Zumba Fitness Licensing Agreement Extended Through 2016
EDISON, NJ--(Marketwired - Jun 10, 2013) - Majesco Entertainment Company (
For the second quarter ended April 30, 2013, Majesco's net revenues were $9.7 million, down 68 percent versus $30.4 million in the same period a year ago. During the second quarter of fiscal 2013, the Company reported an operating loss of $2.2 million, compared to operating income of $2.8 million in the second quarter of fiscal 2012. Net loss for the second quarter was $2.3 million compared to net income of $2.7 million in the second quarter of fiscal 2012. The Company's basic and diluted net loss per share for the quarter ended April 30, 2013 was $(0.06), compared to basic and diluted net income per share of $0.07 in the same period last year.
On a non-GAAP basis, the net loss for the second quarter ended April 30, 2013 was $1.9 million compared to non-GAAP net income of $3.0 million in the second quarter of last year. The non-GAAP diluted net loss per share for the quarter ended April 30, 2013 was $(0.05) compared to diluted net income per share of $0.07 in the same period 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 six months ended April 30, 2013, the Company's net revenues were $33.2 million versus $96.6 million in the year ago period, a decline of 66 percent. The Company reported an operating loss of $4.2 million compared to operating income of $10.3 million in the same period of 2012. For the six months ended April 30, 2013, net loss was $4.4 million compared to net income of $10.4 million for the six months ended April 30, 2012. Included in six month fiscal 2013 operating results is a charge of $0.8 million for severance expenses from the strategic realignment implemented in January 2013. The Company's basic and diluted net loss per share for the six months ended April 30, 2013 was $(0.11), compared to basic and diluted net income per share of $0.26 and $0.25, respectively, for the corresponding period in 2012.
Non-GAAP operating loss for the six month period was $2.7 million compared to non-GAAP net income of $11.2 million for the comparable period in 2012. For the same period, non-GAAP net loss was $3.0 million in 2013 compared to non-GAAP net income of $10.3 million in 2012. The Company's non-GAAP basic and diluted net loss per share for the six months ended April 30, 2013 was $(0.07) compared to diluted net income per share of $0.25 in the corresponding period of 2012. 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.
Management Commentary
"In line with our expectations, Majesco's second quarter results reflect the ongoing industry transition to next generation consoles," said Jesse Sutton, Chief Executive Officer of Majesco. "During the second quarter we worked on, and recently announced, a substantial portion of our holiday release slate of new console and mobile games that we are very excited about, including games based on well-known brands like Disney's Phineas and Ferb and Zumba Fitness that will be available on a variety of platforms including next gen consoles and mobile devices. As we announced earlier today, we're also excited to have extended our relationship with Zumba Fitness through 2016. We believe that there are ample opportunities to broaden the leadership of this interactive fitness franchise. With $25.5 million in cash and no debt on our balance sheet, we remain well positioned to weather this industry transition as we continue to implement our fiscal 2014 strategy of releasing a smaller slate of higher profile, branded titles."
Fiscal 2013 Outlook
Given the decline in revenue in the Company's first six months of fiscal 2013, management continues to expect that revenue for fiscal 2013 will be significantly below fiscal 2012, and that this will result in a loss for the full year of fiscal 2013.
Announced Product Line-up
To date, the Company has announced the following titles that are expected to be released during the balance of fiscal 2013:
The Company expects to announce additional details of its 2013 lineup in the coming months.
Conference Call
At 4:30 p.m. (EDT) 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://ir.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 #10029659.
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and six months ended April 30, 2013 and 2012, 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 to 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 mobile devices. Product highlights include Zumba® Fitness and Cooking Mama™. Majesco is headquartered in Edison, NJ and the company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. More info can be found online at majescoent.com or on Twitter at twitter.com/majesco.
