRODUCT DATA | |||||||||||||||||||||||
NET SALES BY PLATFORM FOR THREE AND TWELVE MONTHS | |||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||
Three Months Ended October 31, | Twelve Months Ended October 31, | ||||||||||||||||||||||
2011 | % | 2010 | % | 2011 | % | 2010 | % | ||||||||||||||||
Nintendo Wii | $ | 13,415 | 53 | % | $ | 8,358 | 36 | % | $ | 73,441 | 59 | % | $ | 23,633 | 31 | % | |||||||
Nintendo DS | 7,569 | 30 | % | 13,383 | 58 | % | 22,179 | 18 | % | 48,779 | 65 | % | |||||||||||
Microsoft Xbox 360 | 2,901 | 12 | % | 1,250 | 5 | % | 23,166 | 18 | % | 1,645 | 2 | % | |||||||||||
Sony PlayStation 3 | 232 | 1 | % | - | - | % | 4,479 | 3 | % | - | - | % | |||||||||||
Other | 1,020 | 4 | % | 292 | 1 | % | 2,025 | 2 | % | 1,491 | 2 | % | |||||||||||
TOTAL | $ | 25,137 | 100 | % | $ | 23,283 | 100 | % | $ | 125,291 | 100 | % | $ | 75,548 | 100 | % | |||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(In thousands, except share amounts) | ||||||||||
October 31, 2011 |
October 31, 2010 |
|||||||||
(unaudited) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 13,689 | $ | 8,004 | ||||||
Due from factor | 937 | 1,015 | ||||||||
Accounts and other receivables, net | 3,143 | 725 | ||||||||
Inventory, net | 11,605 | 8,418 | ||||||||
Advance payments for inventory | 5,975 | 5,454 | ||||||||
Capitalized software development costs and license fees | 12,564 | 4,903 | ||||||||
Prepaid expenses and other current assets | 3,071 | 921 | ||||||||
Total current assets | 50,984 | 29,440 | ||||||||
Property and equipment, net | 1,184 | 520 | ||||||||
Other assets | 209 | 69 | ||||||||
Total assets | $ | 52,377 | $ | 30,029 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued expenses | $ | 20,313 | $ | 11,375 | ||||||
Inventory financing payables | 1,238 | 5,557 | ||||||||
Advances from customers and deferred revenue | 5,642 | 945 | ||||||||
Total current liabilities | 27,193 | 17,877 | ||||||||
Warrant liability | 1,949 | 144 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders' equity: | ||||||||||
Common stock -- $.001 par value; 250,000,000 shares authorized; 41,307,349 and 39,326,376 shares issued and outstanding at October 31, 2011 and October 31, 2010, respectively | 41 | 39 | ||||||||
Additional paid-in capital | 119,222 | 114,824 | ||||||||
Accumulated deficit | (95,501 | ) | (102,333 | ) | ||||||
Accumulated other comprehensive loss | (527 | ) | (522 | ) | ||||||
Net stockholders' equity | 23,235 | 12,008 | ||||||||
Total liabilities and stockholders' equity | $ | 52,377 | $ | 30,029 | ||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(in thousands, except share data) | ||||||||||||||||
Three Months Ended October 31, |
Year Ended October 31, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net revenues | $ | 25,138 | $ | 23,383 | $ | 125,291 | $ | 75,648 | ||||||||
Cost of sales | ||||||||||||||||
Product costs | 12,259 | 14,146 | 54,939 | 38,718 | ||||||||||||
Software development costs and license fees | 5,914 | 5,450 | 22,151 | 17,524 | ||||||||||||
Loss on impairment of software development costs and license fees - future releases | 2,726 | - | 2,726 | 1,021 | ||||||||||||
20,899 | 19,596 | 79,816 | 57,263 | |||||||||||||
Gross profit | 4,239 | 3,787 | 45,475 | 18,385 | ||||||||||||
Operating costs and expenses | ||||||||||||||||
Product research and development | 1,843 | 986 | 6,992 | 3,347 | ||||||||||||
Selling and marketing | 2,755 | 2,207 | 14,707 | 8,432 | ||||||||||||
General and administrative | 2,418 | 1,733 | 10,506 | 8,127 | ||||||||||||
Depreciation and amortization | 175 | 42 | 398 | 183 | ||||||||||||
