Majesco Entertainment Company (COOL, Financial) filed Annual Report for the period ended 2011-10-31.
Majesco Entertainment Company has a market cap of $121.82 million; its shares were traded at around $2.95 with a P/E ratio of 9.83 and P/S ratio of 1.61.
Gross Profit. Gross profit for the year ended October 31, 2011 was $45.5 million compared to a gross profit of $18.4 million in the same period last year. The increase in gross profit was primarily attributable to increased net revenues for the year ended October 31, 2011, and higher gross profit as a percentage of net sales. Gross profit as a percentage of net sales was 36% for the year ended October 31, 2011, compared to 24% for the year ended October 31, 2010. The increase in gross profit as a percentage of sales was primarily due to sales of Zumba Fitness in the United States and Europe. The Microsoft Xbox360 and Nintendo Wii versions of the product continued to sell at their original retail price throughout the year, resulting in comparatively higher gross margins. These factors were partially offset by $1.7 million of inventory charges for slow-moving inventory, $2.7 million of losses on impairment, compared to $1.0 million of losses in the year ended October 31, 2010, and accelerated amortization of capitalized software development costs and license fees. The charges for slow moving inventory related primarily to our Babysitting Mama product which was packaged with a plush doll which required longer lead times and order quantities to manufacture than our other products. The impairment of capitalized software development costs and license fees related to three of our titles released in November 2011 for which sales and profitability was below our original forecasts. We released fourteen game titles during October and November 2011 in anticipation of the Holiday selling season. The release of new titles, particularly on platforms early in their lifecycle carry a higher risk than the release of sequels. However, they also carry a potentially higher return if they are successful and are an important part of our business strategy. If projected sales of an individual product indicate that our investment will not be fully recovered through future cash flows, we record an impairment in the period such a determination can be made.
Loss on Impairment of Software Development Costs and License Fees Cancelled Games. For the year ended October 31, 2011, loss on impairment of software development costs and license fees cancelled games, amounted to $1.5 million compared to $0.4 million in the prior-year period, reflecting a greater number of projects cancelled. Our games in development are subject to periodic reviews to assess game design and changing market conditions. When we do not expect the projected future net cash flows generated from sales to be sufficient to cover the remaining incremental cash obligation to complete a game, we cancel the game, and record a charge to operating expenses for the carrying amount of the game. Charges for the year ended October 31, 2011 included several games in development for the Sony Move platform, which totaled $0.6 million, and other game projects totaling $0.9 million.
Gross Profit. Gross profit for the year ended October 31, 2010 was $18.4 million compared to a gross profit of $22.9 million for the year ended October 31, 2009. The decrease in gross profit was attributable to the lower net revenues for the year discussed above. Gross profit as a percentage of sales was approximately 24% for both the year ended October 31, 2010 and the year ended October 31, 2009, as generally decreased gross profit percentages on 2010 sales were offset by lower charges for impairment of capitalized software development and license costs future releases.
Selling and Marketing Expenses. Total selling and marketing expenses were approximately $8.4 million for the year ended October 31, 2010 compared to $14.6 million for the year ended October 31, 2009. The $6.2 million decrease was due primarily to lower advertising media costs of approximately $4.0 million, lower shipping and commission expense related to lower sales and lower international selling costs due to the Companys change in its international business model. During the year ended October 31, 2009 we ran several television and internet advertising campaigns. After analyzing the costs and benefits of these programs, we decided to reduce our media-related expenditures during the year ended October 31, 2010. In addition, during the year ended October 31, 2010, we reduced sales and other staff in the U.S., and sales staff in the United Kingdom, related to the termination of our direct distribution strategy in Europe. Selling and marketing expense as a percentage of net sales was approximately 11% for the year ended October 31, 2010 compared to 16% for the year ended October 31, 2009.
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Majesco Entertainment Company has a market cap of $121.82 million; its shares were traded at around $2.95 with a P/E ratio of 9.83 and P/S ratio of 1.61.