Safe Harbor
Some statements set forth in this release, including the estimates under the headings "Fiscal 2013 Outlook" contain forward-looking statements that are subject to change. Examples of forward-looking statements include statements relating to industry prospects, our future economic performance including anticipated revenues and expenditures, results of operations or financial position, and other financial items, our business plans and objectives, including our intended product releases, and may include certain assumptions that underlie forward-looking statements. Statements including words such as "anticipate," "believe," "estimate" or "expect" and statements in the future tense are forward-looking statements. These statements are .subject to business and economic risk and reflect management's current expectations, and involve subjects that are inherently uncertain and difficult to predict. Some of the risks and uncertainties which could cause our results to differ materially from our expectations include the following: consumer demand for our products, the availability of an adequate supply of current-generation and next-generation gaming 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, including our Annual Report on Form 10-K for the year ended October 31, 2012. 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 SIX MONTHS | ||||||||||||||||||||||||
(Unaudited, in thousands) | ||||||||||||||||||||||||
Three months Ended | Six months Ended | |||||||||||||||||||||||
April 30, | April 30, | |||||||||||||||||||||||
2013 | % | 2012 | % | 2013 | % | 2012 | % | |||||||||||||||||
(thousands) | (thousands) | (thousands) | (thousands) | |||||||||||||||||||||
Nintendo Wii | $ | 4,469 | 46 | % | $ | 12,161 | 40 | % | $ | 17,053 | 51 | % | $ | 59,608 | 62 | % | ||||||||
Microsoft Xbox 360 | 2,538 | 26 | % | 14,741 | 49 | % | 8,132 | 25 | % | 24,338 | 25 | % | ||||||||||||
Nintendo DS/3DS | 2,008 | 21 | % | 2,617 | 8 | % | 6,748 | 20 | % | 10,651 | 11 | % | ||||||||||||
Sony Playstation 3 | 304 | 3 | % | 258 | 1 | % | 476 | 1 | % | 690 | 1 | % | ||||||||||||
Accessories and other | 401 | 4 | % | 623 | 2 | % | 783 | 3 | % | 1,293 | 1 | % | ||||||||||||
TOTAL | $ | 9,720 | 100 | % | $ | 30,400 | 100 | % | $ | 33,192 | 100 | % | $ | 96,580 | 100 | % | ||||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(In thousands, except share amounts) | ||||||||||
Apr 30, 2013 |
October 31, 2012 |
|||||||||
(unaudited) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 25,535 | $ | 18,038 | ||||||
Due from factor, net | 115 | 12,501 | ||||||||
Accounts and other receivables, net | 1,820 | 3,936 | ||||||||
Inventory | 2,478 | 7,762 | ||||||||
Advance payments for inventory | 213 | 257 | ||||||||
Capitalized software development costs and license fees, net | 5,653 | 3,489 | ||||||||
Prepaid expenses and other current assets | 304 | 1,724 | ||||||||
Total current assets | 36,118 | 47,707 | ||||||||
Property and equipment, net | 863 | 1,003 | ||||||||
Other assets | 569 | 588 | ||||||||
Total assets | $ | 37,550 | $ | 49,298 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued expenses | $ | 11,973 | $ | 15,490 | ||||||
Advances from customers and deferred revenue | 39 | 4,454 | ||||||||
Warrant liability | - | 17 | ||||||||
Total current liabilities | 12,012 | 19,961 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders' equity: | ||||||||||
Common stock -- $.001 par value; 250,000,000 shares authorized; 41,781,459 and 41,862,321 shares issued and outstanding at April 30, 2013 and October 31, 2012, respectively | 42 | 42 | ||||||||
Additional paid-in capital | 121,413 | 120,755 | ||||||||
Accumulated deficit | (95,300 | ) | (90,888 | ) | ||||||
Accumulated other comprehensive loss | (617 | ) | (572 | ) | ||||||
Net stockholders' equity | 25,538 | 29,337 | ||||||||
Total liabilities and stockholders' equity | $ | 37,550 | $ | 49,298 | ||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Unaudited, in thousands, except share amounts) | ||||||||||||||||||
Three Months Ended | Six months Ended | |||||||||||||||||
April 30 | April 30 | |||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
Net revenues | $ | 9,720 | $ | 30,400 | $ | 33,192 | $ | 96,580 | ||||||||||
Cost of sales | ||||||||||||||||||
Product costs | 3,851 | 9,093 | 12,265 | 32,931 | ||||||||||||||
Software development costs and license fees | 2,834 | 9,136 | 10,740 | 28,464 | ||||||||||||||
Total cost of sales | 6,685 | 18,229 | 23,005 | 61,395 | ||||||||||||||
Gross profit | 3,035 | 12,171 | 10,187 | 35,185 | ||||||||||||||
Operating costs and expenses | ||||||||||||||||||
Product research and development | 1,456 | 1,671 | 3,538 | 3,978 | ||||||||||||||
Selling and marketing | 1,467 | 4,686 | 5,196 | 13,672 | ||||||||||||||
General and administrative | 2,215 | 2,679 | 4,466 | 5,696 | ||||||||||||||
Workforce reduction | - | - | 776 | - | ||||||||||||||
Loss on impairment of software development costs and license fees - cancelled games | - | 228 | 175 | 1,219 | ||||||||||||||
Depreciation and amortization | 95 | 149 | 206 | 307 | ||||||||||||||
Total operating costs and expenses | 5,233 | 9,413 | 14,357 | 24,872 | ||||||||||||||
