Majesco Entertainment Company Announces Q4 Fiscal 2008 Financial Results – Exceeds Revenue Guidance and Achieves Profitability in Fiscal 2008
EDISON, N.J., Jan 13, 2009 /PRNewswire-FirstCall via COMTEX News Network/ –
– Exceeds Revenue Guidance and Achieves Profitability in Fiscal 2008 –
– Fiscal 2008 Net Revenues Increased More Than 25% to $63.9M –
– Fiscal 2008 Net Income of $2.1M or $0.08 per share versus Fiscal 2007 Net Loss of $4.8M or $0.20 per share –
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, 2008.
For the fourth quarter ended October 31, 2008, Majesco’s net revenues increased 51.2 percent to $18.0 million versus the same period a year ago. During this same period, the Company reported an operating loss of $0.9 million compared to an operating loss of $1.5 million in the fourth quarter of 2007. Net loss for the quarter was $0.9 million versus a net loss of $1.0 million in 2007. The Company’s basic and diluted loss per share for this quarter was $0.03 compared to a loss of $0.04 in the same period last year.
Results for the fourth quarter of 2008 include $0.4 million of non-cash compensation and a gain of $0.3 million related to a change in the fair value of warrants. Results for the fourth quarter of 2007 include $0.5 million in non-cash compensation; $0.6 million for a gain in the fair value of warrants; and a $0.3 million charge related to settlement of litigation. Non-GAAP Operating loss for the fourth quarter of 2008 was $0.5 million and $0.7 million for 2007. Non-GAAP Net loss was $0.7 million for the fourth quarter of 2008, and $0.8 million for the same period in 2007.
For the twelve months ended October 31, 2008, the Company’s net revenues increased 25.3 percent to $63.9 million versus the year ago period. During this same period, the Company reported operating income of $1.5 million compared to an operating loss of $3.8 million in 2007. Net income through the twelve months of fiscal 2008 was $2.1 million versus a net loss of $4.8 million in 2007. The Company’s basic and diluted earnings per share for the twelve months of fiscal 2008 were $0.08 compared to a loss of $0.20 in 2007.
Results for the 12 months ended October 31, 2008 include: $1.6 million in non-cash compensation; a gain of $0.3 million related to settlement of litigation and a $1.3 million gain for the change in fair value of warrants. For the same period in 2007, results included $1.5 million in non-cash compensation; $2.8 million in charges related to settlement of litigation; a $0.6 million gain related to the change in fair value of warrants; and a $0.3 million gain on settlement of liabilities. Non-GAAP Operating income for the fiscal 2008 year was $2.8 million and $0.2 million for 2007. Non-GAAP Net income was $2.1 million for fiscal 2008 versus a $1.3 million loss in fiscal 2007. The Company’s non-GAAP basic and diluted earnings per share for the twelve months of fiscal 2008 were $0.08 compared to a loss of $0.06 in 2007.
Jesse Sutton, Chief Executive Officer of Majesco Entertainment, said, “Our strong financial performance in 2008 reflects the successful execution of our plan and confirms we’re on the right path. For the year we exceeded our updated guidance on revenue, and achieved profitability. Revenue for the full year increased over 25 percent to $63.9 million. Our combined Wii and DS business, which is at the heart of our strategy, was up 86 percent for the quarter, and 64 percent for the year when compared to 2007. As we grow our business, we are increasingly converting our revenue growth into bottom-line returns allowing us to achieve profitability ahead of schedule. For the full year, operating income was $1.5 million and net income was $2.1 million. Our non-GAAP results showed a $2.5 million improvement in operating income to $2.8 million, and our non-GAAP net income improved to $2.1 million from a $1.3 million loss last year. Our progress in driving profitability reflects our operating discipline, improved product selection, and focused effort towards bringing reasonably priced product to mass market consumers.”
“We expect to further build on our success in 2009. We believe we are well positioned to benefit from consumer trends given our focus on the fastest growing segment of the gaming industry. We have a proven and disciplined business model and a management team that is committed to growing the company in a profitable manner.”
– Fourth quarter 2008, domestic revenue increased 55 percent and
international revenue increased 40 percent.
– For the twelve months of fiscal 2008:
– Revenue increased 25.3% to $63.9 million.
– Gross profit margin increased to 36.1 percent from 33.9 percent in
– Non-GAAP operating income reached $2.8 million.
– The Company’s interest and financing costs fell to $0.6 million
from $1.6 million in the same period one-year ago.
– Non-GAAP net income was $2.1 million.
– Non-GAAP basic and diluted EPS increased to $0.08 from a loss of
$0.06 last year.
