Majesco Entertainment Company Reports Second Quarter Fiscal 2013 Financial Results

Majesco Entertainment Company Reports Second Quarter Fiscal 2013 Financial 
Results 
Zumba Fitness Licensing Agreement Extended Through 2016 
EDISON, NJ -- (Marketwired) -- 06/10/13 --  Majesco Entertainment
Company (NASDAQ: COOL), an innovative provider of video games for the
mass market, today reported financial results for the second quarter
of fiscal 2013 ended April 30, 2013. 
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: 


 
--  Zumba(R)Dance is the first ever motion-based fitness experience for
    mobile tablets based on the global lifestyle brand lets you take the
    dance-fitness party with you, anywhere you go. (Launches in July)
--  Crash City Mayhem on 3DS rewards players for causing mayhem on the
    rubber-burned roads of Crash City. Players can unlock 15 different
    vehicles, from monster trucks to F1 racers, as they progress through
    36 action-packed missions that challenge their skill behind the wheel.
    (Launches in July)
--  Phineas and Ferb: Quest for Cool Stuff on the Xbox 360(R) games and
    entertainment system from Microsoft, Wii U(TM), Wii(TM), Nintendo
    3DS(TM) and DS(TM), is based on the top-rated Emmy Award-winning
    hit series from Disney. Join Phineas and Ferb as they travel to
    out-of-this-world places in their newest invention, the All-Terrain
    Transformatron, an upgradeable, customizable, ultra-cool amphibious
    ride that lets the boys collect treasures to display in their backyard
    Museum of Cool. (Launches in August)
--  Agent P DoofenDASH on iOS and Android, focuses on Perry the Platypus,
    the breakout star from Disney's Phineas and Ferb. Play as Agent P and
    his fellow O.W.C.A. agents as they battle Dr. Doofenshmirtz, stop his
    evil plot, and save the town of Danville. Players will experience
    unique gameplay every time they play and can challenge friends for the
    top secret agent score. (Launches in September)
--  Young Justice: Legacy (distributed by Majesco, published by Little
    Orbit) on PlayStation(R)3, Xbox 360 and Wii U(TM) is based on the
    acclaimed Cartoon Network animated series inspired by the DC Comics
    characters. 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. (Launches
    in September)
--  Monster High(TM)13 Wishes Shadow Secrets (distributed by Majesco,
    published by Little Orbit) on Wii U(TM), Wii(TM), Nintendo
    3DS(TM) and DS(TM) whisks fans away on an amazing adventure with
    their favorite freaky-fab ghouls who jump, climb and swing through
    multiple magical levels to save Monster High(TM). (Launches in
    October)
--  Zumba(R)Fitness World Party on Xbox One(R), the all-in-one games
    and entertainment system from Microsoft, Kinect(TM) for Xbox
    360(R), Wii U(TM) and Wii(TM) is the latest game in the
    successful dance fitness franchise that has sold more than 9 million
    units worldwide. This fun, freeing fitness journey embodies Zumba's
    global reach of over 185 countries by taking your work out to exotic
    locations around the world. Burn up to 1,000 calories per hour with
    new modes, dance styles and 40 high-energy new routines set to a
    world-class soundtrack featuring Lady Gaga, Daddy Yankee and Pitbull.
    (Launches in October and later this year on Xbox One)
--  Barbie(T
M) Dreamhouse Party(TM) (distributed by Majesco, published
    by Little Orbit) on Wii U(TM), Wii(TM), Nintendo 3DS(TM) and
    DS(TM) takes fans behind the pink doors into the fantastic world of
    the Barbie(R) Dreamhouse(R) mansion. (Launches in November
    during first quarter of fiscal 2014)

  
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: 


 
--  Expenses related to non-cash compensation
--  Expenses related to workforce reduction
--  Change in fair value of warrants

  
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(R) Fitness and
Cooking Mama(TM). 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 s
tock 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,     October 31, 
                                                     2013          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        3,97
8 
  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. 
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 
 
 
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