Majesco Entertainment Company Reports Third Quarter Fiscal 2010 Financial Results

EDISON, N.J., Sept. 14 /PRNewswire-First Call/ -- Majesco Entertainment Company (Nasdaq: COOL), an innovative provider of video games for the mass market, today reported financial results for the third quarter ended July 31, 2010.

For the third quarter ended July 31, 2010, Majesco's net revenues decreased 29 percent to $12.2 million versus $17.2 million in the same period a year ago. During this same period, the Company reported an operating loss of $1.7 million, compared to an operating loss of $4.2 million in the third quarter of 2009.  For the quarter, Non-GAAP operating loss was $1.4 million versus Non-GAAP operating loss of $3.3 million in 2009. Net loss for the quarter was $1.6 million versus a net loss of $5.2 million in 2009. On a Non-GAAP basis, net loss for the quarter was $1.4 million compared to Non-GAAP net loss of $3.5 million last year.

The Company's basic and diluted net loss per share for the quarter ended July 31, 2010 was $0.04 compared to a net loss per share of $0.18 in the same period last year. For the same quarter, Non-GAAP basic and diluted net loss per share was $0.04 compared to net loss per share of $0.12 last year.

For the nine months ended July 31, 2010, the Company's net revenues decreased 26 percent to $52.3 million versus the year ago period.  During the same period, the Company reported an operating loss of $0.8 million compared to an operating loss of $1.1 million in the same 2009 period.  Non-GAAP operating income for the nine month period was $0.9 million compared to $2.0 million for the comparable 2009 period.  For the nine months ended July 31, 2010 net income was $0.6 million compared to net loss of $2.7 million for the nine months ended July 31, 2009.  For the same period, Non-GAAP net income was $0.2 million this year compared to $1.1 million in 2009.

The Company's basic and diluted earnings per share for the nine months ended July 31, 2010 was $0.02 and $0.01, respectively, compared to a net loss per share of  $0.10 for the corresponding period in 2009.  The Company's Non-GAAP basic and diluted earnings per share for the nine months ended July 31, 2010 was $0.01 compared to $0.04 in the corresponding 2009 period.

Jesse Sutton, Chief Executive Officer of Majesco, said, "Our Company's third quarter results were in line with our internal expectations.  The revenue decline for the quarter was as expected and was a result of a smaller release slate compared with the third quarter of 2009.  Tetris Party Deluxe did well, and will likely be one of our best-selling titles of 2010.  Importantly, because of our tight cost controls, we significantly reduced our operating loss despite the revenue decline.  We remain excited about our upcoming titles scheduled for release during the balance of the fiscal year and this holiday season.  Brand new motion control devices coming from both Microsoft and Sony should be a catalyst for the industry, and Majesco will be there to support both this holiday.  Our management team is focused on improved profitability and is totally committed to building long-term value for our shareholders."

Highlights

• Selling and Marketing expense declined to $1.6 million, or 14% of sales, down from 25% in the same period in 2009.
• Total operating expenses declined to $4.5 million, down 42% from the same period in 2009.
• At the end of the quarter and nine months ending July 31, 2010 the Company had $10.5 million in cash and cash equivalents, up from $6.3 million on July 31, 2009.
• Shipped Tetris Party Deluxe, for both the Wii and Nintendo DS, which was a hit at retail and built on the past success of Tetris Party for WiiWare.  

Announced Product Line-up

Fourth Quarter ending October 31, 2010  

To date, the Company has announced the following titles that were or are expected to be released during its fourth quarter:

• Crafting Mama for Nintendo DS is the newest brand extension of the Cooking Mama franchise that has sold nearly seven million units in North America. Using the stylus as a universal crafting tool, players will sew, mold, glue, cut and paint under Mama's masterful direction as they create 40 different projects, from patchwork quilts to earrings, candles and vases.
• Greg Hastings Paintball 2 for Xbox 360® and Wii is the most realistic paintball experience to date from the most successful name in the sport. The game introduces more than 10 single and multiplayer game modes, each staged in all-new paintball locations based on 62 actual fields around the world. Featuring three new event branches -- Tournament Speedball, Recball, and Tournament Woodsball -- players can build and develop their team of professional ballers and even cheat to stay in the game.
• My Baby 3 & Friends for Nintendo DS is the third installment in the My Baby franchise that has sold nearly 2 million units worldwide. My Baby 3 lets players experience the joy of parenting as they feed, bathe, change and cuddle with their in game baby. What's more, the game also sparks new social development skills via interaction with another baby and puppy.
• Serious Sam HD: The Second Encounter for Xbox LIVE Arcade continues the glorious high-definition chaos with a slick new graphic presentation, intense multiplayer action, and an onslaught of all-new levels, enemies and bosses from the golden age of first-person shooters.
• Swords for Wii pits players against some of the most formidable adversaries in history using the Wii Remote with Wii MotionPlus as their blade for accurate 1-to-1 motion based battles.
• Flip's Twisted World for Wii is a unique puzzle platformer that stars Flip, a magician's apprentice who mistakenly gets sucked into an alternate universe where up and down are only a matter of perspective. Players will help Flip navigate his puzzling world by rotating the environment 180 degrees in any direction with a simple twist of the Wii Remote.
• Summer Camp Showdown for Wii is a motion-based adventure where players vie for the upper hand in sports and pranks to determine who rules the woods.
• Dawn of Heroes for Nintendo DS is a tactical role playing game that combines classic RPG concepts -- including character development, epic combat, quests and puzzles -- with a humorous style.