Loss on impairment of software development costs and license fees - cancelled games | - | 131 | 1,512 | 407 | ||||||||||||
7,191 | 5,099 | 34,115 | 20,496 | |||||||||||||
Operating income (loss) | (2,952 | ) | (1,312 | ) | 11,360 | (2,111 | ) | |||||||||
Other expenses (income) | ||||||||||||||||
Interest and financing costs, net | 177 | 296 | 1,255 | 999 | ||||||||||||
Change in fair value of warrant liability | 761 | (70 | ) | 2,847 | (482 | ) | ||||||||||
Income (loss) before income taxes | (3,889 | ) | (1,538 | ) | 7,258 | (2,628 | ) | |||||||||
Income taxes | 5 | (9 | ) | 426 | (1,656 | ) | ||||||||||
Net income (loss) | $ | (3,894 | ) | $ | (1,529 | ) | $ | 6,832 | $ | (972 | ) | |||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | (0.10 | ) | $ | (0.04 | ) | $ | 0.18 | $ | (0.03 | ) | |||||
Diluted | $ | (0.10 | ) | $ | (0.04 | ) | $ | 0.17 | $ | (0.03 | ) | |||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 39,601,781 | 37,556,634 | 38,527,589 | 37,019,750 | ||||||||||||
Diluted | 39,601,781 | 37,556,634 | 40,123,968 | 37,019,750 | ||||||||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | |||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(in thousands) | |||||||||||
Year Ended October 31 | |||||||||||
2011 | 2010 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income (loss) | $ | 6,832 | $ | (972 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 398 | 183 | |||||||||
Change in fair value of warrant liability | 2,847 | (482 | ) | ||||||||
Non-cash compensation expense | 1,468 | 1,340 | |||||||||
Loss on disposal of assets | -- | 27 | |||||||||
Provision for price protection and customer allowances | 3,928 | 3,226 | |||||||||
Amortization of capitalized software development costs and license fees | 6,204 | 6,543 | |||||||||
Loss on impairment of software development costs and license fees | 4,238 | 1,428 | |||||||||
Inventory write downs | 1,794 | 180 | |||||||||
Changes in operating assets and liabilities, net of acquisition: | |||||||||||
Due from factor | (2,997 | ) | (3,325 | ) | |||||||
Accounts and other receivables | (3,223 | ) | 618 | ||||||||
Inventory | (4,981 | ) | (2,423 | ) | |||||||
Capitalized software development costs and license fees | (18,064 | ) | (9,197 | ) | |||||||
Advance payments for inventory | (521 | ) | (2,328 | ) | |||||||
Prepaid expenses and other assets | (1,918 | ) | (66 | ) | |||||||
Accounts payable and accrued expenses | 8,752 | 2,041 | |||||||||
Customer billings due to distribution partner | -- | (230 | ) | ||||||||
Advances from customers | 4,660 | 402 | |||||||||
Net cash provided by (used in) operating activities | 9,417 | (3,035 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Purchases of property and equipment | (465 | ) | (283 | ) | |||||||
Purchase of assets of Quick Hit, Inc., net of acquired cash | (779 | ) | -- | ||||||||
Net cash used in investing activities | (1,244 | ) | (283 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Proceeds from exercise of options and warrants | 1,830 | -- | |||||||||
Inventory financing | (4,319 | ) | (496 | ) | |||||||
Net cash (used in) provided by financing activities | (2,489 | ) | (496 | ) | |||||||
Effect of exchange rates on cash and cash equivalents | 1 | (21 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 5,685 | (3,835 | ) | ||||||||
Cash and cash equivalents -- beginning of year | 8,004 | 11,839 | |||||||||
Cash and cash equivalents -- end of year | $ | 13,689 | $ | 8,004 | |||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||