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and twelve months ended October 31, 2008 and 2007, the Company has presented both GAAP and Non-GAAP financial results. GAAP financial measures, including operating income, net income, and basic and diluted earnings/loss per share, have been adjusted to report Non-GAAP financial measures which exclude expenses related to non-cash compensation, gains due to changes in the value of our common stock to be issued in settlement of the class action litigation and related charges, net, gains related to the settlements of liabilities and other gains, and the change in the fair value of warrants issued in connection with our September 2007 equity financing. 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.
During the fiscal year ended October 31, 2007, the Company recorded a $2.8 million charge in connection with the expected settlement of class action litigation. The charge was comprised of $2.5 million, which represented the fair value, on the date the agreement was executed, of the common stock expected to be distributed when the settlement becomes effective and $0.3 million which represented the increase in the value of the shares since that date through October 31, 2007.
The Company will adjust the fair value of the liability to the fair value of the common stock expected to be distributed at each balance sheet date and record the resulting change as a non-cash charge, or gain, to earnings in each period until the common stock is distributed. Due to fluctuations in the Company’s stock price, this resulted in a non-cash gain of $0.3 million during the twelve months ended October 31, 2008. The settlement provides that if the fair value of the stock falls below $2.5 million, the Company will issue additional shares of common stock, subject to certain limitations, with a fair market value equal to the amount of the decrease. Therefore, the liability will not be adjusted below $2.5 million.
During the fourth quarter of 2007, the Company raised $5.9 million in an equity financing. As part of that transaction, the Company issued warrants that contain a provision that under certain circumstances in which the Company is sold, merged, or otherwise enters into a “fundamental transaction”, as defined in the warrant agreement, with a company that is not publicly traded, the warrants may be settled by a cash payment. As a result, the warrants were recorded as a liability at their fair value of $2.1 million, in accordance with FASB statement No. 150, Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity, and FASB Staff position 150-1 Issuers Accounting for Freestanding Financial Instruments Composed of More Than One Option or Forward Contract Embodying Obligations under FASB Statement 150. In addition, the Company will measure the fair value of the warrants at each balance sheet date, and record the change in fair value as a non-cash charge, or gain, to earnings each period. Changes in the Company’s stock price resulted in a non-cash gain of $0.3 million during the quarter ended October 31, 2008 and $1.3 million during the twelve months ended October 31, 2008. The warrants were valued at $0.2 million at October 31, 2008.
Comparison of Three Months Ended October 31, 2008 to October 31, 2007
– Net revenue was $18.0 million in 2008, compared to $11.9 million in 2007. The increase was due primarily to strong sales of the Cooking Mama franchise, Jillian Michaels’ Fitness Ultimatum and a strong value program.
– In the fourth quarter of 2008, 83 percent of revenue came from domestic sales with 17 percent from international. This compares to the fourth quarter of 2007 when 81 percent of revenue came from domestic sales with 19 percent from international.
– Gross margin was 27.8 percent, compared to 30.9 percent in 2007. Gross margin for the period was impacted by holiday value programs that, while profitable, were at a lower margin.
– The GAAP operating loss was $0.9 million, compared to a 2007 operating loss of $1.5 million. Non-GAAP 2008 operating loss was $0.5 million, compared to a non-GAAP operating loss of $0.7 million in 2007.
– The GAAP operating loss for 2008 included $0.4 million of non-cash compensation expense, compared to $0.5 million in 2007. The 2008 loss also included the impact of a $0.3 million expense in association with one of our customer’s filing for bankruptcy.
– The GAAP net loss was $0.9 million or $0.03 per share, compared to 2007 net loss of $1.0 million, or $0.04 per share. Non-GAAP net loss was $0.7 million, or $0.03 per share, compared to a non-GAAP net loss of $0.8 million, or $0.03 per share.
Comparison of Year Ended October 31, 2008 to October 31, 2007
– Net revenue was $63.9 million, exceeding the Company’s guidance. This compares to $51.0 million in 2007. The increase was primarily attributable to a 33 percent increase in domestic revenue; sales across our Cooking Mama franchise, the performance of Jillian Michaels’ Fitness Ultimatum, as well as a number of other titles including Wild Earth and Wonder World.
– In the twelve months of fiscal 2008, 90.7 percent of revenue came from domestic sales with 9.3 percent from International. This compares to 85.5 percent domestic and 14.5 percent international in the same period last year. The decline in international was the result of unfavorable foreign exchange and a delay in a number of releases.
– Gross margin was 36.1 percent, compared to 33.9 percent in 2007.
– Including the aforementioned litigation charges, the GAAP operating income was $1.5 million. This compares to 2007 GAAP operating loss of $3.8 million. Non-GAAP 2008 operating income was $2.8 million, compared to a non-GAAP operating income of $0.2 million in 2007.
