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Majesco 4th quarter/year end financial results

Majesco Entertainment Company (Nasdaq: COOL - News), an innovative provider of digital entertainment products and content, today announced financial results for its fourth quarter and year ended October 31, 2006.

Jesse Sutton, Majesco's President and Interim Chief Executive Officer, commented, "In 2006, we made significant improvements to our financial results compared to 2005. We have also taken great strides to transition our business away from big budget console games to a more balanced product portfolio comprised mainly of quality, easy-to-play, affordable games for the mass market. With notable successes including Cooking Mama for the Nintendo DS and JAWS(TM) Unleashed for the PlayStation 2 and Xbox, we are optimistic that our refined strategy is working."

Comparison of Three Months Ended October 31, 2006 to October 31, 2005

* Increased net revenue to $21.5 million for the 2006 fourth fiscal
quarter, compared to $4.6 million reported for the same period in 2005.

* Reduced operating loss to $1.9 million for the 2006 quarter, which
included stock-based compensation expense of $1.2 million required under
generally accepted accounting principles (GAAP). This compared to an
operating loss of $34.4 million for the same period one year ago, which
included impairment charges of $20.1 million. Non-GAAP operating loss
for the 2006 quarter was $0.7 million, compared to non-GAAP operating
loss of $34.3 million for the same period one year ago. The company
defines non-GAAP operating loss and non-GAAP net loss as operating loss
and net loss adjusted for stock-based compensation expense. Non-GAAP net
loss per share equals non-GAAP net loss divided by the basic share count
as of that period end. A table reconciling GAAP and non-GAAP figures
follows in this press release. The company believes the non-GAAP
measures that exclude equity-based compensation enhance the
comparability of results against prior periods. 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.

* Reported net loss for the 2006 quarter was $2.9 million, or $0.13 per
share, compared to a net loss of $34.2 million, or $1.54 loss per share,
for the same period last year. Non-GAAP net loss for the 2006 quarter
was $1.7 million, or $0.07 per share, compared to a non-GAAP net loss of
$34.2 million, or $1.54 loss per share, for the same period in 2005.

Comparison of Year Ended October 31, 2006 to October 31, 2005

* Increased annual revenue 12 percent to $66.7 million, compared to $59.7
million.

* Reduced operating loss to $3.0 million, which included one-time
settlement gains of $4.8 million, capitalized costs write-off of $2.4
million and stock-based compensation expense of $2.2 million. This
compared to fiscal 2005 operating loss of $70.2 million, which included
capitalized cost write-offs of $26.3 million. This dramatic improvement
was a direct result of the company's strategy change which substantially
reduced development costs, significantly decreased marketing costs, and
lowered fixed costs. The 2006 non-GAAP operating loss was $0.7 million,
compared to $68.8 million for 2005.

* Reported net loss of $5.4 million, or $0.24 per share, which included
the $2.0 million charge related to stock-based compensation expense and
$0.2 million related to the issuance of warrants. This compared to a net
loss attributable to common stockholders of $72.0 million, or $3.48 per
share, which included a $1.4 million stock-based compensation expense in
2005. Non-GAAP net loss for 2006 was $3.1 million, or $0.14 per share,
compared to a non-GAAP net loss attributable to common stockholders of
$70.6 million, or $3.41 loss per share, for 2005.

* Generated $0.2 million in cash flow from operations compared to an
operating cash use of $55.0 million in 2005, reflecting the
aforementioned strategy change substantially reducing development and
marketing expenditures and having shorter development cycles that
resulted in a quicker turn of cash. 2006 includes a $9.1 million benefit
from the sale of titles in development to another publisher.

John Gross, Chief Financial Officer, said, "Our refined strategy drove our improved 2006 results. We have transitioned away from the big budget games and dramatically decreased our development costs and operating expenses, thereby significantly reducing our use and loss of cash. The substantial improvements in the health of our balance sheet and the turnaround of our cash flow are encouraging signs. Going into 2007, we are better positioned financially and will continue to focus on controlling costs while we continue to execute our new strategy."