Cash paid during the year for interest and financing costs | $ | 1,255 | $ | 1,006 | |||||||
Cash paid during the year for income taxes | $ | 3 | $ | -- | |||||||
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES | |||||||||||
Landlord-provided leasehold improvements | $ | 163 | $ | -- | |||||||
Warrant liability reclassified to additional paid-in capital upon exercise | $ | 1,042 | $ | -- | |||||||
Issuance of warrants for license fees | $ | 58 | $ | -- | |||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | |||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |||||||||||||||
(Unaudited, in thousands, except share amounts) | |||||||||||||||
Three Months Ended October 31, |
Year Ended October 31, |
||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
GAAP operating income (loss) | $ | (2,952 | ) | $ | (1,312 | ) | $ | 11,360 | $ | (2,111 | ) | ||||
Non-cash compensation (1) | 405 | 69 | 1,468 | 1,395 | |||||||||||
Severance (2) | - | - | - | 403 | |||||||||||
Non-GAAP operating income (loss) | $ | (2,547 | ) | $ | (1,243 | ) | $ | 12,828 | $ | (313 | ) | ||||
GAAP net income (loss) | $ | (3,894 | ) | $ | (1,529 | ) | $ | 6,832 | $ | (972 | ) | ||||
Non-cash compensation (1) | 405 | 69 | 1,468 | 1,395 | |||||||||||
Severance (2) | - | - | - | 403 | |||||||||||
Change in fair value of warrants (3) | 761 | (70 | ) | 2,847 | (482 | ) | |||||||||
Sale of NJ state operating loss carryforwards (4) | - | - | - | (1,656 | ) | ||||||||||
Non-GAAP net income (loss) | $ | (2,728 | ) | $ | (1,530 | ) | $ | 11,147 | $ | (1,312 | ) | ||||
GAAP net income (loss) per diluted share | $ | (0.10 | ) | $ | (0.04 | ) | $ | 0.17 | $ | (0.03 | ) | ||||
Non-cash compensation (1) | 0.01 | - | 0.04 | 0.04 | |||||||||||
Severance (2) | - | - | - | 0.01 | |||||||||||
Change in fair value of warrants (3) | 0.02 | - | 0.07 | (0.01 | ) | ||||||||||
Sale of NJ state operating loss carryforwards (4) | - | - | - | (0.05 | ) | ||||||||||
Non-GAAP net income per diluted share | $ | (0.07 | ) | $ | (0.04 | ) | $ | 0.28 | $ | (0.04 | ) | ||||
Shares used in GAAP and Non-GAAP per diluted share amounts | 39,601,781 | 37,556,634 | 40,123,968 | 37,019,750 | |||||||||||
(1) Represents expenses recorded for stock compensation expense. The Company does not consider stock-based compensation charges when evaluating business performance and management does not consider stock-based compensation expense in evaluating its short and long-term operating plans. |
(2) Represents one time severance costs related to a workforce reduction. During January 2010, Company management initiated a plan of restructuring to better align its workforce to its revised operating plans. As part of the plan, the Company reduced its personnel count by 16 employees, then representing 17% of its workforce. |
(3) Represents the change in the fair value of warrants classified as a liability. The fair value of the warrants is calculated at each balance sheet date with a corresponding charge or credit to earnings for the amount of the change in fair value. |
(4) In December 2009, we received proceeds of approximately $1.6 million from the sale of the rights to approximately $21.2 million of New Jersey state income tax operating loss carryforwards, under the Technology Business Tax Certificate Program administered by the New Jersey Economic Development Authority. Net proceeds were recorded as an income tax benefit during the year ended October 31, 2010. |
Contact Information:
For additional information, please contact:
Todd Greenwald, CFA
Director of Investor Relations & Strategic Planning
732-476-1938
tgreenwald@majescoentertainment.com