Majesco exploring strategic initiatives to maximise company value

NASDAQ-listed gaming company Majesco Entertainment said Monday that it is exploring a number of strategic initiatives to stabilise and increase company value, having posted nearly two years of operating losses.

Majesco said that in the past it was able to capitalize on and derive a substantial amount of revenue from a “thriving” casual games market on Nintendo handheld and console systems.

“However, more recently the shift of the casual gamer from dedicated platforms to smartphones, tablets and social networks, as well as declining sales of our fitness games based on the Zumba fitness brand has resulted in lower revenue and operating losses,” said CEO Jesse Sutton in an earnings call following publication of its Q3 results.

Last year, Zumba sales accounted for 66 per cent of its third quarter results, compared to just 13 per cent this year.

“We are continuing to focus on diversifying our revenue streams from higher growth business segments, such as online, digital and casino. However, revenue from our new business units Pariplay, and Midnight City have not been material to our operations to-date.”

In its results for the third quarter ended July 31st, the company saw revenue drop 28 per cent to $2.9m, contributing to a net loss of $2.7m during the period. This included a $1.3m impairment loss on the company's investment in GMS Entertainment. For the nine month period, revenue fell 24 per cent to $28.1m with net loss widening to $10.8m.

“We are continuing to explore and implement initiatives to reduce our operating expenses, diversify our business into new categories, and evaluate possible strategic alternatives in an effort to maximize company value,” continued Sutton.

The company has retained merchant bank Bond Lane Partners to act as its financial advisor to assist in evaluating strategic alternatives to maximize company value. Strategic alternatives may include a merger, joint venture, strategic investment, asset divestitures, or similar transactions, as well as continuing to operate the business in the ordinary course.

Sutton said that the company remained optimistic about its 50 per cent ownership of Pariplay, which is expected to launch a new Three Stooges slots game for the real-money gaming market in Europe, as well as a number of Atari-themed slot games.

“We also anticipate broader distribution of our slots games across the 888games slots website,” he said. “These games are anticipated to launch over the next few months. As for the iLottery business, we believe that our partnership with Intralot in the digital lottery space will begin to show better results in the coming months.”

Sutton said however that as the company continues to develop its real-money gaming business, it has put the social casino product on a “rebuild mode” in order to better analyze the game play and monetization mechanics.
 
“We are doing this because the game, Crazy Cash Slots, available on Facebook, has not proven to return more revenues per daily user than the cost per install,” he said.

As at July 31st the company held cash and cash equivalents of $10.9m compared to $13.4m a year ago.

Shares in Majesco Entertainment Company (Co. Data) (NASDAQ:COOL) closed Monday at $1.8298 per share, up 3.97 per cent in trading in New York.