At October 31, 2006, the company had cash and cash equivalents of $3.8 million and a "Due from Factor" of $1.2 million, compared to cash and cash equivalents of $2.4 million and a "Due to Factor" of $7.0 million on October 31, 2005. "Due from Factor" is defined as total receivables less allowances and cash advances from our factor. Over the course of the year, management significantly improved the balance sheet:

* Reducing current liabilities by $12.7 million, or almost 50 percent, to
$13.3 million, which included a $7.5 million reduction in accounts
payable and accrued expenses;
* Decreasing capitalized software development costs by $15.8 million from
$17.3 million in 2005 to $1.5 million in 2006; and
* Reducing inventories by almost 70 percent to $2.4 million.

Recent Business Highlights

* Reached almost 600,000 units worldwide in retail shipments of JAWS(TM)
Unleashed since its release on May 23, 2006.

* Signed digital distribution agreements with Macrovision's Trymedia
Network, and Steam, the leading online platform for PC games, for
several of our catalog titles including: Psychonauts, BloodRayne 1 & 2
and Advent Rising.

* Received several industry honors for Cooking Mama, including "Most
Innovative DS Design of E3 2006Ã*€ ³ from leading video game website IGN;
and GameDaily's "Nod Award," which called Cooking Mama "a fun DS game
that uses the stylus to near perfection."

* Received two industry awards for Age of Empires: Age of Kings for the
Nintendo DS including the Canadian Award for the Electronic and Animated
Arts in the category of Best Design and the British Academy of Film and
Television Arts (BAFTA) Game Award for Best Strategy Game.

* Published 13 titles for the Nintendo DS, two titles for the Nintendo
Game Boy Advance, two titles for the Sony PlayStation 2, two titles for
the Microsoft Xbox and one PC title.

"In 2007, the core of our line-up will include a variety of titles for the handheld markets, with an emphasis on products for the increasingly popular Nintendo DS system. We currently have games in development for the DS based on popular licenses that we believe will appeal to the mass market audience. Specific titles include: New York Times Crosswords, Nancy Drew(TM), and Cake Mania(TM). We also believe Nintendo's new Wii console, with its appealing price point and unique play mechanics, will increasingly resonate with the mainstream gamer. The Wii's mass appeal, combined with its relatively affordable development costs, fits in our strategy. As such, we now have three games, including the previously announced Cooking Mama: Cook Off and Bust-A-Move Bash, in development for this system."

Sutton continued, "Although we're predominantly focused on traditional game systems now, going forward our ultimate vision is to create quality, affordable, mass market games that can be leveraged across leading digital entertainment outlets."

2007 Outlook

"We are cautiously optimistic about 2007 and will continue to execute our new strategy of publishing affordable, mass market games with relatively short development cycles and low development costs," added Sutton. "2007 will be the first year that our revenue will be derived from a majority of products developed in line with this strategy. Based solely on our current release schedule, we expect fiscal 2007 revenue to decline approximately 10 percent to 15 percent as compared to fiscal 2006 revenue, with the fourth quarter being the strongest. That said, we expect to achieve higher gross margins and a lower break-even model. We also believe we have the potential to benefit from a fairly quick return on investment by bringing products to market more quickly than in the past. With nearly nine months remaining in the year, the acquisition of additional titles through our product development process could add to our 2007 release schedule and impact the second half of the year. In addition, we believe there are synergies with our current products and other digital entertainment mediums such as cell phones and portable media players, and we intend to leverage our experience to enter into those product categories."

The company is only providing its annual outlook, largely because of the movement of title release dates that is typical in the industry and the potential significance of the shift of one title between quarters.
News was posted/written by Aaron Lockard, on Mon, 29 January 2007 17:55:47 , and has been read 1 times. It is filled under the following Tags: 4th end financial Majesco quarter results year

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