Operating (loss) income | (2,198 | ) | 2,758 | (4,170 | ) | 10,313 | ||||||||||||
Other expenses (income) | ||||||||||||||||||
Interest and financing costs | 74 | 200 | 257 | 663 | ||||||||||||||
Change in fair value of warrant liability | - | (165 | ) | (17 | ) | (992 | ) | |||||||||||
(Loss) income before income taxes | (2,272 | ) | 2,723 | (4,410 | ) | 10,642 | ||||||||||||
Income taxes | (1 | ) | 20 | 2 | 213 | |||||||||||||
Net (loss) income | $ | (2,271 | ) | $ | 2,703 | $ | (4,412 | ) | $ | 10,429 | ||||||||
Net (loss) income per share: | ||||||||||||||||||
Basic | $ | (0.06 | ) | $ | 0.07 | $ | (0.11 | ) | $ | 0.26 | ||||||||
Diluted | $ | (0.06 | ) | $ | 0.07 | $ | (0.11 | ) | $ | 0.25 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||||
Basic | 40,543,635 | 39,819,106 | 40,512,763 | 39,777,497 | ||||||||||||||
Diluted | 40,543,635 | 41,387,755 | 40,512,763 | 41,445,746 | ||||||||||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(Unaudited, in thousands) | |||||||||||
Six months Ended April 30, |
|||||||||||
2013 | 2012 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net (loss) income | $ | (4,412 | ) | $ | 10,429 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 206 | 307 | |||||||||
Change in fair value of warrant liability | (17 | ) | (992 | ) | |||||||
Non-cash compensation expense | 665 | 863 | |||||||||
Provision for price protection | 1,170 | 3,006 | |||||||||
Amortization of capitalized software development costs and license fees | 2,689 | 10,690 | |||||||||
Loss on impairment of software development costs and license fees | 175 | 1,219 | |||||||||
Provision for excess inventory | 319 | - | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Due from factor | 11,216 | (5,940 | ) | ||||||||
Accounts and other receivables | 2,079 | (1,487 | ) | ||||||||
Inventory | 4,965 | 6,098 | |||||||||
Capitalized software development costs and license fees | (5,028 | ) | (4,750 | ) | |||||||
Advance payments for inventory | 44 | 5,712 | |||||||||
Prepaid expenses and other assets | 1,421 | 2,309 | |||||||||
Accounts payable and accrued expenses | (3,438 | ) | (2,748 | ) | |||||||
Advances from customers and deferred revenue | (4,377 | ) | (5,222 | ) | |||||||
Net cash provided by operating activities | 7,677 | 19,494 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Purchases of property and equipment | (145 | ) | (179 | ) | |||||||
Net cash used in investing activities | (145 | ) | (179 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Repayment of inventory financing | - | (1,238 | ) | ||||||||
Net cash used in financing activities | - | (1,238 | ) | ||||||||
Effect of exchange rates on cash and cash equivalents | (35 | ) | (32 | ) | |||||||
Net increase in cash and cash equivalents | 7,497 | 18,045 | |||||||||
Cash and cash equivalents -- beginning of period | 18,038 | 13,689 | |||||||||
Cash and cash equivalents -- end of period | $ | 25,535 | $ | 31,734 | |||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||
Cash paid during the year for interest and financing costs | $ | 324 | $ | 663 | |||||||
Cash paid during the year for income taxes | $ | - | $ | 514 | |||||||
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY | ||||||||||||||||
RECONCILATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
(Unaudited, in thousands, except share amounts) | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
April 30, | April 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
GAAP operating income | $ | (2,198 | ) | $ | 2,758 | $ | (4,170 | ) | $ | 10,313 | ||||||
Non-cash compensation (1) | 385 | 429 | 665 | 863 | ||||||||||||
Severance (2) | - | - | 776 | - | ||||||||||||
Non-GAAP operating (loss) income | $ | (1,813 | ) | $ | 3,187 | $ | (2,729 | ) | $ | 11,176 | ||||||
GAAP net income | $ | (2,271 | ) | $ | 2,703 | $ | (4,412 | ) | $ | 10,429 | ||||||
Non-cash compensation (1) | 385 | 429 | 665 | 863 | ||||||||||||
Severance (2) | - | - | 776 | - | ||||||||||||
Change in fair value of warrants (3) | - | (165 | ) | (17 | ) | (992 | ) | |||||||||
Non-GAAP net (loss) income | $ | (1,886 | ) | $ | 2,967 | $ | (2,988 | ) | $ | 10,300 | ||||||
GAAP net income per diluted share | $ | (0.06 | ) | $ | 0.07 | $ | (0.11 | ) | $ | 0.25 | ||||||
Non-cash compensation (1) | 0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||
Severance (2) | - | - | 0.02 | - | ||||||||||||
Change in fair value of warrants (3) | - | (0.01 | ) | - | (0.02 | ) | ||||||||||
Non-GAAP net (loss) income per diluted share | $ | (0.05 | ) | $ | 0.07 | $ | (0.07 | ) | $ | 0.25 | ||||||
Shares used in GAAP and Non-GAAP per diluted share amounts | 40,543,635 | 41,387,755 | 40,512,763 | 41,445,746 |
(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 2013, 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 approximately 40 employees.
(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.
Contact Information:
For additional information, please contact:
Company Contact:
Michael Vesey
Chief Financial Officer
732.476.1956
Investor Relations Contact:
Stephanie Prince/Jody Burfening
LHA
212.838.3777
sprince@lhai.com