Majesco Entertainment Co. :COOL-US: Earnings Analysis: Q4, 2016 By the Numbers : January 4, 2017

Majesco Entertainment Co. reports financial results for the quarter ended October 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 0.22 million, Net Earnings of USD -0.41 million.
  • Gross margins widened from 91.08% to 92.41% compared to the same period last year, operating (EBITDA) margins now -231.25% from -199.30%.
  • Change in operating cash flow of 71.90% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-10-31 2016-07-31 2016-04-30 2016-01-31 2015-10-31
Relevant Numbers (Quarterly)
Revenues (mil) 0.22 0.32 0.41 0.59 0.43
Revenue Growth (%YOY) -47.42 -71.13 -75.84 -82.97 -93.22
Earnings (mil) -0.41 -2.49 -1.1 -0.65 -0.79
Earnings Growth (%YOY) 48.61 -838.11 31.1 58.34 85.3
Net Margin (%) -181.25 -789.21 -267.23 -109.48 -185.45
EPS -0.15 -0.94 -0.6 -3.96 -0.43
Return on Equity (%) -29.81 -170.86 -74.47 -249.21 -28.19
Return on Assets (%) -23.44 -131.17 -56.29 -20.5 -23.4

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, COOL-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if COOL-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -28.89% and earnings by 83.67% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 91.08% to 92.41%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

COOL-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 2,204.92 days from 2,390.35 days for the same period last year.

Cash Versus Earnings – Sustainable Performance?

COOL-US‘s year-on-year change in operating cash flow of 71.90% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s operating (EBIT) margins contracted from -203.99% to -233.93%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -185.45% to -181.25%.

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Majesco Entertainment Co.

Company Profile

Majesco Entertainment Co. engages in the development, publishing and distribution of video game products primarily for the casual-game consumer. It publishes video games for major current generation interactive entertainment hardware platforms, including Nintendo’s DS, DSi, 3DS, Wii and WiiU, Sony’s PlayStation 3, or PS3, Microsoft’s Xbox 360 and Xbox One and the personal computer, or PC. It also publishes games for digital platforms, such as Xbox Live Arcade and PlayStation Network, or PSN, mobile platforms such as the iOS and Android phones, and online platforms such as Facebook and Steam. The company was founded in 2004 and is headquartered in Edison, NJ.

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