Highlight of Business Operations:
Our provisions for price protection and other allowances fluctuate over periods as a result of a number of factors including analysis of historical experience, current sell-through of retailer inventory of our products, current trends in the interactive entertainment market, the overall economy, changes in customer demand and acceptance of our products and other related factors. Significant management judgments and estimates must be made and used in connection with establishing the allowance for returns and price protection in any accounting period. However, actual allowances granted could materially exceed our estimates as unsold products in the distribution channels are exposed to rapid changes in consumer preferences, market conditions, technological obsolescence due to new platforms, product updates or competing products. For example, the risk of requests for allowances may increase as consoles pass the midpoint of their lifecycle and an increasing number of competitive products heighten pricing and competitive pressures. While management believes it can make reliable estimates regarding these matters, these estimates are inherently subjective. Accordingly, if our estimates change, this will result in a change in our provisions, which would impact the net revenues and/or selling and marketing expenses we report. For the 12-month periods ended October 31, 2011, 2010 and 2009, we provided allowances for future price protection and other allowances of $4.0 million, $3.5 million and $5.0 million, respectively. The fluctuations in the provisions reflected our estimates of future price protection based on the factors discussed above. We limit our exposure to credit risk by factoring a portion of our receivables to a third party that buys without recourse. For receivables that are not sold without recourse, we analyze our aged accounts receivables, payment history and other factors to make a determination if collection of receivables is likely, or a provision for uncollectible accounts is necessary.Gross Profit. Gross profit for the year ended October 31, 2011 was $45.5 million compared to a gross profit of $18.4 million in the same period last year. The increase in gross profit was primarily attributable to increased net revenues for the year ended October 31, 2011, and higher gross profit as a percentage of net sales. Gross profit as a percentage of net sales was 36% for the year ended October 31, 2011, compared to 24% for the year ended October 31, 2010. The increase in gross profit as a percentage of sales was primarily due to sales of Zumba Fitness in the United States and Europe. The Microsoft Xbox360 and Nintendo Wii versions of the product continued to sell at their original retail price throughout the year, resulting in comparatively higher gross margins. These factors were partially offset by $1.7 million of inventory charges for slow-moving inventory, $2.7 million of losses on impairment, compared to $1.0 million of losses in the year ended October 31, 2010, and accelerated amortization of capitalized software development costs and license fees. The charges for slow moving inventory related primarily to our Babysitting Mama product which was packaged with a plush doll which required longer lead times and order quantities to manufacture than our other products. The impairment of capitalized software development costs and license fees related to three of our titles released in November 2011 for which sales and profitability was below our original forecasts. We released fourteen game titles during October and November 2011 in anticipation of the Holiday selling season. The release of new titles, particularly on platforms early in their lifecycle carry a higher risk than the release of sequels. However, they also carry a potentially higher return if they are successful and are an important part of our business strategy. If projected sales of an individual product indicate that our investment will not be fully recovered through future cash flows, we record an impairment in the period such a determination can be made.
Loss on Impairment of Software Development Costs and License Fees Cancelled Games. For the year ended October 31, 2011, loss on impairment of software development costs and license fees cancelled games, amounted to $1.5 million compared to $0.4 million in the prior-year period, reflecting a greater number of projects cancelled. Our games in development are subject to periodic reviews to assess game design and changing market conditions. When we do not expect the projected future net cash flows generated from sales to be sufficient to cover the remaining incremental cash obligation to complete a game, we cancel the game, and record a charge to operating expenses for the carrying amount of the game. Charges for the year ended October 31, 2011 included several games in development for the Sony Move platform, which totaled $0.6 million, and other game projects totaling $0.9 million.
Gross Profit. Gross profit for the year ended October 31, 2010 was $18.4 million compared to a gross profit of $22.9 million for the year ended October 31, 2009. The decrease in gross profit was attributable to the lower net revenues for the year discussed above. Gross profit as a percentage of sales was approximately 24% for both the year ended October 31, 2010 and the year ended October 31, 2009, as generally decreased gross profit percentages on 2010 sales were offset by lower charges for impairment of capitalized software development and license costs future releases.
Selling and Marketing Expenses. Total selling and marketing expenses were approximately $8.4 million for the year ended October 31, 2010 compared to $14.6 million for the year ended October 31, 2009. The $6.2 million decrease was due primarily to lower advertising media costs of approximately $4.0 million, lower shipping and commission expense related to lower sales and lower international selling costs due to the Companys change in its international business model. During the year ended October 31, 2009 we ran several television and internet advertising campaigns. After analyzing the costs and benefits of these programs, we decided to reduce our media-related expenditures during the year ended October 31, 2010. In addition, during the year ended October 31, 2010, we reduced sales and other staff in the U.S., and sales staff in the United Kingdom, related to the termination of our direct distribution strategy in Europe. Selling and marketing expense as a percentage of net sales was approximately 11% for the year ended October 31, 2010 compared to 16% for the year ended October 31, 2009.
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