– GAAP net income was $2.1 million, or $0.08 per share, compared to a GAAP net loss of $4.8 million, or $0.20 per share in 2007. Non-GAAP net income was $2.1 million, or $0.08 per share, compared to a non-GAAP net loss of $1.3 million, or $0.06 per share in 2007.
– Interest expense and financing costs decreased 58 percent in 2008 to $0.6 million from $1.6 million in 2007. The reduction was attributable to the Company’s ability to self- finance most of its purchasing requirements following a financing of $5.9 million in September 2007, lower factoring fees and improved cash management.
– At October 31, 2008, the company had cash and equivalents of $5.5 million.
Announced Product Line-up
First Quarter 2009 ending January 31, 2009:
All of the following titles have, or are expected to be released in North America during the Company’s first quarter:
– Cooking Mama: World Kitchen for Wii is the sequel to the best-selling Cooking Mama Cook Off game that has sold 700,000 units and challenges players to use the Wii Remote as the ultimate cooking utensil.
– Left Brain Right Brain 2 for DS is the follow up to the original hit that features all-new challenges to train both hemispheres of the brain and help players become truly ambidextrous.
– Cake Mania: In the Mix! for Wii marks the first introduction of Sandlot Games’ best-selling PC title on the Wii system. The game integrates motion-based control with the series’ signature cake-baking, multi-tasking gameplay style.
– Wonder World Amusement Park for DS is the first game from Majesco Studios Santa Monica. This companion game to the Wii version lets players experience a complete day at the park in the palm of their hands. Using the Touch Screen, players can toss, drive, shoot, whack and spin in more than two dozen mini-games throughout six themed zones.
To date, the Company has announced the following titles that are expected for release during the rest of fiscal 2009:
– Gardening Mama for DS stars Mama from the multi-million selling Cooking Mama franchise and is the first gardening game available on DS. Gardening Mama transforms the stylus into a universal gardening tool that players will use to plant, nurture and harvest flowers, fruits and vegetables.
– Math Blaster in the Prime Adventure for DS is inspired by the original hit PC game from Knowledge Adventure that makes learning fun by combining a variety of adventure-based learning games with challenging mathematic puzzles and the unique capabilities of Nintendo DS.
– Marker Man Adventures for DS is a unique game based on drawing and physics challenges as players maneuver the charming stick figure, Marker Man, through a myriad of scrolling world puzzles in his attempt to find his best friend, Doodle Dog.
– Our House Party! for Wii turns the Wii Remote into the ultimate home renovating tool that lets players compete party style to build their own personalized trophy home that they can then share with friends via WiiConnect24.
– Our House for DS is the second game from Majesco Studios Santa Monica. This companion game to the Wii version lets players work as contractors and then use their work-for-hire earnings to design, build and decorate their own personalized home.
– Rollin’ Rascals for DS is an addictive puzzler that challenges players to roll adorable round pets around obstacles and into identical twos to clear them from the game board.
– Major Minor’s Majestic March for Wii marks the return of the creative team behind the renowned PaRappa the Rapper franchise–legendary game designer and multimedia musician Masaya Matsuura and famed New York artist Rodney Alan Greenblat. The game turns the Wii Remote into a “special” baton the bandleader Major Minor uses to keep tempo, recruit new band members and pick up valuable items, while marching through whimsical locations.
– Hot ‘n’ Cold for DS is the first fully 3D hunt and find adventure game for the handheld. Players use the innovative Hot ‘n’ Cold meter as a guide to discovery of hundreds of missing objects.
– Escape the Museum for Wii is based on the popular online hidden object game that challenges players to rescue museum artifacts and find their missing daughter in a museum devastated by an earthquake.
– Drama Queens for DS tasks players with juggling their love life, career and friendships as they compete in a popularity contest set within a virtual 3D board game.
– Powerbike for DS is an intense motorcycle racer that features death-defying stunts, intense police chases and competitive multiplayer modes.
– Orchard for online and retail PC is a simulation that challenges players to manage all facets of a retail business, including planting and harvesting crops, developing new recipes, buying ingredients and hiring a workforce.
Fiscal 2009 Outlook
The Company expects fiscal 2009 full year net revenue to be in excess of $70.0 million and that it will be profitable on an operating basis. The Company believes that its mix of international revenues for fiscal 2009 will increase slightly from the previous year and that its gross margins will be in line with fiscal 2008. The Company’s guidance assumes the release of approximately 31 titles in 2009 with approximately 15 Wii and 16 DS titles. The Company’s results are also impacted by seasonality from the December holiday period and variability based on release schedules.