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Majesco Entertainment's CEO Discusses Q1 2012 Results - Earnings Call Transcript

To facilitate a comparison between the reported periods, the company has presented both GAAP and non-GAAP financial measures. GAAP financial measures include expenses related to non-cash compensation, changes in the fair value of warrants, severance costs and a benefit from the sale of certain state income tax benefits derived from net operating losses. Operating income, net income and diluted income per share have been adjusted to report non-GAAP financial measures that exclude these items.

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 as substitute or superior to GAAP results. Reconciliation between GAAP and non-GAAP financial measures is included in the press release issued earlier today.

With me on the call are Jesse Sutton, Chief Executive Officer; and Mike Vesey, Chief Financial Officer. I'd now like to turn the call over to Jesse.

Jesse Sutton

Thanks, Todd. I'll open the call with some highlights and an overview of our performance in the first quarter. Mike will follow with the financial review, and I'll conclude with an update on our product slate for the rest of the year, after which, we'll be happy to take your questions.

In Q1, a year ago, we experienced growth of over 60% as we introduced the Zumba Fitness brand to the world of interactive entertainment. In Q1 of this year, we are pleased to show that we followed up that breakout performance with another strong quarter and with substantial year-over-year growth. Sales grew 37% year-over-year to $66.2 million in the quarter fueled by the strong global sales of the industry's leading fitness title, Zumba Fitness. In addition to solid catalog sales of Zumba 1, we launched Zumba 2 on the Wii, which has gotten off to a great start and sold over 1 million units worldwide in its first 3 months. At the same time, we were able to reinvest some of our earnings in the marketing and development of our most important brands, as well as our new emerging Social and Mobile business. As a result, we delivered over 35% revenue growth in Q1 with healthy gross margins of 35% and a non-GAAP operating margin of over 12%. We also delivered a robust release slate this holiday season, easily one of the largest in the company's history, including Zumba Fitness 2, Cooking Mama 4 for 3DS and Camping Mama for the DS, Alvin & The Chipmunks: Chipwrecked, Twister Mania, Hulk Hogan's Main Event, Jillian Michaels' Fitness Adventure, JAWS: Ultimate Predator, as well as a number of other innovative and fun Kinect and 3DS titles.

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