Majesco Entertainmen Q4 2010 Earnings Call Transcript

Majesco Entertainmen (COOL)

Q4 2010 Earnings Call

January 18, 2011 4:30 pm ET

Executives

Michael Vesey - Inerim Chief Financial Officer, Chief Accounting Officer, Senior Vice President and Corporate Controller

Jesse Sutton - Chief Executive Officer and Director

Todd Greenwald -

Analysts

Jon deRoy Gruber

John Taylor - Arcadia

David Bench -

Edward Woo - Wedbush Securities Inc.

Sean McGowan - Needham & Company, LLC

Presentation

Operator

Hello, this is the Chorus Call operator. Welcome to the Majesco Entertainment Company's Fiscal Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the call over to Todd Greenwald, Director of Investor Relations and Strategic Planning. Please go ahead.

Todd Greenwald

Thank you, and good afternoon. I'd like to welcome you to Majesco Entertainment's conference call. Before we get started, I'd like to remind you that the call is being recorded and the audio broadcast and replay of the teleconference will be available in the Investor Relations section on the company's website.

As a reminder, this call may contain forward-looking statements, including statements regarding management's intention, hope, expectations, representations, plans or predictions about the future. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results or actual future results to differ materially from the expectations set forth in the forward-looking statements. Factors that could cause actual results to differ materially are specified in the company's annual report on Form 10-K for the year ended October 31, 2009, and other filings with the SEC.

The company does not undertake and specifically disclaims any obligations to release publicly the results of any revision that may be made to any forward-looking statements to reflect the occurrences of anticipated or unanticipated events or circumstances after the date of such statements. 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, settlement of litigation, changes in the fair value of warrants, the closure of the California development studio, severance 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 a 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, Interim 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 the overview of our performance in the fourth 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. Then we would be happy to take your questions.

In Q4, we generated a much smaller operating loss compared to the same quarter a year ago as a result of the healthier gross margin and a more prudent marketing investment. I would also point out that as a result of our October fiscal year end, essentially, all of our key holiday releases fell into our Q1 results and are not be reflected in this Q4 report.

Importantly, fiscal 2011 is off to a strong start, driven by the November launches of Zumba Fitness and Babysitting Mama as well as the continued reorders for the late October release of Crafting Mama. We recently announced that Zumba Fitness has quickly surpassed the 500,000 unit mark, and we expect to see continued reorders of that product throughout the coming year.

The Mama brand is alive and well and continues to grow. We recently shipped our 8 millionth unit in the Mama franchise and experienced successful recent launches of Crafting Mama on the DS and Babysitting Mama on the Wii. Crafting Mama was a creative extension of the Mama brand and, combined with Gardening Mama, proves that Mama resonates with consumers and players will follow her in her many adventures. This provides us significant potential to further grow the franchise into many new directions.

With the release of Babysitting Mama, we created a product that allows girls to play with the Mama in a unique and innovative way, using an interactive doll packaged in with the game. Designing and manufacturing the hundreds of thousands of plush toys was a big undertaking, but we shipped the product on time and to a warm reception at retail.

Finally, we'd note that essentially all of Mama's success to date has come on only two platforms, the Wii and DS. And while we have nothing to announce at this date, we are excited to bring Mama to a broader audience by taking advantage of all of the new mass market platforms. As new platforms like Kinect for Xbox 360 and PlayStation Move penetrate the mass market and attract younger consumers, we believe this creates new opportunities for Mama.

Finally, as we announced last week, Mama is now on Facebook and has quickly attracted a large following of active users despite no significant marketing campaign having launched yet. This is a testament to how brand awareness bodes well for future growth of the Mama franchise.

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