First Quarter ending January 31, 2011

• Babysitting Mama for Wii stars the iconic Mama from the best-selling Cooking Mama franchise and features an exciting new play mechanic. This innovative simulation game will be delivered to consumers with an adorable plush baby doll that the babysitter tucks the Wii Remote into in order to interact with the doll and game at the same time in 40 different activities.
• Zumba Fitness® for Wii, PlayStation®Move and Kinect for Xbox 360 is a one-of-a-kind exercise program that pairs Latin rhythms with red-hot international dance steps so you can have a blast as you party your way into shape. Through invigorating, high calorie-burning fitness classes, Zumba Fitness® has helped melt the pounds and inches off seven and a half million Zumba-enthusiasts in more than 75 countries.
• Monster Tale for Nintendo DS is being developed by the key leads behind the critically acclaimed Henry Hatsworth and the Puzzling Adventure. The game mixes platform game play on the top screen with a deep pet-raising game on the Touch Screen to create a dynamic, one-of-a-kind adventure. The heroes of this intriguing tale are little Ellie and a mysterious young monster named Chomp who together set out to reclaim the Monster World from the Kid Kings and their enslaved creature pets.

Fiscal 2010 Outlook

Our final holiday release schedule has resulted in a shift of some of our new releases into fiscal 2011, or in the case of Crafting Mama, to the final week of fiscal 2010.  Specifically, Zumba Fitness, originally scheduled for a late October launch, will now launch in mid-November to be better aligned with the Microsoft Kinect launch window and ship simultaneously across all platforms (Wii, Xbox 360, and PlayStation 3).  Greg Hastings Paintball 2, originally planned for the PlayStation 3 in September, will instead launch in early 2011 as a downloadable title for the PlayStation Network (PSN).  As a result, the revenue mix for the fourth quarter of 2010 will be weighted less to new releases and will shift some revenue and earnings from fiscal 2010 into fiscal 2011.  We now expect to achieve approximately $77 to $80 million in revenue for the fiscal year, down from prior expectations of $80 million.  Accordingly, we continue to expect to be profitable in FY10, but are currently expecting Non-GAAP EPS in the range of $0.01 to $0.03, down from prior expectations of $0.05, and compared to a net loss of $0.15 in the prior year.  The Company assumes the release of approximately 25 SKUs in 2010, including 11 DS and 12 Wii, with 7 titles released in the fourth quarter.  We also expect that roughly 63% of our revenue will come from DS titles; 33% from Wii titles and 4% from all other platforms.  

Conference Call

At 4:30 PM ET today, management will host an earnings conference call. To access the call 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 Web site 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 412-317-0088.  Enter access code 444180#.

Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics

To facilitate a comparison between the three months ended July 31, 2010 and 2009, 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 condensed consolidated statements of operations:

• Expenses related to non-cash compensation
• Net proceeds from the sale of certain state income tax net operating loss carryforwards
• Change in fair value of warrants
• Settlement of certain litigation in 2009
• Costs of operating a development studio in California in 2009
• Severance costs

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 Wii™, Nintendo DS™ and other leading systems. Product highlights include Cooking Mama™, TETRIS Party Deluxe, Alvin and the Chipmunks: The Squeakquel and Jillian Michaels' Fitness Ultimatum. The company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. Majesco is headquartered in Edison, NJ and has an international office in Bristol, UK. More information about Majesco can be found online at www.majescoentertainment.com. @Majesco is on twitter or at www.twitter.com/majesco.

Safe Harbor

Some statements set forth in this release, including the estimates under the headings "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 availability of an adequate supply of current-generation and next-generation gaming hardware, including but not limited to Nintendo's DS and Wii platforms; 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, 2009. We do not undertake, and specifically disclaim 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.

SOURCE Majesco Entertainment Company