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Majesco Entertainment Company Reports Fourth Quarter and Full Year Fiscal 2012 Financial Results
Fiscal 2012 Operating Income of $3.7 Million on Revenue of $132 Million
EDISON, N.J., January 14, 2013 /Marketwire/ -- Majesco Entertainment Company (Nasdaq: COOL), an innovative provider of video games for the mass market, today reported financial results for the fourth quarter and full year ended October 31, 2012.
Fourth Quarter Results
For the fourth quarter ended October 31, 2012, Majesco's net revenues were $26.6 million, up 6 percent versus $25.1 million in the same period a year ago. During the fourth quarter of 2012, the Company reported an operating loss of $3.0 million, compared to an operating loss of $3.0 million in the fourth quarter of 2011. Net loss for the quarter was $2.7 million versus a net loss of $3.9 million in 2011. On a non-GAAP basis, net loss for the quarter was $2.7 million compared to a non-GAAP net loss of $2.7 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, 2012 was $0.07, compared to a basic and diluted net loss per share of $0.10 in the same period last year. Non-GAAP diluted net loss per share for the quarter ended October 31, 2012 was $0.07 compared to a net loss per share of $0.07 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.
Twelve Month Fiscal 2012 Results
For the twelve months ended October 31, 2012, the Company's net revenues increased 6 percent to $132.3 million versus the year ago period. The Company reported operating income of $3.7 million compared to $11.4 million of operating income in the same period a year ago. Non-GAAP operating income for the twelve month period was $5.4 million compared to non-GAAP operating income of $12.8 million for the comparable 2011 period. In the twelve months ended October 31, 2012, net income was $4.6 million compared to net income of $6.8 million for the twelve months ended October 31, 2011. Non-GAAP net income was $4.4 million in 2012 compared to non-GAAP net income of $11.1 million in 2011.
The Company's basic and diluted earnings per share for the twelve months ended October 31, 2012 was $0.12 and $0.11, respectively, compared to basic and diluted earnings per share of $0.18 and $0.17, respectively, for the corresponding period in 2011. The Company's non-GAAP diluted earnings per share for the twelve months ended October 31, 2012 was $0.10 compared to diluted non-GAAP net earnings per share of $0.28 in the corresponding 2011 period. Non-GAAP earnings per share of $0.10 for the twelve months of fiscal 2012 was lower than previously expected due to accelerated amortization and inventory write-off’s related to lower than expected sales of NBA Baller Beats.
“We met our revenue expectations in fiscal 2012 against the backdrop of weak industry-wide sales,” said Jesse Sutton, Chief Executive Officer of Majesco. “The Zumba® Fitness franchise benefited from the release of Zumba® Fitness 2 in the first quarter, Zumba® Fitness Rush in the second quarter and Zumba® Fitness Core in the fourth quarter. Zumba is now firmly entrenched as the second bestselling fitness franchise ever with over 8 million units sold worldwide. We ended the year with $31.3 million in combined cash and availability from our factor and no long term debt.”
“For fiscal 2013, we expect declining sales as our core products on legacy platforms decline, and we will be offering a smaller slate of new handheld and console titles than we introduced in fiscal 2012,” Sutton added.
In order to better align operating costs with expected sales trends, the Company has implemented several initiatives to reduce fixed operating costs in favor of an outsourced, variable cost model. These initiatives include the closing of its social game development studio in Foxboro, Massachusetts, and reduction of game testing personnel in its New Jersey office. The Company plans to continue to develop mobile games through its production team in Southern California and the use of external development studios. In addition, the Company has eliminated certain marketing and support positions reflecting the planned reduction of its console game slate in fiscal 2013. The Company expects to record approximately $0.7 - $1.0 million in severance and other expenses related to this strategic realignment in the first quarter of fiscal 2013. These initiatives are expected to result in reduced operating expenses of approximately $1.5 - $2.0 million on an annual basis.
“Having successfully navigated through industry transitions and periods of uncertainty in the past, we believe it is prudent to preserve our financial resources as new platforms are deployed. We plan to continue to support our established franchises, look for opportunities to reach new audiences through mobile devices and position the Company to capitalize as new platforms grow and gain consumer acceptance. Our strong balance sheet and liquidity give us the resources to resume growth as industry dynamics become clear,” concluded Sutton.
Fiscal 2013 Outlook
As a result of the weakness in demand for products on legacy console platforms and uncertainty around consumer adoption of the next generation of consoles, management is modifying its practice of providing quantitative fiscal year revenue and earnings guidance. Instead, for fiscal 2013, management is presenting a qualitative assessment of its outlook for financial results.
Based on early analysis of sell-through during the 2012 holiday season, management anticipates holiday sales will be at least 50% lower than last year. Given the Company’s dependence on holiday sales, management anticipates revenue for fiscal 2013 will be significantly below fiscal 2012. Management expects to report between a modest non-GAAP EPS loss to breakeven for the first quarter of fiscal 2013 and a loss for the full year of fiscal 2013.
Announced Product Line-up
First Quarter Fiscal 2013 Ending January 31, 2013
To date, the Company has announced the following titles that were, or are expected to be, released during its fiscal first quarter 2013, which includes the recent holiday sales period:
- Maestro Piccolo’s Flea Symphony for iPhone, iPad and iPod Touch recently received the Editor’s Choice Award from Apple. Flea Symphony turns players into mini maestros, conducting a tiny orchestra of fleas to create beautiful melodies with a range of instruments, including tuba cannons, guitar string launchers, and even turntables. Players must solve 100 levels of progressively complex musical puzzles through five imaginative music box worlds.
- Monster High: Skultimate Roller Maze™ on Nintendo DS™ and Wii™ was released as part of a distribution agreement with Little Orbit that includes an additional Nintendo 3DS™ sku launching this March. Players can pick their favorite Monster High character and form a team of friends as they skate through the crypts of Monster High. Collect power-ups, avoid monstrous obstacles, scream past the competition and use each character's special ability and ghoul power to win the race.
To date, the Company has announced the following titles that are expected to be released during the balance of fiscal 2013:
- Young Justice: Legacy on Xbox 360® and PlayStation®3 launches this April as part of the Company’s distribution agreement with Little Orbit. Based on WB’s hit animated series airing on Cartoon Network, the game lets players assemble their Young Justice team from 12 heroes including NightWing, Kid Flash, Robin and more. Track down notorious villains and be mentored by powerful superheroes as you explore, customize and battle in this action-packed, RPG styled game.
- Phineas and Ferb (working title) for retail consoles and gaming handhelds, including smartphones and tablets, is based on the animated hit Disney television series. Additional details will be announced shortly.
- The next iteration of the best-selling Zumba® Fitness franchise that offers players a fun and effective at home workout solution. Specific product details to be announced.
The Company expects to announce additional details of its 2013 lineup in the coming months.
At 4:30 p.m. ET today, management will host an earnings conference call to discuss the fourth quarter results. 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 one hour 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 #10023438.
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and twelve months ended October 31, 2012 and 2011, 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:
- Expenses related to non-cash compensation
- Net proceeds from sale of certain state income tax net operating loss carryforwards
- Change in fair value of warrants
- Severance costs for workforce reduction
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 mobile devices. Product highlights include Zumba® Fitness, Cooking MamaTM and NBA Baller Beats™. The company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. Majesco is headquartered in Edison, NJ and has an office in Brockhampton, UK. More info can be found online at www.majescoent.com or on Twitter at www.twitter.com/majesco.